UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16426 / February 4, 2000
SECURITIES AND EXCHANGE COMMISSION v. MICHAEL D. JENKINS, ET AL.
The Securities and Exchange Commission announced that on January 27, 2000, the Honorable Sam A. Lindsay, United States District Court for the Northern District of Texas, entered final judgments of permanent injunction against defendants Michael D. Jenkins and Michael L. Kinney. The judgments permanently enjoined both defendants from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5, thereunder. Kinney was also enjoined from violating Section 15(a) of the Exchange Act. The Court did not not order Jenkins to pay disgorgement based on an existing restitution order in a related criminal case. Defendant Kinney was ordered to pay disgorgement in the amount of $7,800, however payment of disgorgement was waived based upon Kinney's sworn showing of inability to pay. Moreover, the Court did not order either defendant to pay a civil penalty because of his demonstrated inability to pay. Jenkins and Kinney consented to the entry of the judgments.
The Complaint, which was filed by the Commission on August 11, 1998, alleged that between 1992 and 1996, Jenkins' privately-held company offered and sold securities in the form of promissory notes, raising approximately $4.5 million from at least 150 investors in fifteen states. The majority of the funds raised were for the stated purpose of developing a Missouri sand-mine that never became operational. The complaint alleged that Jenkins defrauded investors by failing to disclose material facts about the ownership of the sand-mine and by misappropriating approximately $1.5 million of investor funds. In August 1999, Jenkins pleaded guilty to one count of securities fraud based on the activities alleged in the Commission's Complaint. U.S. v. Michael D. Jenkins, CR 3:98-177-G, USDC NDTX. Pursuant to his plea, Jenkins was sentenced to a 27 month federal prison term followed by a three year period of supervised release. Jenkins was further ordered to pay approximately $1.5 million in restitution to his investors.
According to the complaint, defendant Kinney along with two other defendants, collectively raised approximately $800,000 in promissory notes issued by Jenkins' company. The Complaint further alleges that in connection with the offer and sale of the notes, Kinney made material misrepresentations and omissions of material fact concerning, among other things, the ownership of the sand mine, the use of investor funds, and the safety of the investment.