UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 39150 / September 30, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9453 In the Matter of : ORDER INSTITUTING PUBLIC : PROCEEDINGS, MAKING WILLIAM H. MALEK, : FINDINGS AND IMPOSING : REMEDIAL SANCTIONS Respondent. : I. The Securities and Exchange Commission (Commission) deems it appropriate and in the public interest that public proceedings be instituted pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 (Exchange Act) against William H. Malek (Malek). In anticipation of these proceedings, Malek has submitted an Offer of Settlement which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission, or to which the Commission is a party, Malek, by his Offer of Settlement, without admitting or denying the Commission's findings, except the Commission's jurisdiction and the findings contained in Paragraphs III.A., III.B., III.K. and III.L., which are admitted, consents to the entry of this Order. II. Accordingly, IT IS HEREBY ORDERED THAT proceedings pursuant to Sections 15(b) and 19(h) of the Exchange Act be, and they hereby are, instituted. III. On the basis of this Order and the Offer of Settlement submitted by Malek, the Commission finds <(1)> that: A.Malek, age 46, was most recently a resident of Bellaire, Michigan. From at least 1989 to the present, Malek has been the president and 50 percent shareholder of Lease Equities Fund, Inc. (LEF), a defunct Michigan <(1)> The findings herein are made pursuant to Malek's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding. ======END OF PAGE 1====== Corporation located in Milford, Michigan. Since 1993 to the present, Malek has been the vice president and 50 percent shareholder of NBF Cable Systems, Inc. (NBF), a Michigan Corporation located in Fort Lauderdale, Florida and an affiliate of LEF. B.Malek operated LEF for the sole purpose of leasing equipment for use by businesses and financing these transactions by offering and selling securities in the form of promissory notes secured by the equipment leases. Neither Malek nor LEF was ever registered as a broker-dealer with the Commission. C. From 1990 to October 1995, LEF leased equipment for use by businesses and financed these transactions by issuing securities in the form of promissory notes ("Notes or "LEF Notes") secured by the equipment leases. Each Note was secured by a percentage of a lease equal to the present value of the principal due on the Note. No registration statement has been filed with the Commission or been in effect for the LEF Notes. D.Beginning in 1990 and continuing through October 1995, Malek began operating a "Ponzi" scheme in which he used part of the proceeds from the sale of new LEF Notes to make principal payments to LEF's earlier investors. In or about August 1994, LEF, through Malek, began offering and selling Notes secured by: (1) leases that were previously assigned in full to other investors; (2) leases that were forged or altered; (3) otherwise genuine leases to which LEF was not a party and in which LEF had no interest; and (4) unconsummated agreements between NBF and potential customers of NBF. In addition, Malek often failed to perfect the security interests of the investors in the leases. Malek was also using funds raised from Notes to finance the operations of NBF. As a result of this Ponzi scheme, LEF owed at least $14.2 million on at least 265 Notes issued to at least 95 investors when it ceased doing business in September 1995 and had few, if any, assets with which to repay investors. E.From 1990 and continuing through October 1995, most of the Notes were sold by two individuals acting as unregistered broker-dealers. However, during this period, Malek personally sold seven Notes, totaling more than $1 million, to investors. Malek personally represented to these investors, and represented in Notes he prepared and executed and that were sold by others to investors, that (1) the funds raised by the Notes were to be used to finance equipment lease transactions when, in fact, he was using the funds to pay previous noteholders, to repay LEF bank loans, and to finance the operations of Cable; (2) the Notes were adequately secured by a lease or NBF contract when, in fact, the leases were also assigned to other Notes, were forged or altered, were not owned by or assigned to LEF or, in the case of NBF contracts, were never consummated; and (3) a financing statement was filed with the Michigan Secretary of State to record the investor's security interest in the lease when, in fact, Malek did not always make such filings. F.From 1990 through October 1995, Malek willfully violated Sections 5(a) and 5(c) of the Securities Act of 1933 (Securities Act) in that he directly or indirectly made use of the means or instruments of transportation or ======END OF PAGE 2====== communication in interstate commerce or of the mails to sell or offer to sell, through the use or medium of a prospectus or otherwise, securities described in Paragraphs III.B. and III.C. above, or carried or caused to be carried through the mails or in interstate commerce by the means or instruments of transportation for the purpose of sale or for delivery after sale, while no registration statement was in effect or filed with the Commission, as described in Paragraphs III.B. through III.E. above. G.From 1990 through October 1995, Malek willfully violated Section 17(a) of the Securities Act in that he, in the offer or sale of securities described in Paragraphs III.B. and III.C. above, by the use of the means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly, employed devices, schemes or artifices to defraud; obtained money or property by means of untrue statements of material fact or omissions 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; or engaged in transactions, practices or courses of business which operated or would operate as a fraud or deceit upon purchasers and prospective purchasers of such securities. As a part of this conduct, he made misrepresentations and omissions of material facts to investors, as described above in Paragraphs III.D. and III.E. above. H.From 1990 through October 1995, Malek willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder in that he, in connection with the purchase and sale of the securities described in Paragraphs III.B. and III.C. above, directly or indirectly, by the use of the means or instrumentalities of interstate commerce, or of the mails: employed devices, schemes or artifices to defraud; made untrue statements of material fact or 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; or engaged in acts, practices, or courses of business which operated or would operate as a fraud or deceit upon the purchasers of the securities, as described in Paragraphs III.D. and III.E. above. I.From 1990 through October 1995, Malek willfully violated Section 15(a)(1) of the Exchange Act in that he made use of the mails or the means or instrumentalities of interstate commerce to effect transactions in, or to induce or attempt to induce the purchase or sale of the securities described in Paragraphs III.B. and III.C. above, without being registered as, or associated with, a broker or dealer registered with the Commission pursuant to Section 15(b) of the Exchange Act, as described in Paragraphs III.B. through III.E. above. J.From 1990 through October 1995, Malek willfully violated Section 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder in that he, while acting as a broker-dealer, by the use of the mails or of the means or instrumentalities of interstate commerce, effected transactions in, or induced or attempted to induce the purchase or sale of the securities described in Paragraphs III.B. and III.C. above, by means of manipulative, deceptive or other fraudulent devices or contrivances, including acts, ======END OF PAGE 3====== practices or courses of business which operated or would operate as a fraud or deceit or made untrue statements of material fact or 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, which statements or omissions were made with knowledge or reasonable grounds to believe they were untrue or misleading, as described in Paragraphs III.B. through III.E. above. K.On September 26, 1997, the United States District Court for the Eastern District of Michigan, in the case of Securities and Exchange Commission v. William H. Malek, Dean C. Turner and Michael L. Cooperstock (Civil Action No. 97-74810), entered a Final Judgment and Order of Permanent Injunction by consent against Malek, which enjoins him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act, and Sections 10(b) and 15(a)(1) and 15(c)(1) of the Exchange Act and Rules 10b-5 and 15c1-2 thereunder. L.On August 19, 1996, in the United States District Court for the Eastern District of Michigan, in the case of United States v. William H. Malek, Crim. No. 96-80603 (E.D. Mich., August 19, 1996), Malek pled guilty to one count of violating the federal mail fraud statute in connection with the sale of LEF securities. His conviction was entered on April 14, 1997. IV. In view of the foregoing, it is in the public interest to impose the sanctions specified in the Offer of Settlement, such sanctions to begin from the date of the entry of the Commission's order. Accordingly, IT IS ORDERED THAT William H. Malek be and hereby is, barred from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, such sanction to begin from the date of the entry of this Order. By the Commission. Jonathan G. Katz Secretary ======END OF PAGE 4======