==========================================START OF PAGE 1====== UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7416 / April 15, 1997 SECURITIES EXCHANGE ACT OF 1934 Release No. 38511 / April 15, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9125 ______________________________ In the Matter of : : WAYNE J. CONNERS, : THOMAS A. PIECHOWICZ, : ORDER MAKING FINDINGS JAMES M. FLYNN, : AND IMPOSING REMEDIAL SHARON BARTOCK, : SANCTIONS BY DEFAULT WINFRED KIPP, and : CHRISTOPHER D. CONWAY : _____________________________ : James M. Flynn and Winfred Kipp are in default under the Securities and Exchange Commission s ( Commission ) Rules of Practice, Rules 155 and 220(f), 17 C.F.R. .. 201.155, .220(f) (1996), because they failed to answer the Order Instituting Public Proceedings ( OIP ) which the Commission issued on September 30, 1996, and the Show Cause Order which I issued on March 28, 1997. Accordingly, I find that the allegations in the OIP as to Respondents Flynn and Kipp are true: A. James M. Flynn, age 46, resides in Latrobe, Pennsylvania. Flynn worked in the securities industry from 1982 through April 1995 as a registered representative associated with various broker-dealers. Currently, Flynn is selling insurance products and fixed annuities in Pennsylvania and is not associated with a registered broker-dealer. B. Winfred Kipp, age 51, resides in Murrysville, Pennsylvania. Kipp has never been licensed by the NASD. C. From May 1993 through January 1995, C'est Lestial Waters, Inc. ("CWI") raised over $7 million from more than 100 investors through the offering and sale of unregistered collateral trust bonds (the "CWI bonds"), as well as the securities of certain entities related to CWI. In connection. ==========================================START OF PAGE 2====== with that offering, CWI, certain of its principals and agents, as well as certain other entities and individual sales representatives, violated, variously, the securities registration, antifraud and broker-dealer registration provisions of the federal securities laws. Specifically, these entities and individuals made misrepresentations of material fact and failed to disclose material information concerning the security underlying the CWI bonds and their relative safety, their status as exempt from registration with the Commission, and the use of offering proceeds. D. From approximately April 1994 through January 1995, Flynn offered and sold more than $1 million in CWI bonds and received approximately $70,000 in commissions. In connection with these sales, Flynn made misrepresentations and omissions of material fact to investors, including that: 1. the CWI bonds were collateralized by a pool of viatical settlements; and 2. bondholders had a first lien interest in the collateral. E. From October 1993 through July 1994, Kipp offered and sold more than $221,000 in CWI bonds and received approximately $12,100 in commissions. In connection with these sales, Kipp made misrepresentations of material fact to investors, including that: 1. the CWI bonds were fully secured through a first and irrevocable lien interest in certain assets of CWI in favor of investors; and 2. he had verified the existence of the collateral. F. Based on the conduct described above in paragraphs D and E, Flynn and Kipp willfully violated Section 17(a) of the Securities Act of 1933 ( Securities Act ) and Section 10(b) of the Securities Exchange Act of 1934 ( Exchange Act ) and Rule 10b-5 thereunder, in connection with the offer, purchase and sale of securities, in that they, directly and indirectly, by use of the mails and the means and instruments of transportation and communication in interstate commerce, and the means and instrumentalities of interstate commerce: (1) employed devices, schemes or artifices to defraud; (2) obtained money and property by means of, and made, untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (3) engaged in acts, transactions, practices, and courses of business which operated as a fraud or deceit upon offerees and purchasers of securities.. ==========================================START OF PAGE 3====== G. Based on the conduct described above in paragraphs D and E, Flynn and Kipp willfully violated Sections 5(a) and 5(c) of the Securities Act in that they, directly and indirectly, made use of the mails or other means or instruments of transportation or communication in interstate commerce to offer to sell, sell, and deliver after sale to members of the public, certain securities, namely the CWI bonds, when no registration statement was filed or in effect as to said securities and no exemption from registration was available. H. Based on the conduct described above in paragraph D, Flynn, during the period from approximately June 1994 through January 1995, willfully