U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21077 / June 9, 2009
Securities and Exchange Commission v. Christopher M. Kunkel, 1:09-CV-1481 (N.D. Ga. June 4, 2009)
The Securities and Exchange Commission ("Commission") announced that on June 4, 2009, it filed a complaint in the United States District Court for the Northern District of Georgia against Christopher M. Kunkel ("Kunkel"). The complaint alleges that Kunkel, an attorney and resident of Grayson, Georgia, provided services to Pinnacle Development Partners LLC ("Pinnacle") and assisted in a fraudulent unregistered offering of securities by Pinnacle in the form of nominal general partnership interests.
The complaint alleges that from October 2005 until October 2006, Pinnacle raised more than $62 million from approximately 2,220 investors in 48 states and several foreign countries through a national advertising scheme which promised investors a 25% return in 45 or 60 days. The complaint further alleges that although the investments were described as general partnerships, they functioned as limited partnerships in that Pinnacle had sole control of the ventures. Further, the complaint alleges that Pinnacle's investment program purported to generate profits by buying and flipping foreclosed real estate in Atlanta. In fact, the investment program functioned as a Ponzi scheme in which Pinnacle used investments by later investors to generate returns for earlier investors.
The complaint further alleges that Kunkel knew Pinnacle was advertising a 25% profit to investors in 45 days and understood that the promised return was "nonsensical." Kunkel was also aware that Pinnacle was not effecting sufficient real estate transactions on behalf of the partnerships to generate the purported returns. Despite this knowledge, Kunkel allegedly spoke with prospective investors on a regular basis and vouched that the company had always paid investors profits on a timely basis. In his conversations with investors, Kunkel failed to disclose his belief that the promised return was nonsensical or that Pinnacle was not selling sufficient properties to pay the returns promised to investors. According to the complaint, Kunkel also wrote a reference letter that Pinnacle sent to prospective investors personally touting the integrity of Pinnacle and its business model and informing investors that they might forfeit their profits if they contacted other Pinnacle investors without his permission.
In a consent filed with the complaint, Kunkel agreed, without admitting or denying the allegations in the complaint, to the entry of a final judgment permanently enjoining him from future violations of the registration and antifraud provisions of the federal securities laws, Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, Kunkel consented to pay disgorgement of $81,023 plus prejudgment interest of $2,796, provided that payment of the disgorgement be waived and a civil penalty not be imposed based on Kunkel's sworn representations in his Statement of Financial Condition.
See also: L.R. No. 19864 / October 11, 2006