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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23828 / May 9, 2017

Securities and Exchange Commission v. Matthew E. White, et al., No. 16-cv-2715 (N.D. Ga.)

SEC Obtains Final Judgments in Grand Empire Palace and Resort Bond Offering Fraud

The Securities and Exchange Commission today announced that it obtained final judgments against Matthew E. White, Rodney A. Zehner, Daniel J. Merandi, and their six affiliated corporate entities.

On July 27, 2016, in an emergency action filed in federal court in Atlanta, the SEC alleged that White, Zehner and Merandi fraudulently issued $1 billion in unsecured corporate bonds out of a shell company and claimed the money would be used to fund construction of a resort complex in Georgia called the Grand Empire Palace and Resort. But they never came close to raising the funds necessary to start the project, and in the meantime they pocketed the $5.6 million they did raise and used it for extravagant trips and personal purchases at stores such as Saks Fifth Avenue, Gucci, Louis Vuitton, Prada, and Versace. The SEC obtained an order freezing the defendants' cash held in a brokerage account and freezing the bonds held in a separate brokerage account.

The final judgments, entered by the Honorable William S. Duffey, Jr. of the U.S. District Court for the Northern District of Georgia on March 31, 2017 and May 1, 2017, permanently enjoin the defendants from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and prohibit the defendants from participating in the future issuance, offer, or sale of any security, except for trading in their own personal accounts. The judgments also order the defendants to disgorge approximately $6 million in ill-gotten gains and prejudgment interest and order White, Zehner, and Merandi to pay combined civil penalties of $450,000. The defendants neither admit nor deny the allegations in the SEC's complaint.

The SEC's litigation was led by H.B. Roback, Anthony J. Winter, and Debbie T. Hampton of the Atlanta Regional Office.

 

https://www.sec.gov/litigation/litreleases/2017/lr23828.htm


Modified: 05/09/2017