UNITED STATES SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 15473 / September 4, 1997 Securities and Exchange Commission v. J. Bristow Anderson, Bradley F. Bahret, Deborah D. Bahret, Lisa R. Burgess-Pittman, Linda A. Connor, George L. Gore, Jr., Moroni Leon Jensen, Stephen J. Katz, Charles R. Perry, Jr. (N.D. Ga., Civil Action No. 1-97-CV-2432-JEC) The Securities and Exchange Commission announced today that it has charged seven Atlanta, Georgia residents and two Denver, Colorado men with illegal insider trading of Paragon Mortgage Corporation stock. The nine defendants are J. Bristow Anderson of Atlanta, Georgia, Bradley F. Bahret of Marietta, Georgia, Deborah D. Bahret of Marietta, Georgia, Lisa R. Burgess-Pittman of Roswell, Georgia, Linda A. Connor of Acworth, Georgia, George L. Gore, Jr. of Castle Rock, Colorado, Moroni Leon Jensen of Duluth, Georgia, Stephen J. Katz of Alpharetta, Georgia, and Charles R. Perry, Jr. of Denver, Colorado. Deborah Bahret, Burgess-Pittman, Connor, Gore, Katz and Perry are former employees, and Jensen is a former director, of Paragon Mortgage Corporation, a now defunct mortgage banking company formerly headquartered in Smyrna, Georgia. Anderson is an attorney in Atlanta and Bradley Bahret is the husband of Deborah Bahret. The complaint alleges as follows. From 1989 through 1993, W. Gene Ross and Lynn K. Ross (the "Ross brothers") misappropriated $229,040 from Paragon to pay principal and interest on four personal loans. Gene Ross was Paragon's chief executive officer and chairman of its board, and Lynn Ross was a director of Paragon and its president. Jensen was chairman of the Paragon board's special litigation committee which retained special counsel to investigate the apparent misconduct of the Ross brothers. Jensen illegally tipped his mother to sell 1,000 shares of Paragon stock on November 15, 1993, and illegally tipped his daughter to sell 2,500 shares on December 2, 1993, before the Ross brothers' misconduct was publicly disclosed on December 21, 1993. Previously, in October 1993, Jensen had illegally tipped his mother to purchase 1,000 shares of Paragon stock prior to a favorable, public announcement regarding Paragon's planned takeover of a competitor. Jensen's illegal tipping allowed his mother and daughter to obtain ill- gotten gains and avoid losses totalling $5,125. On December 13, 1993, Connor illegally tipped her husband about nonpublic information regarding the Ross brothers' misconduct. The next day, Connor's husband sold 1,500 shares of Paragon stock. On the morning of December 21, 1993, Jensen and Paragon's new president, conducted a confidential, internal meeting for Paragon employees. Jensen and Paragon's president read the employees a - 2 - ======END OF PAGE 1====== press release which the employees were told would not be issued until after the stock market closed that day. The press release included information regarding the Ross brothers' misconduct and resignations, problems with Paragon's 1992 and 1993 financial statements, and uncertainties regarding Paragon's ability to conduct its mortgage lending business. During the meeting, Jensen and Paragon's president told the employees on several occasions that they were prohibited from selling their Paragon stock or conveying the information to others because of insider trading laws. The warnings were consistent with Paragon's written corporate policy which prohibited Paragon's employees from selling Paragon stock, or advising others to sell Paragon stock, while the employee was in possession of material, nonpublic information. All Paragon employees had received a copy of this policy which had been written by Jensen. The employees were also told that selling their stock would be illegal and could subject them to criminal prosecution, including jail time, and were told that the Securities and Exchange Commission would investigate any trading of Paragon stock. Shortly after the meeting, Deborah Bahret illegally tipped her husband, a former stockbroker, and advised him to sell 2,000 shares of Paragon stock; Burgess-Pittman illegally tipped her sister and advised her to sell 1,000 shares of Paragon stock; Katz illegally sold 1,500 shares of Paragon stock and then illegally tipped Anderson who sold 1,000 shares of Paragon stock; and Gore and Perry, after reviewing the press release in Paragon's Denver, Colorado office, illegally sold 2,000 and 3,000 shares of Paragon stock, respectively. Later that day, trading in Paragon's stock was halted and for the first time, Paragon publicly issued the press release which it had provided to its employees earlier that day. On December 23, 1993, Paragon's stock resumed trading, hitting a low of $ 3/4 per share, down 63% from the previous closing price of $2 per share, before closing at $1 1/4 per share, down approximately 40% from the previous closing price. Anderson, Deborah Bahret, Burgess-Pittman, Connor, Katz and Perry, have each consented to a permanent injunction, without admitting or denying the allegations set forth in the complaint, which enjoins them from violating the antifraud provisions of the federal securities laws. Anderson, Deborah Bahret, Burgess-Pittman, Connor, Katz and Perry have agreed to pay disgorgement in the amounts of $937.50, $2,000, $937.50, $1,406.25, $1,500 and $2,250, respectively, for losses they illegally avoided, plus pay $187.50, $500, $225, $187.50, $393 and $600, respectively, of prejudgment interest. Further, Anderson, Deborah Bahret, Burgess-Pittman, Connor, Katz and Perry have also agreed to pay civil penalties in the amounts of $1,875, $4,000, $937.50, $1,406.25, $2,437.50 and $2,250, respectively. Litigation against defendants Bradley Bahret, Gore and Jensen is continuing. ======END OF PAGE 2======