U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20169 / June 28, 2007
SEC v. Lawbaugh, Criminal Action No. 05-cr-0402 (D. Md.)
John Lawbaugh, Former CEO of 1st Atlantic Guaranty Corp. and SBM Certificate Co., Pleads Guilty to Stealing $1.2M From the Investment Companies, Wire Fraud, and Tax Evasion
The Securities and Exchange Commission announced today that, on June 26, 2007, John J. Lawbaugh ("Lawbaugh"), age 37, of Poolesville, Maryland, the former Chairman of the Board of Directors, Chief Executive Officer, and majority shareholder of 1st Atlantic Guaranty Corp. ("1st Atlantic") and Chairman and CEO of SBM Certificate Company ("SBM"), both face-amount certificate companies registered with the Commission, pleaded guilty to stealing over $1.2 million from 1st Atlantic and SBM, admitting that he had diverted those funds to his own use, as well as pleading guilty to wire fraud and tax evasion charges.
Lawbaugh faces a maximum sentence of five years in prison followed by three years of supervised release and a $250,000 fine on each of the wire fraud, theft from a registered investment company, and tax evasion charges. District Judge Roger W. Titus, of the United States District Court for the District of Maryland, has scheduled a sentencing hearing for October 2 and 3, 2007, as well as October 25 and 26, 2007.
Previously, on September 29, 2003, the Commission filed an enforcement action against Lawbaugh charging him with fraud, embezzlement, and other prohibited conduct in connection with his operation of 1st Atlantic and SBM. SEC v. Lawbaugh, Civil Action No. 03-cv-2768 (D. Md.) On March 14, 2005, the Commission obtained a default judgment, permanently restraining and enjoining Lawbaugh from violating 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, and Sections 17(e)(1), 34 and 37 of the Investment Company Act of 1940 ("Investment Company Act"); permanently restraining and enjoining him from serving as an officer, director, member of an advisory board, investment adviser, or depositor of any registered investment company, or as a principal underwriter for any registered open-end investment company, unit investment trust, or face-amount certificate company pursuant to Section 36(a) of the Investment Company Act; permanently restraining and enjoining him from acting as an officer or director of a public company pursuant to Section 21(d)(2) of the Exchange Act; holding him liable for disgorgement and prejudgment interest in the amount of $4,149,752.89, and finding that amount satisfied as a result of the forced sale in bankruptcy of Lawbaugh's entire stock interest in 1st Atlantic; as well as ordering Lawbaugh to pay a civil penalty of $120,000.
Additional information may be found in Litigation Release No. 18377.