U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20773 / October 6, 2008
Securities and Exchange Commission v. Jonathan W. Mikula, John B. Craddock, JW&P Consulting, LLC, and Nations Warranty Group, Inc., Civil Action No. 1:08-CV-3097-BBN (NDGA, October 2, 2008)
The Securities and Exchange Commission (Commission) announced today that, on October 2, 2008, it filed a Complaint and application for emergency relief in the United States District Court for the Northern District of Georgia against Jonathan W. Mikula (Mikula), John B. Craddock (Craddock), JW&P Consulting, LLC (JW&P Consulting), and Nations Warranty Group, Inc. (Nations Warranty) (collectively, the Defendants). The Commission alleges that since approximately January 2008, Mikula, a recidivist securities law violator, and Craddock, acting individually or through Nations Warranty or JW&P Consulting, have used misrepresentations and omissions of material fact to offer and sell approximately $2.8 million of securities issued by Nations Warranty in unregistered transactions to approximately 120 investors.
Nations Warranty is a Marietta, Georgia-based extended automobile warranty broker that is majority-owned and controlled by Craddock and partially owned by Mikula. The Complaint alleges that Mikula, operating through his wholly-owned entity JW&P Consulting, and Craddock used material misrepresentations and omissions of material facts to offer and sell short-term promissory notes issued by Nations Warranty. The notes were sold with terms of either 100 or 220 days, and promised rates of return of 4% or 5% per month, respectively. Among the misrepresentations and omissions, the defendants described Nations Warranty to investors as a profitable company when, in fact, Nations Warranty has incurred a net loss of at least $1.2 million during 2008. Defendants also claimed the Nations Warranty notes were "guaranteed" when, in fact, they were not. Furthermore, Defendants represented that JW&P Consulting had evaluated the risks of investing in Nations Warranty notes and had found the risks acceptable. However, Defendants failed to disclose that JW&P Consulting was nothing more than Mikula himself and that Mikula had been enjoined in a Commission action in July 2007 for operating a Ponzi scheme (See SEC Litigation Release No. 20205).
The Commission alleges that, by their conduct, the Defendants have violated 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 (Exchange Act) and Rule 10b-5 thereunder. The Complaint also alleges that Mikula and JW&P Consulting violated Section 15(a) of the Exchange Act. The Complaint seeks against the Defendants preliminary and permanent injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties.
On October 2, 2008, the Honorable Beverly B. Martin, United States District Judge for the Northern District of Georgia, granted the Commission's application for emergency relief and entered a temporary restraining order and asset freeze against the Defendants. The Court also appointed, at the Commission's request, a receiver for the estates of Nations Warranty and JW&P Consulting. A hearing on the Commission's application for a preliminary injunction is scheduled for October 9, 2008. The litigation is pending as to all parties.