U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22634 / March 7, 2013
Securities and Exchange Commission v. Gerald D. Kegley, et al., Civil Action No. Case No. 1:12-CV-1605 (N.D. Ga)
Court enters final judgment against Arizona Resident
The Securities and Exchange Commission ("Commission") announced today that the Honorable Thomas W. Thrash, Jr., United States District Judge for the Northern District of Georgia, entered a final judgment on February 26, 2013, permanently enjoining Gerald D. Kegley ("Kegley"). The final judgment restrained and enjoined Kegley from future violations of Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated thereunder. The order also restrained and enjoined Kegely from aiding and abetting future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Kegley was ordered to pay disgorgement of $99,940, prejudgment interest of $9,851.93, and a civil penalty of $99,940, for a total of $209,731.92.
The Commission's complaint, filed on May 8, 2012, alleged that from at least April 8, 2010 through at least August 20, 2010, the defendants were directly responsible for introducing six individuals, who invested $1.95 million, to the fraudulent scheme. The complaint alleges that in furtherance of the scheme, the defendants forwarded misrepresentations made by others to investors. These misrepresentations included: 1) that investors could draw upon bank issued guarantees worth millions of dollars without having to repay the withdrawn funds; and 2) that investor funds would be held in escrow until the bank guarantees were issued. The complaint alleges that defendants knew or were reckless in not knowing that both of these representations were false because no such bank guarantees existed and investor funds were misappropriated immediately upon receipt.
Defendants also misrepresented that they would be paid commissions only once the investor received the bank guarantee. In fact, defendants were paid commissions relatively soon after the investors transferred the money. Defendants further told investors that they had previously worked on a successful bank guarantee program. Defendants, however, had actually reported this purportedly successful bank guarantee program to the Federal Bureau of Investigation because they believed it was a fraud.
See also L.R. 22361