U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19864 / October 11, 2006
SEC v. Pinnacle Development Partners LLC and Gene A. O'Neal, Civil Action No. 1:06-CV-02431-JTC (NDGA October 11, 2006)
The Securities and Exchange Commission (Commission) announced today that it has filed a complaint seeking emergency relief in the United States District Court for the Northern District of Georgia against Pinnacle Development Partners LLC ("Pinnacle") and Gene A. O'Neal (O'Neal). Pinnacle is a Georgia limited liability company with its principal place of business in Atlanta, Georgia. The complaint alleges that O'Neal founded Pinnacle and serves as its managing member. The Court subsequently entered an order freezing the defendants' assets, appointing a receiver for Pinnacle and investor partnerships controlled by Pinnacle, imposing a preliminary injunction against the defendants enjoining future violations of the registration and antifraud provision of the federal securities laws, and providing other relief. The defendants consented to the order without admitting or denying the allegations in the complaint.
The complaint alleges that, from October 2005 through the present, Pinnacle and O'Neal have operated a Ponzi scheme and raised at least $30 million from more than 2,000 investors located in thirty-three states and two foreign countries. Specifically, the complaint alleges that Pinnacle fraudulently offered and sold interests in real estate development partnerships through a nationwide advertising campaign. Pinnacle also sold notes to some investors. According to the complaint, Pinnacle promised investors a 25% return in 45 (or later 60) days and a second 25% return, and the return of investor capital, after 90 days. Pinnacle represented that the profits would be earned by the respective partnership purchasing foreclosed real estate, making minor repairs and reselling the property within 45 to 60 days. In fact, without disclosure to investors, Pinnacle itself purchased property from third parties and sold it to its investor partnerships at high mark ups. The exorbitant returns promised to investors were generated by the respective partnership selling the property to other investor partnerships controlled by Pinnacle.
The Complaint alleges that the defendants have violated the registration and antifraud provisions of the federal securities laws, Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.