==========================================START OF PAGE 1====== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 14991 / July 26, 1996 Accounting and Auditing Enforcement Release No. 805 / July 26, 1996 SECURITIES AND EXCHANGE COMMISSION v. THE BENNETT FUNDING GROUP, INC., PATRICK R. BENNETT, BENNETT MANAGEMENT AND DEVELOPMENT CORPORATION, BENNETT RECEIVABLES CORPORATION AND BENNETT RECEIVABLES CORPORATION-II, 96 Civ. 2237 (S.D.N.Y.)(JES) The Securities and Exchange Commission (the "Commission") announced today that Patrick R. Bennett ("Patrick Bennett") has consented to the entry of a preliminary injunction against future violations of the antifraud provisions of the federal securities laws ("Preliminary Injunction"); Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933. The Preliminary Injunction also freezes Patrick Bennett's assets pending the resolution of the Commission's action against him. Patrick Bennett consented to the entry of the Preliminary Injunction without admitting the allegations of the Commission's complaint. In its complaint, filed on March 28, 1996, the Commission alleges that The Bennett Funding Group, Inc. ("BFG"), a finance company headquartered in Syracuse, New York; Patrick Bennett, formerly BFG's chief financial officer; two of BFG's wholly-owned subsidiaries, Bennett Receivables Corporation ("BRC") and Bennett Receivables Corporation-II ("BRC-II"), and Bennett Management and Development Corporation ("BMDC"), fraudulently offered and sold over $570 million worth of securities from 1991 through 1995. The Commission's Complaint alleges that the defendants sold assignments of purported equipment leases ("Lease Assignments") when no underlying lease existed, including the sale of over $55 million in fictitious and supposedly tax-exempt New York City Transit Authority leases. The Complaint alleges that in cases where defendants did have an underlying lease, the defendants sometimes fraudulently purported to sell to investors leases they already had sold to other investors. The Commission further avers that defendants sold millions of dollars of BRC and BRC-II promissory notes by means of materially false BFG 1992 and 1993 audited financial statements. The Complaint alleges that Patrick Bennett, as BFG's chief financial officer, directed BFG's offer and sale of Lease Assignments and promissory notes and that he was responsible for the preparation of BFG's financial statements. The defendants allegedly diverted the proceeds from the sale of Lease Assignments and promissory notes to various people and entities connected with Patrick Bennett or the other defendants. According to the Complaint, this diversion of funds ==========================================START OF PAGE 2====== included the payment of over $10 million to Patrick Bennett personally in installments spread over at least four years. On March 29, 1996, BFG, BMDC, BRC, and BRC-II filed for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of New York. In April, a trustee was appointed to administer their estates (the "Bennett Bankruptcy Trustee"). Also on March 29, 1996, the United States Attorney for the Southern District of New York charged Patrick Bennett with violating the federal securities laws and with committing perjury before the Commission. - 2 - Patrick Bennett also was sued by the Bennett Bankruptcy Trustee in an adversary proceeding complaint dated June 6, 1996. The Preliminary Injunction allows Patrick Bennett to expend assets only to pay his living expenses, not to exceed $5,000 per month, and to pay reasonable attorneys fees. In an accompanying stipulation, the parties to the Commission's lawsuit have agreed, and the court has ordered, that discovery and the filing of certain motions in that action will be stayed until the resolution of criminal charges against Patrick Bennett. The stay of discovery in the action does not affect the Commission's ongoing investigation of the facts surrounding BFG or curb the fact-finding powers of the Bennett Bankruptcy Trustee. For more information see Litigation Release No. 14875, April 15, 1996.