U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19922 / November 21, 2006

SEC v. Gary L. McNaughton, Individually and d/b/a The Haven Equity Company, and Andrew K. Lech, Civil Action No. 1:03CV1249 (U.S.D.C. N.D. OH., filed June 23, 2003) (Judge Dan A. Polster)

The Securities and Exchange Commission announced that on November 14, 2006, the United States Attorneys Office for the Northern District of Ohio filed charges against Gary L. McNaughton in the United States District Court in Cleveland, Ohio. These charges stem from McNaughton's role in a Ponzi scheme in which he fraudulently raised at least $17 million from approximately 200 investors and which was the subject of a prior Commission action.

In the criminal case, McNaughton is charged with committing securities fraud, mail fraud, money laundering, tax evasion, unlawful sale of unregistered securities and making false statements. The indictment charges that McNaughton raised at least $17 million from approximately 200 investors through the sale of unregistered securities in the form of notes under the name of The Haven Equity Company. The indictment further charges that McNaughton fraudulently guaranteed an annual return of 10% to 35% on the investment and told investors that they would receive their returns in the form of monthly interest payments. According to the indictment, McNaughton also told investors that he would send their money to a trader and friend in Ontario, Canada, who would use a trading strategy to generate the guaranteed returns. However, rather than investing the funds, McNaughton used investor funds to, among other things, pay purported interest and principal to existing investors and pay his personal expenses.

On June 23, 2004, the Commission filed a Complaint against McNaughton and obtained a temporary restraining order and asset freeze against him. On December 4, 2003, the Commission obtained an order of permanent injunction against McNaughton, pursuant to his consent, based on his violations of 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. On August 23, 2004, the Commission obtained a Final Judgment and Order of Disgorgement against McNaughton.

For additional information, see Litigation Release Nos. 18202 (June 26, 2003), 18875 (September 9, 2004), and 19365 (September 7, 2005).