violated Section 15(a) of the Exchange Act in that, without registering with the United States Securities and Exchange Commission pursuant to Section 15(b) of the Exchange Act, Flynn made use of the mails or means or instrumentalities of interstate commerce to effect transactions in, or to induce or attempt to induce the purchase or sale of, securities other than exempted securities or commercial paper, bankers' acceptances, or commercial bills, namely, the CWI bonds. I. Based on the conduct described above in paragraphs D and F, Flynn, during the period from approximately June 1994 through January 1995, willfully violated Section 15(c) of the Exchange Act and Rule 15c1-2 thereunder, in that, using the mails or means or instrumentalities of interstate commerce, Flynn effected transactions in, or induced or attempted to induce the purchase and sale of, securities other than exempted securities or commercial paper, bankers' acceptances, or commercial bills, namely the CWI bonds, otherwise than on a national securities exchange of which he was a member, by means of manipulative, deceptive, or other fraudulent devices or contrivances. I find further that it is in the public interest to: (1) bar Flynn from association with any broker, dealer, or registered securities association, pursuant to Sections 15(b) and 19(h) of the Exchange Act; (2) direct Flynn to disgorge $75,000 plus prejudgment interest pursuant to Section 8A(e) of the Securities Act and Sections 21B(e) and 21C(e) of the Exchange Act; (3) direct Kipp to disgorge $15,000 plus prejudgment interest pursuant to Section 8A(e) of the Securities Act and Sections 21B(e) and 21C(e) of the Exchange Act; (4) order Flynn to pay a civil penalty of $75,000 pursuant to Section 21B of the Exchange Act; and (5) order Flynn and Kipp to cease and desist from committing or causing any violations or future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange. ==========================================START OF PAGE 4====== Act.-[1]- ACCORDINGLY, it is: ORDERED, pursuant to Sections 15(b) and 19(h) of the Exchange Act, that James M. Flynn is barred from association with any broker, dealer, or registered securities association; ORDERED, pursuant to Section 8A(e) of the Securities Act and Sections 21B(e) and 21C(e) of the Exchange Act, that James M. Flynn disgorge $75,000 plus prejudgment interest from February 1, 1995, through the last day of the month preceding the month in which payment of disgorgement is made at the rate of interest established under Section 6621(a)(2) of the Internal Revenue Code, 26 U.S.C. . 6621(a)(2), compounded quarterly, pursuant to Rule 600 of the Commission s Rules of Practice; ORDERED, pursuant to Section 8A(e) of the Securities Act and Sections 21B(e) and 21C(e) of the Exchange Act, that Winfred Kipp disgorge $15,000 plus prejudgment interest from August 1, 1994, through the last day of the month preceding which payment is made at the rate of interest established under Section 6621(a)(2) of the Internal Revenue Code, 26 U.S.C. . 6621(a)(2), compounded quarterly, pursuant to Rule 600 of the Commission s Rules of Practice; ORDERED, pursuant to Section 21B of the Exchange Act, that James M. Flynn pay a civil penalty of $75,000; and ORDERED, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, that James M. Flynn cease and desist from committing or causing any violations or future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act; Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and Sections 15(a) and 15(c) of the Exchange Act and Rule 15c1-2 thereunder. ORDERED, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, that Winfred Kipp cease and desist from committing or causing any violations or future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Payment of sums owed shall be: (i) made by United States postal money order, certified check, bank cashier s check, or bank money order; (ii) made payable to the Securities and Exchange Commission; (iii) delivered by hand or courier to the ---------FOOTNOTES---------- -[1]- I will not order Kipp to pay a civil penalty pursuant to Section 21B of the Exchange Act, as requested by the Division of Enforcement, because the OIP does not authorize such a sanction as to Kipp.. ==========================================START OF PAGE 5====== Office of the Secretary, Securities and Exchange Commission, 450 5th Street, N.W. Washington, D.C. 20549; and (iv) submitted under cover letter which identifies each party as a Respondent in these proceedings, and the file number of these proceedings. The Division shall submit a plan of disgorgement, pursuant to Rule 610, no later than sixty (60) days after each Respondent has paid any or all of the disgorgement amount and interest. G. Marvin Bober Administrative Law Judge.