U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16712 / September 20, 2000
SECURITIES AND EXCHANGE COMMISSION v. RYNELL & ASSOCIATES, INC., LENGURNAL, INC., FIRST PARAGON, INC., MOVIE MANAGEMENT SERVICES, INC., DAVID L. BURNELL, J. ERIC RYMLAND AND DANIEL B. RUNG, Civil Action No. 98-6508 (C.D. Cal.)
The Securities and Exchange Commission ("Commission") announced that the United States District Court for the Central District of California entered a Final Judgment of Permanent Injunction and Disgorgement ("Final Judgment") against defendants J. Eric Rymland ("Rymland") and First Paragon, Inc. ("First Paragon") on August 31, 2000. The Final Judgment permanently enjoins Rymland and First Paragon from future violations of the antifraud and registration provisions of the federal securities laws, Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Final Judgment also orders Rymland and First Paragon to pay jointly and severally disgorgement in the amount of $1,040,000, representing their ill-gotten gains, but waives payment of disgorgement due to their demonstrated inability to pay. Rymland and First Paragon consented to the entry of the Final Judgment without admitting or denying the allegations in the Complaint.
The Complaint alleges that between November 1995 and December 1997, Rymland and First Paragon, among others, through Desert Gold Partners ("Desert Gold"), raised approximately $8 million from the offer and sale of Desert Gold's general partnership units to about 600 investors nationwide. The Complaint further alleges that the defendants made material misrepresentations and omissions in connection with the offer and sale of these securities. The defendants represented that investor funds would be used to produce and distribute a motion picture entitled "Operation: Desert Gold" and that investors could potentially earn a 160-445% return. The defendants, however, misused investors' funds by transferring most of the funds to themselves and their affiliates. The Complaint also alleges that Rymland and First Paragon, among others, offered and sold securities in Desert Gold without being registered as broker-dealers, as required under the federal securities laws.