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             U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 15259 / February 14, 1997

UNITED STATES OF AMERICA V. KENNETH J. SCHULTE, Defendant,
(United States District Court for the Northern District of Ohio,
Case No. 1:96CR305)

     The Securities and Exchange Commission (Commission)
announced that on February 11, 1997, a federal District Court
jury sitting in Cleveland, Ohio returned guilty verdicts on all
counts of an indictment against Kenneth J. Schulte (Schulte)
charging him with fraudulently offering and selling derivative
securities to various municipalities and school districts in the
State of Ohio. The Commission originally filed a Complaint for
Preliminary and Permanent Injunction against Schulte on December
24, 1994 in the United States District Court for the Northern
District of Ohio.  Subsequently, an Order of Permanent Injunction
by Default was entered against Schulte on April 16, 1996, along
with an Order for Disgorgement in the amount of $398,787.62.

     The indictment charged Schulte with two counts of wire
fraud, three counts of mail fraud and one count of securities
fraud.  The indictment alleged that Schulte engaged in a scheme
to defraud various Ohio municipalities and school districts
through the offer and sale of derivative securities, primarily
Interest Only securities (IO's), by misrepresenting and failing
to disclose the true nature and risks of these securities. 
Specifically, the indictment charged that Schulte, while a
registered representative at Murchison Investment Bankers
(Murchison) and Hart Securities Inc. (Hart) both of Houston,
Texas, induced investors to purchase IOs and other derivative
securities by offering attractive interest rates and convincing
them that the security was guaranteed by the U.S. government and
that their investment principal was not at risk.  In reality, IOs
are not guaranteed by the U.S. government or anyone else and the
entire amount of an investor's principal is at risk.  The
indictment further charged that from January, 1990 through May,
1994 Schulte fraudulently offered and sold at least $39.4 million
of these securities to various Ohio municipalities and school
districts.  As a result of Schulte's scheme to defraud, these
investors incurred losses in excess of $6 million.

     The maximum penalty for each count of mail fraud and wire
fraud is five years incarceration and $250,000 in fines.  The
maximum penalty for securities fraud is 10 years incarceration
and $250,000 in fines.