Litigation Release No. 19985 / January 31, 2007

SEC v. Sharon E. Vaughn and Directors Financial Group, Ltd., Case No. 06-C-1135 (N.D. Ill.)

SEC Obtains Final Judgment Against Owner of Investment Adviser Firm

Defendant Agrees to Pay $200,000 in Civil Penalties

The Securities and Exchange Commission ("Commission") announced today that, on January 29, 2007, the U.S. District Court for the Northern District of Illinois entered a Final Judgment in the Commission's civil action against Directors Financial Group, Ltd. ("DFG"), an Illinois investment adviser formerly registered with the Commission, and Sharon E. Vaughn, DFG's owner and operator. In addition to relief previously ordered, the Court's Final Judgment requires Vaughn to pay a $200,000 civil penalty. Vaughn consented to the Final Judgment without admitting or denying the allegations of the Complaint.

The Commission filed its Complaint on March 2, 2006, alleging that Vaughn and DFG defrauded their private hedge fund clients in Directors Performance Fund, L.L.C. (the "Fund"). According to the Complaint, Vaughn and DFG, among other things (1) invested the Fund's assets in a fraudulent Prime Bank trading scheme (the "Trading Program") contrary to the Fund's disclosed trading strategy, (2) failed to investigate the Trading Program or its promoters, (3) entered into an undisclosed profit sharing agreement that ceded 25% of the Fund's purported profits to one of the Trading Program's promoters, (4) gave control of the Fund's assets to the Trading Program's promoters in violation of the terms of the Fund's prospectus, and (5) tried to cover up their fraud by withholding documents from - and providing fake documents to - the Commission's exam staff.

On March 2, 2006, Judge Charles P. Kocoras entered an order (a) permanently enjoining DFG and Vaughn from violating the provisions of federal securities law specified in the Commission's Complaint, and (b) requiring DFG and Vaughn to pay disgorgement and prejudgment interest totaling $808,820.07. Judge Kocoras subsequently authorized the distribution of all of the Fund's assets, totaling $22.5 million, to the Fund's investors, which returned their principal investment and profits preceding investment in the Trading Program.

The U.S. Attorney's Office for the Northern District of Illinois ("USAO") has indicted two individuals associated with the Trading Program. The Commission acknowledges the assistance of the USAO and the U.S. Secret Service's Chicago Field Office in this investigation.