UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 37064 / April 3, 1996 ADMINISTRATIVE PROCEEDING File No. 3-8930 ------------------------- : In the Matter of : ORDER MAKING FINDINGS : AND IMPOSING REMEDIAL MICHAEL J. RANDY : SANCTIONS BY DEFAULT : ------------------------- I held a prehearing conference by telephone on April 1, 1996. Michael J. Randy (Mr. Randy) was present at the conference. He stated that the Commission lacked jurisdiction over him and then refused to speak. I find Mr. Randy in default under the Securities and Exchange Commission's (Commission) Rules of Practice, Rules 155 and 220, 17 C.F.R.  201.155 and 201.220 (1996) because he has not answered either the Order Instituting Public Proceedings (Order) which the Commission issued on January 18, 1996 or the Order to Show Cause which I issued on March 1, 1996. Accordingly, I find the following allegations in the Order are true: A. On September 28, 1994, the Commission filed an action against Mr. Randy, and ten others captioned Securities and Exchange Commission v. Michael J. Randy, et al, Civil Action No. 94 C 5902 (N.D. Ill.). On September 15, 1995, a Final Judgment of Permanent Injunction and Other Equitable Relief was entered by default against Mr. Randy permanently enjoining him from, directly or indirectly, engaging in conduct violative of Sections 5(a), 5(c), 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act of 1933 (Securities Act), Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 promulgated thereunder. B. On April 15, 1994, Mr. Randy was convicted in the United States District Court for the Northern District of Illinois of mail and wire fraud and money laundering based upon the same conduct alleged by the Commission in its complaint, and on April 27, 1995, he was sentenced to 15 years and eight months imprisonment. United States v. Randy, 92 CR 1029 (N.D. Ill.). C. From September 1983 to October 1992, Mr. Randy was a registered representative associated with various broker-dealers, ==========================================START OF PAGE 2====== most recently with Roger J. Lange & Co., Inc. D. From at least September 1990 to November 1992, Mr. Randy willfully violated Section 17(a) of the Securities Act in that, in the offer and sale of securities, by the use of the means and instruments of transportation or communication in interstate commerce and by the use of the mails, directly and indirectly, he employed devices, schemes and artifices to defraud; obtained money and property by means of untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and engaged in transactions, practices, and courses of business which operated or would operate as a fraud and deceit upon the purchaser. As part of this conduct, Mr. Randy and his agents, in the offer and sale of Canadian Trade Bank, Ltd. "certificates of deposit" (CTB CDs), misrepresented material facts and omitted to state material facts to investors concerning, among other things, the legitimacy of CTB, the safety of the investment and the use of proceeds. Specifically, Mr. Randy and his agents misrepresented to investors that CTB CDs were guaranteed to pay 12-14% annual interest, were safe investments and were fully insured by independent insurance companies. Mr. Randy also misrepresented that CTB maintained $100 in reserve for every $100 on deposit, was audited five times per year and invested depositor funds exclusively in government and high-grade corporate bonds. In addition to these misrepresentations, Mr. Randy failed to disclose that CTB was not a bank and was not legally licensed as a bank by any governmental agency, that he performed substantially all activities relating to CTB out of his offices in Illinois, including making all investment decisions, and that he used investor funds for personal expenses, for unrelated business expenses, for paying off earlier investors, and for speculative investments and loans. Mr. Randy and his agents sold over $15.5 million worth of the CTB CDs to at least 550 investors from which Mr. Randy personally profited by at least $5 million. E. From at least September 1990 to November 1992, Mr. Randy willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder in that, directly and indirectly, by the use of the means and instrumentalities of interstate commerce, and of the mails, in connection with the purchase and sale of securities, he employed devices, schemes and artifices to defraud; made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and engaged in acts, practices and courses of business which operated or would operate as a fraud and deceit. As part of this conduct, Mr. Randy engaged in the activities ==========================================START OF PAGE 3====== described in paragraph D. above. F. From at least September 1990 to November 1992, Mr. Randy willfully violated Section 15(a) of the Exchange Act in that he made use of the mails and means and instrumentalities of interstate commerce to effect transactions in and induced the purchase of securities without being registered as a broker or dealer in accordance with Section 15(b) of the Exchange Act. As part of this conduct, Mr. Randy effected transactions in and induced the purchase of CTB CDs without being registered as a broker or dealer in accordance with Section 15(b) of the Exchange Act. G. From at least September 1990 to November 1992, Mr. Randy willfully violated Section 5(a) of the Securities Act in that, directly and indirectly, he made use of the means and instruments of transportation and communication in interstate commerce and of the mails, through the use or medium of a prospectus and otherwise, to sell securities and carried and caused to be carried through the mails and interstate commerce, by the means and instruments of transportation, securities, for the purpose of sale and delivery after sale, without a registration statement being in effect with respect to such securities and while no exemption from registration was applicable. As part of this conduct, Mr. Randy sold CTB CDs to investors without a registration statement being in effect with respect to such securities and while no exemption from registration was applicable. H. From at least September 1990 to November 1992, Mr. Randy willfully violated Section 5(c) of the Securities Act in that, directly and indirectly, he made use of the means and instruments of transportation and communication in interstate commerce and of the mails to offer to sell, through the use of a prospectus or otherwise, securities, without a registration statement being filed with respect to such securities and while no exemption from registration was applicable. As part of this conduct, Mr. Randy offered to sell CTB CDs without a registration statement being filed with respect to such securities and while no exemption from registration was applicable. I find further that it is in the public interest to sanction Mr. Randy pursuant to Sections 15(b) and 19(h) of the Exchange Act. I ORDER that Michael J. Randy is barred from association with any broker or dealer and from association with any member of a national securities exchange or registered securities ==========================================START OF PAGE 4====== association. IT IS FURTHER ORDERED that the hearing, the date of which was to be determined during the prehearing conference on April 1, 1996, be, and hereby is, cancelled. ______________________________ Brenda P. Murray Chief Administrative Law Judge