Litigation Release No. 21112 / June 30, 2009

Securities and Exchange Commission v. Don Warner Reinhard, Case No. 4:07-cv-00529-RH-WCS (N.D. Fla.)


The Securities and Exchange Commission announced that on December 9, 2008, the United States District Court for the Northern District of Florida entered a Judgment against Defendant Don Warner Reinhard ordering him to pay disgorgement in the amount of $5,857,241.09, together with prejudgment interest of $2,258,940.58 and imposing a civil penalty of $120,000. Previously, on October 3, 2008, the Court entered a Judgment of Permanent Injunction and Other Relief against Reinhard, which permanently enjoined him from (i) violations of Section 17(a) of the Securities Act of 1933; (ii) violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (iii) violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act"); (iv) aiding and abetting violations of Section 206(4) of the Advisers Act and Rule 206(4)-4(a)(2) thereunder; (v) aiding and abetting violations of Section 204 of the Advisers Act and Rule 204-2(a)(7) thereunder; and (vi) violations of Section 207 of the Advisers Act.

The Commission began this action by filing its complaint against Reinhard on December 13, 2007. The complaint alleged that Reinhard, through his wholly owned investment adviser, Magnolia Capital Advisors, Inc., made false and misleading statements and omissions of material fact to his clients in connection with the offer and sale of collateralized mortgage obligations ("CMOs"). Specifically, Reinhard misrepresented the safety of principal in the highly leveraged CMOs he purchased for his clients' accounts and the account of Magnolia Capital Partners, L.P., a hedge fund he controlled as the general partner.

For additional information, see Litigation Release No. 20401 (December 17, 2007).