Litigation Release No. 16175 / June 4, 1999

Securities and Exchange Commission v. Keith Knutsson, Defendant and Kaldi, Inc., Relief Defendant. Civil Action No. 1:97-2514-CC (N.D. Ga. June 1, 1999)

Federal Judge Permanently Enjoins Keith Knutsson In Fraudulent Offering

The Securities and Exchange Commission announced today that Judge Clarence Cooper of the United States District Court for the Northern District of Georgia entered an Order of Permanent Injunction And Other Relief against Keith Knutsson ("Knutsson") restraining and enjoining him from further violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. Knutsson consented to the entry of the permanent injunction without admitting or denying the allegations of the Commission's complaint. The Court ordered disgorgement against Knutsson and relief defendant Kaldi, Inc. ("Kaldi") in the amount of $779,395 for each defendant but waived payment based upon Knutsson's and Kaldi's demonstrated inability to pay. The Order did not impose a civil penalty against Knutsson based upon his demonstrated inability to pay.

The Commission's complaint, filed on August 29, 1997, alleged that Knutsson conducted a fraudulent offering of notes, options to acquire stock, and investment contracts purportedly to finance the establishment of Kaldi Koffee, an entity which Knutsson proposed to form for the purpose of opening a chain of specialty coffee shops in Europe. In the offering, Knutsson made misrepresentations including ones related to return on investment and use of proceeds. In actuality, Knutsson misappropriated the money he raised, using it to pay for several trips to Europe, two Paris apartments and other personal expenses. As a corporation controlled by Knutsson that received investor funds, Kaldi was sued as a relief defendant.

The complaint sought a permanent injunction against defendant Knutsson to prevent future violations of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint also sought disgorgement, prejudgment interest and civil penalties from defendant Knutsson and disgorgement and prejudgment interest from relief defendant Kaldi.

See also: L.R. 15475 (September 4, 1997)