UNITED STATES SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7557 / July 28, 1998 SECURITIES EXCHANGE ACT OF 1934 Release No. 40267 / July 28, 1998 INVESTMENT ADVISERS ACT OF 1940 Release No. 1737 / July 28, 1998 INVESTMENT COMPANY ACT OF 1940 Release No. 23333 / July 28, 1998 ADMINISTRATIVE PROCEEDING File No. 3-9657 In the Matter of Piper Capital Management, Inc., Worth V. Bruntjen, Marijo A. Goldstein, Robert H. Nelson, Amy K. Johnson, Molly Destro, Edward J. Kohler The Securities and Exchange Commission announced the entry of an Order Instituting Public Administrative and Cease-And- Desist Proceedings (Order) against Piper Capital Management, Inc. (PCM), Worth V. Bruntjen (Bruntjen), Marijo A. Goldstein (Goldstein), Robert H. Nelson (Nelson), Amy K. Johnson (Johnson), Molly Destro (Destro) and Edward J. Kohler (Kohler). The Division of Enforcement's (Division) allegations in the Order stem from the respondents' conduct in connection with the Piper Jaffray Institutional Government Income Portfolio (the Fund), a fixed-income mutual fund with a stated investment objective of "a high level of current income consistent with the preservation of capital." The Order alleges that from approximately early 1992 through at least April 1994, PCM, the investment adviser to the Fund, and Bruntjen and Goldstein, the Fund's portfolio managers, committed fraud by making false and misleading statements to investors regarding the risks associated with an investment in the Fund. The Order alleges that, despite its conservative investment objective, the Fund was in fact a high-risk investment as a result of PCM's, Bruntjen's and Goldstein's investment of Fund assets in interest rate- sensitive collateralized mortgage obligation (CMO) derivatives. According to the Order, PCM, Bruntjen and Goldstein misled investors by not adequately disclosing the risks associated with investing in the Fund. The Division also alleges in the Order that PCM, Bruntjen and Goldstein committed fraud by making false and misleading statements regarding the leveraging of Fund assets. Furthermore, the Order alleges that PCM, Bruntjen and Goldstein falsely told investors that the Fund was hedged to guard against losses from rising interest rates, and that Bruntjen repeatedly lied to investors about his educational background. The Order also alleges that, as a result of their CMO investments, PCM, Bruntjen and Goldstein caused the Fund to change its investment objective without shareholder approval. According to the Order, Kohler failed to supervise Bruntjen and Goldstein with a view to preventing, among other things, their false and misleading risk disclosures. The Order also alleges that each of the respondents, except Kohler, committed fraud in connection with the Fund's NAV. According to the Order, PCM, Bruntjen and Goldstein falsely told investors that they would calculate a current NAV on a daily basis for purchases and redemptions of Fund shares. The Order alleges that, in fact, a majority of the securities in the Fund's portfolio were only priced on a weekly basis. Furthermore, the Order alleges that PCM, Bruntjen, Goldstein, Nelson, Johnson and Destro manipulated the Fund's NAV beginning in late March 1994 and continuing through at least the first week of April 1994. According to the Order, the respondents engaged in a scheme to override dealer quotations and gradually lower or "ratchet down" prices of securities in the Fund's portfolio to limit reductions in the Fund's NAV. In doing so, the Order alleges that, among other things, the respondents committed fraud by materially overstating the Fund's NAV during the relevant time period. As a result of the above conduct, the Order alleges that respondents PCM, Bruntjen and Goldstein, Nelson, Johnson and Destro violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; respondents PCM and Bruntjen violated Section 207 of the Investment Advisers Act of 1940 (Advisers Act); respondents PCM, Bruntjen, Goldstein, Johnson and Destro aided and abetted and caused the Fund's violations of Rule 22c-1 of the Investment Company Act of 1940 (Investment Company Act); respondents PCM, Goldstein, Nelson, Johnson and Destro aided and abetted and caused the Fund's violations of Section 31(a) of the Investment Company Act and Rule 31a-1 thereunder; respondents PCM, Bruntjen, Goldstein, Nelson, Johnson and Destro violated Section 34(b) of the Investment Company Act; respondents PCM, Bruntjen and Goldstein aided and abetted and caused the Fund's violation of Section 13(a)(3) of the Investment Company Act; and respondent Kohler failed reasonably to supervise Bruntjen and Goldstein, pursuant to Section 203(f) and within the meaning of Section 203(e)(6) of the Advisers Act, with a view to preventing their securities laws violations. In the Order the Division requests relief in the form of, among other things, a cease-and-desist order against the respondents as well as the imposition of civil penalties.