U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19854 / September 29, 2006
SEC v. Paul V. Degenhart, University Club Group, Inc. and UC Properties, LLC, Civil Action No. 2:04-CV-23267 (DSC)
Federal Judge Permanently Enjoins Paul V. Degenhart, University Club Group, Inc. and UC Properties, LLC
The Securities and Exchange Commission (Commission) announced that on September 28, 2006, the Honorable David C. Norton, United States District Judge for the District of South Carolina, Charleston Division, entered Final Judgments as to Defendants Paul V. Degenhart (Degenhart), University Club Group, Inc. (UC Group) and UC Properties, LLC (UC Properties). The defendants were enjoined from future violations of Section 17(a) of the Securities Act of 1933 (Securities Act), Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The Court ordered disgorgement and prejudgment interest against Degenhart, but waived payment of all but $50,000 due to Degenhart's sworn representations in his Statement of Financial Condition, and did not impose a civil penalty. The defendants consented to the entries of the judgments against them without admitting or denying any of the allegations of the Commission's Complaint.
The Complaint alleged that from November 1998 through May 2002, the defendants operated a Ponzi scheme through a series of twenty-one securities offerings they made with the assistance of Southern Financial Group, Inc., a former South Carolina broker-dealer which served as underwriter for these offerings. The actual amount of funds raised from the offerings, including rolled-over investments, totaled approximately $29.8 million. The Complaint alleged that the defendants knew, or were severely reckless in not knowing, but failed to disclose to investors, that the note offerings operated as a Ponzi scheme. The Complaint further alleged that the defendants knew, or were severely reckless in not knowing, that the information presented to investors in connection with these offerings failed to disclose that the collateral was insufficient to secure the payment of the notes, and that the offering materials presented to investors falsely represented, among other things, the interest rates and amounts of UC Group and UC Properties outstanding obligations.
Degenhart is an owner and the controlling person of UC Group and UC Properties in Columbia, South Carolina.