==========================================START OF PAGE 1====== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 15324 / April 10, 1997 Accounting and Auditing Enforcement Release No. 902 / April 10, 1997 SECURITIES AND EXCHANGE COMMISSION V. KENNETH P. KASARJIAN, THE KENTON GROUP, INC. F/K/A KENTON PORTFOLIO MANAGEMENT, INC., 97 Civ. 2516 (JES)(S.D.N.Y.) The Securities and Exchange Commission ("Commission") announced that it filed today a Complaint in federal court in Manhattan charging a former executive of The Bennett Funding Group, Inc. ("BFG") and a corporation that he controlled with directing the fraudulent offer and sale of hundreds of millions of dollars of unregistered securities on behalf of BFG and its affiliates. Today's action is the second civil suit filed by the Commission arising out of the alleged massive Ponzi scheme perpetrated by BFG and its affiliates. Named in the Complaint are: Kenneth P. Kasarjian ("Kasarjian"), 52, who was a senior vice president of BFG from about 1990 through May 1995. During this time and continuing through December 1995, Kasarjian managed sales of BFG financial products through a network of broker-dealers. The Kenton Group, Inc. ("Kenton"), a New Jersey corporation wholly-owned by Kasarjian since January 1993, and owned jointly by Kasarjian and another person from 1990 through 1992. Kenton is the corporate entity through which Kasarjian managed sales of BFG financial products. From late 1995 through 1996, Kenton created and managed investment funds designed to invest primarily in office equipment leases to be acquired from, among others, BFG and its affiliates. According to the Complaint, Kasarjian, both as an executive of BFG and through Kenton, from about 1991 through about 1996 offered and sold several hundred million dollars of securities on behalf of BFG and certain of its affiliates through a network of broker-dealers located in, among other places, New York City, New Jersey, and Philadelphia. In SEC v. The Bennett Funding Group, Inc. et al., 96 Civ. 2237 (JES) (the "SEC-Bennett District Court Action"), the Commission alleges that between 1991 through 1996, BFG and certain others engaged in a massive "Ponzi" scheme in the offer and sale of several hundred million dollars of securities including purported assignments of equipment leases ("Lease Assignments") and promissory notes ("Notes") issued by BFG, Bennett Receivables Corporation ("BRC"), or Bennett Receivables Corporation-II ("BRC-II"). The Commission alleges that BFG did not have sufficient receivable streams to support the Lease Assignments offered and sold to investors. In some instances, such as the sale of tens of millions of dollars of purported New ==========================================START OF PAGE 2====== York City Transit Authority Lease Assignments, the underlying leases simply did not exist. In other instances, the leases purportedly sold were already pledged to other investors or to banks. The Commission further alleges that BRC and BRC-II Notes were sold by means of materially false BFG financial statements. In the Complaint filed today, the Commission alleges that Kasarjian and Kenton violated the antifraud provisions of the federal securities laws when they sold BFG Lease Assignments and Notes on behalf of BFG. The Commission alleges that Kasarjian and Kenton knew or were reckless in not knowing: (a) that BFG did not have sufficient receivable streams to support the sales of Lease Assignments; and (b) that BFG's financial statements were materially false. According to the Complaint, Kasarjian and Kenton participated in sham transactions that were used to materially overstate income on BFG's audited financial statements. Those financial statements were included in memoranda used to offer and sell BRC and BRC-II Notes. Kasarjian's and Kenton's sale of the Lease Assignments allegedly also violated the registration provisions of the Securities Act of 1933. Last, Kasarjian and Kenton are charged with fraudulently offering and selling, during 1995 and 1996, approximately $27 million in membership interests in certain investment funds ("Funds") that were designed to invest in municipal leases and other debt instruments. The Complaint alleges that Kasarjian and Kenton fraudulently advanced the proceeds of these membership interest offerings to BFG and its affiliates without acquiring any such debt instruments for the Funds. The Commission seeks permanent injunctions against future violations of the securities laws, disgorgement of all ill-gotten gains, prejudgment interest, and other relief. BFG and certain of its affiliates are debtors in Chapter 11 bankruptcy proceedings pending in the United States Bankruptcy Court for the Northern District of New York. In April 1996, the bankruptcy court granted the Commission's motion for the appointment of a Chapter 11 Trustee over BFG and its affiliated debtors, and subsequently appointed Richard C. Breeden to serve in that capacity. In July 1996, Patrick Bennett consented to a preliminary injunction and an asset freeze in the SEC-Bennett District Court Action, without admitting the allegations. Since then, the SEC-Bennett District Court Action against Patrick Bennett has been stayed pending the resolution of criminal proceedings against him. The Commission's investigation of the facts surrounding the sale of BFG securities remains ongoing. For more information see Litigation Release Nos. 14875 and 14991; Accounting and Auditing Enforcement Release Nos. 772 and 805.