UNITED STATES SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 15440 / August 12, 1997 SECURITIES AND EXCHANGE COMMISSION v. AMERICAN GROWTH CAPITAL CORP., AMERICAN GROWTH FUND I, LP, GROWTH CAPITAL RESOURCES CORP., CAPITAL GROWTH FUND I, LP, DONNA L. SNYDER, CHARLES E. DUQUETTE, ROBERT K. KELLY, HUGO V. CIANCIULLI, WILLIAM M. MCNARY, EMANUEL B. NEDWICK, JEROME L. GLAZOV, AND CHRISTOPHER A. PAULICK, Civil Action No. 97-5993 RAP (JGx) (C.D. Cal.). The Securities and Exchange Commission announced, on August 12, 1997, that it filed suit, in the United States District Court in Los Angeles, against two Las Vegas-based investment advisers, and eight affiliated individuals, alleging fraud and other securities law violations in connection with the sale of investments in and/or the management of two investment companies. The Commission's Complaint alleges that American Growth Capital, an investment adviser formerly based in Orange County, California, and now based in Las Vegas, Nevada, fraudulently managed American Growth Fund I, an investment company with almost $7.4 million under management and over 300 investors nationwide. According to the Complaint, American Growth Capital and American Growth Fund were both managed by Defendants Donna L. Snyder and Charles E. Duquette (both of Las Vegas). The Complaint alleges that American Growth Capital, Snyder, and Duquette misused and misappropriated at least $1.6 million of investor funds to pay for: (1) $945,000 in sham investments in shell companies (companies with no assets and that conducted no business) controlled by Snyder and Duquette; (2) $185,600 in undisclosed and excessive commissions on sales of investments in American Growth Fund; and (3) $468,000 in undisclosed payments to American Growth Capital, Snyder, and Duquette. Moreover, the Complaint alleges that Defendants American Growth Capital, Snyder, and Duquette failed to disclose to investors that Duquette was acting as a control person of both American Growth Capital and American Growth Fund. In addition, the Commission's Complaint alleges that American Growth Capital, Snyder, and Duquette raised over $800,000 for a company in which American Growth Fund had invested and then misappropriated this money for their own personal and business uses. The Commission's Complaint charges American Growth Capital, Snyder and Duquette with violating and/or aiding and abetting violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Also named as defendants were Emanuel B. Nedwick (West Hills, California), Jerome L. Glazov (Paradise Valley, Arizona), and Christopher A. Paulick (North Hollywood, California), who sold and/or supervised sales of investments in American Growth Fund. The Complaint alleges that these defendants committed fraud by failing to disclose to investors that they and others were receiving commissions up to almost three times the stated commission amount (10%). The Complaint charges Nedwick, Glazov, and Paulick with violating the antifraud provisions of Section 17(a) of the ======END OF PAGE 1====== Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Complaint further charges American Growth Capital, American Growth Fund, Snyder, Duquette, Nedwick, Glazov, and Paulick with unlawful sales of unregistered securities of American Growth Fund in violation of Sections 5(a) and 5(c) of the Securities Act. The Commission's Complaint also alleges that Glazov and Paulick, aided and abetted by Snyder and Duquette, were unregistered broker-dealers in selling investments in American Growth Fund, in violation of Section 15(a)(1) of the Exchange Act. And the Complaint charges American Growth Fund with unlawfully operating as an investment company without registering with the Commission, in violation of Section 7(a) of the Investment Company Act of 1940. The Commission's Complaint also alleges that Growth Capital Resources, an investment adviser in Las Vegas, fraudulently managed Capital Growth Fund, an investment company with almost $500,000 under management and over 25 investors from several states. According to the Complaint, Growth Capital Resources and Capital Growth Fund were managed by Defendants Duquette, Hugo V. Cianciulli (Las Vegas), Robert K. Kelly (Las Vegas), and William M. McNary (Henderson, Nevada). The Complaint alleges that Growth Capital Resources, Duquette, Cianciulli, Kelly, and McNary misappropriated at least $44,000 for undisclosed payments to Kelly, Cianciulli, McNary, and to Growth Capital. Furthermore, the Complaint alleges that these defendants failed to disclose to investors that Duquette was a control person of both Growth Capital Resources and Capital Growth Fund. The Complaint charges Growth Capital Resources, Duquette, Cianciulli, Kelly, and McNary with violations of the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act. The Complaint also charges Capital Growth Fund with unlawfully operating as an investment company without registering with the Commission, in violation of Section 7(a) of the Investment Company Act. In addition, the Complaint charges Growth Capital Resources with receiving an undisclosed kickback in connection with an investment made by Capital Growth Fund, in violation of Section 17(e)(1) of the Investment Company Act. The Commission also announced that Growth Capital Resources and Capital Growth Fund consented, without admitting or denying the allegations in the Complaint, to the entry of permanent injunctions enjoining them from future violations of certain provisions of the federal securities laws and to the appointment of a permanent receiver over them. The receiver will marshall and preserve the assets of these entities from further misappropriation and oversee eventual liquidation of the Fund. ======END OF PAGE 2======