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U.S. Securities and Exchange Commission


Litigation Release No. 19660 / April 17, 2006

SEC v. Credit First Fund, LP, Credit First, LLC, Credit First Income Plus, LLC, Investors First Financial Services, Inc., Investors Guild, Inc., and David R. Lund, Civil Action No. CV-05-8741-DSF(PJWx) (C.D. Cal.)

SEC Seeks Civil Contempt Order Against Architect of Offering Fraud Targeting Seniors

On March 31, 2006, the Securities and Exchange Commission ("Commission") filed in United States District Court for the Central District of California an application for an order to show cause why David R. Lund of Newport Beach, California should not be held in civil contempt for failing to comply with the court's preliminary injunction, order freezing assets, and other orders. According to the Commission's court papers, Lund has not complied with the court's orders freezing all of his monies and assets and prohibiting him from converting, disposing of or dissipating any of his property. According to the Commission, on December 19, 2005, three days after Lund was served with the court's asset freeze order, he applied to World Savings Bank for a refinancing of his Newport Beach, California property. When the refinancing closed on January 24, 2006, Lund converted $279,850 of the loan proceeds for his personal use. Should the court hold Lund in civil contempt, the Commission asked that the court impose a sanction sufficiently coercive to compel his compliance with the orders. Specifically, the Commission asked the court to incarcerate Lund and levy a daily fine until he complies with the orders. The Commission requested a May 1, 2006 hearing date for the contempt application.

The Commission filed a complaint against Lund, his companies, Investors First Financial Services, Inc. ("Investors First") and Investors Guild, Inc., and the three private offering funds Lund managed through his companies, Credit First Fund, LP, Credit First, LLC, and Credit First Income Plus, LLC (collectively, "Credit First"), in federal court on December 15, 2005, alleging that the defendants fraudulently induced elderly investors nationwide to purchase $10.7 million of ownership units in Credit First. The defendants represented that investor funds would be used to purchase distressed debt, which Credit First would collect or resell at a profit. The defendants also represented that Credit First would pay investors a monthly return of one to three percent on their investment from Credit First's operations. The Commission alleges that, in actuality, Credit First was not profitable and Lund was operating a Ponzi-like scheme by using investor monies to pay promised returns. The Commission obtained orders freezing each of the defendants' assets, appointing a permanent receiver over Credit First, Investors First, and Investors Guild, Inc., prohibiting the destruction of documents, requiring accountings from the defendants, and preliminarily enjoining all of the defendants from future violations of the securities registration and antifraud provisions of the federal securities laws, Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The court found that "[p]laintiff provides evidence that at least some investors were told or led to believe through omission that they would be receiving a 1% (or more) return of profits," and "[d]efendants cannot overcome Plaintiff's evidence that material misrepresentations or omissions were made to investors regarding the profitability of the Funds." The SEC also seeks other relief, including disgorgement and civil penalties, against all defendants. (LR-19497, LR-19565).



Modified: 04/17/2006