UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7458 / September 29, 1997 SECURITIES EXCHANGE ACT OF 1934 Release No. 39142 / September 29, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9446 : In the Matter of : : ORDER INSTITUTING PUBLIC LDF MANAGEMENT, INC. and : ADMINISTRATIVE PROCEEDING, MAKING LAURA D. FLETCHER : FINDINGS AND ISSUING A : CEASE-AND-DESIST ORDER Respondents.: : I. The Securities and Exchange Commission ("Commission") deems it appropriate that a public administrative proceeding pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") be instituted against LDF Management, Inc. ("LDF") and Laura D. Fletcher ("Fletcher"). II. In anticipation of the institution of this proceeding, LDF and Fletcher have each submitted an Offer of Settlement, each of 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 in which the Commission is a party, and without admitting or denying the findings contained herein, except that LDF and Fletcher each admits the jurisdiction of the Commission over each of them and over the subject matter of this proceeding, LDF and Fletcher each consents to the entry of this Order Instituting Public Administrative Proceeding, Making Findings and Issuing a Cease-and-Desist Order ("Order") set forth below. Accordingly, IT IS ORDERED that a proceeding pursuant to Section 8A of the Securities Act and 21C of the Exchange Act be, and hereby is, instituted. III. On the basis of this Order and the Offers of Settlement submitted by LDF and Fletcher, the Commission finds<(1)> that: A. ENTITIES INVOLVED 1. Mustang Development Corporation ("Mustang") is a California corporation, incorporated on November 25, 1987 and located in Beverly Hills, California. From 1987 through October 1994, Mustang was controlled by Neal Stein ("Stein") and Cary Greene ("Greene"). During the same period, Mustang was the corporate general partner for approximately 60 oil and gas limited partnerships. 2. Tower Operating Company ("Tower") is a California corporation, incorporated on September 15, 1987, and located in Beverly Hills, California and Tulsa, Oklahoma. From 1987 through 1995, Mustang contracted with Tower to develop oil and gas properties for the Mustang limited partnerships. From 1987 through October 1994, Tower was owned and controlled by Stein and Greene. Tower's Beverly Hills office was located in the same building as Mustang's office. B. RESPONDENTS 1. LDF Management, Inc. ("LDF"), incorporated in 1993, was located in Beverly Hills, California, and operated out of the same building as Mustang and Tower. LDF is Fletcher's personal service corporation, and Fletcher is LDF's sole employee. From 1993 through 1995, Fletcher, through LDF, provided business and financial management services to Tower. 2. Laura D. Fletcher is 63 years old and resides in La Crescenta, California. Fletcher is the president and sole owner of LDF. From 1992 through 1995, Fletcher provided business and financial management services to Tower, first through a sole proprietorship and then through her corporation, LDF. C. FACTS 1. From December 1987 through March 1995, Mustang raised approximately $139 million from thousands of investors nationwide in the sale of interests in approximately 60 oil and gas limited partnerships. 2. Mustang's disclosure documents informed investors that the purpose of the Mustang partnerships was to find, develop, and produce commercial reserves of oil and gas. From 1987 through 1995, Mustang contracted with Tower to acquire and operate oil and gas wells on behalf of the Mustang partnerships. Mustang represented to investors that 81% of <(1)>The findings herein are made pursuant to LDF's and Fletcher's Offers of Settlement and are not binding on any other person or entity named as a respondent in this or any other proceeding. ======END OF PAGE 2====== investor funds would go to Tower to acquire and operate these oil and gas wells. 3. Beginning in 1992, Stein and Greene hired Fletcher to take over the management of Tower's bank accounts and finances. When Fletcher formed LDF in 1993, she managed Tower's finances through her company, LDF. 4. From August 1994 through February 1995, Mustang raised approximately $16.7 million from investors in five oil and gas limited partnership offerings ("the five partnerships"). Mustang transferred 81% of the $16.7 million raised from the five partnerships, approximately $13.3 million, to Tower for the purpose of acquiring and operating the oil and gas wells on behalf of the five partnerships. Fletcher, acting as financial manager for Tower through LDF, knew of Tower's receipt of these funds and knew that these funds represented Mustang investor capital. 5. In contrast to Mustang's representations to investors, Tower did not use the funds it received from Mustang to acquire and operate oil and gas wells. Instead, Tower misappropriated $12.7 million of the $13.3 million it received from the five partnerships. As manager of Tower's finances, Fletcher, through LDF, effected the misappropriation of investor funds pursuant to instructions from Stein and Greene. In several instances, Fletcher personally executed checks drawn against Tower accounts to finance the lavish personal lifestyles of Stein and Greene and to support their various business ventures. At the further direction of Stein and Greene, Fletcher, through LDF, used a portion of the proceeds from the five partnerships to execute a Ponzi scheme. In that respect, Fletcher and LDF knowingly executed the transfer of investor proceeds from Tower to over 50 Mustang partnerships for the purpose of paying fictitious returns to investors. 6. As a result of the conduct identified in paragraphs III.C.1. through III.C.5., LDF and Fletcher caused violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in that LDF and Fletcher, in the offer and sale of securities, and in connection with the purchase and sale of securities, by the use of the means and instruments and instrumentalities of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, caused, due to acts and omissions LDF and Fletcher knew or should have known would contribute to others' violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, the employing of devices, schemes and artifices to defraud; the obtaining of money and property by the means of untrue statements of material facts and omissions 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 the engaging in of acts, transactions, practices or courses of business which operated as a fraud or deceit upon persons. As part of the foregoing conduct, from August 1994 through February 1995, LDF and Fletcher caused misrepresentations and omissions of material facts to be made to Mustang investors by, at the direction of Stein and Greene, effecting the misappropriation of $12.7 million in ======END OF PAGE 3====== proceeds obtained from the sale of interests in oil and gas limited partnerships. IV. Based on the foregoing, the Commission deems it appropriate to accept the Offers of Settlement submitted by LDF and Fletcher. Accordingly, IT IS HEREBY ORDERED that: 1. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, LDF cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and 2. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Fletcher cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. By the Commission. Jonathan G. Katz Secretary ======END OF PAGE 4======