SECURITIES AND EXCHANGE COMMISSION LITIGATION RELEASE NO. 15813/July 16, 1998 SECURITIES AND EXCHANGE COMMISSION v. MICHAEL D. RICHMOND, individually, MICHAEL D. RICHMOND d/b/a LIBERTY NETWORK, ROYAL MERIDIAN INTERNATIONAL BANK, MERIDIAN MONETARY SERVICES, INC., WILLIAM DUKE, MERIDIAN MANAGEMENT SERVICES, LLC., K. BRUCE NUCKOLS, ANTHONY GARRY, THOMAS CONNOLLY, AND AS RELIEF DEFENDANTS, ZONE PRODUCTIONS, INC., TERRY KOONTZ AND MARIANNE CLARK AND LINDA MITCHELL as Trustees for PURR TRUST (United States District Court for the District of Massachusetts, C.A. No. 98CV11378-NG) The Commission announced today that the Honorable Reginald C. Lindsay issued a Temporary Restraining Order, an order for the freezing of assets, an order prohibiting the acceptance of additional investor funds, an accounting of assets, an order requiring the repatriation to the United States of assets transferred abroad, and other relief against Michael D. Richmond ("Richmond"), individually and doing business as Liberty Network ("Liberty"), Royal Meridian International Bank ("RMIB"), Meridian Monetary Services, Inc. ("Meridian Monetary"), William Duke ("Duke"), Meridian Management Services, LLC ("Meridian Management"), K. Bruce Nuckols ("Nuckols"), Anthony Garry ("Garry"), and Thomas Connolly ("Connolly"). The Commission requested this relief in a complaint, filed on July 15, 1998 in the United States District Court for the District of Massachusetts, which alleged that the defendants are engaging in an on-going Ponzi scheme, offering unregistered securities, in the form of "International Certificates of Deposits" ("CDs") and that $7.2 million has been raised from at least 185 investors in fourteen states, including Massachusetts, Virginia, Illinois and Indiana. According to the Commission's allegation, since at least October 1997, Richmond has orchestrated the Ponzi scheme, in which he used internet websites and a network of Liberty sales agents to convince unsophisticated investors, including many elderly persons and widows, to liquidate annuities and other investments in order to purchase fraudulent securities issued by RMIB. Further, the Commission alleged that, using false information and promotional brochures provided by Richmond, sales agents including defendants Nuckols, Garry and Connolly falsely informed investors that the RMIB CDs would provide a guaranteed rate of return of 12%, 18%, or in some cases 24%, that RMIB holds 125% in cash reserves for each investment, that all investments would be secured by Government National Mortgage Association ("GNMA") bonds, and that certain large investors will receive a security interest in their investment evidenced by a UCC-1 issued by the "The Federal Bank." The brochures and websites authored by Richmond, also misrepresented that RMIB was a "fully- chartered" private, offshore bank, with offices in Canada, the Bahamas, Guernsey and Turks & Caicos. The Commission alleges that RMIB is a shell with no offices and no apparent significant sources of revenue from which it can pay the guaranteed return except through the sale of additional fraudulent securities to unwitting investors. In addition, the Commission charges in its complaint that investor funds, instead of being deposited with RMIB, secured and reinvested as represented, are being deposited into a series of money market and bank accounts controlled by Richmond or his affiliates, and subsequently are being used to repay other investors and for personal expenses incurred by the Richmond and others. According to the complaint, of the $7.2 million raised, only approximately $2.69 million remains to repay defrauded investors. In connection with this scheme, the Commission alleges that the defendants directly and indirectly have engaged, are engaging or are about to engage in transactions, acts, practices and courses of business which constitute violations of the antifraud and registrations provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The Commission's action continues as the Commission seeks preliminary and permanent injunctions against future violations, disgorgement of ill-gotten gains and the imposition of civil monetary penalties as to all defendants. Investors are advised to read the SEC's Cyberspace Alert before purchasing any investment promoted on the internet. The free publication which alerts investors to the telltale signs of online investment fraud is available on the Investors Assistance and Compliance link of the SEC's home page on the World Wide Web . It can also be obtained by calling 1-800-SEC- 0330.