UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16205 / July 7, 1999
SECURITIES AND EXCHANGE COMMISSION V. JAMES RUSSELL CLEVELAND, individually and d/b/a CENTRAL TEXAS SECURITIES, Civil Action No. H-96-1629, USDC, SD/TX (Houston)
The Securities and Exchange Commission ("Commission") announced that on June 28, 1999, the Hon. Melinda Harmon, United States District Judge for the Southern District of Texas, directed entry of a Final Summary Judgment against James Russell Cleveland ("Cleveland"), individually, and doing business as Central Texas Securities ("CTS"), an unincorporated association. The final judgment permanently enjoined Cleveland violating Section 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and awarded the Commission a disgorgement judgment of $2,510,000, and prejudgment interest of $623,578.67, and imposed a civil money penalty of $100,000.
Judge Harmon found that Cleveland, through CTS, took in at least $4.8 million from CTS customers for the stated purpose of purchasing municipal securities, but never purchased such securities for his victims. Cleveland fraudulently diverted these funds for his personal uses, and to make "Ponzi" payments to other victims; the disgorgement amount represents the total amount of funds Cleveland spent for personal uses.
Cleveland previously pleaded guilty to federal and state criminal charges arising from the activities set out in the Commission's Complaint, and is currently serving a 46 month sentence in a federal correctional facility. Cleveland has also been sentenced to 15 years incarceration in the Texas criminal case; this sentence is to be served concurrently with his federal incarceration, with the balance of his time served in state correctional facilities. See, L.R. 16002, L.R. 15112.http://www.sec.gov/litigation/litreleases/lr16205.htm