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U.S. Securities and Exchange Commission


Litigation Release No. 16771 / October 17, 2000

SECURITIES AND EXCHANGE COMMISSION v. JEROME BECHSTEIN, Civil Action No. 3:99CV7591, U.S. District Court for the Northern District of Ohio, filed on September 21, 1999

The U.S. Securities and Exchange Commission ("Commission") announced that on October 4, 2000, the Honorable David A. Katz, U.S. District Judge for the Northern District of Ohio, entered a Final Order and Judgment of Permanent Injunction and Other Relief Against Jerome Bechstein ("Order") based on his alleged fraud in the sale of common stock of Towne Bancorp, Inc. Bechstein, a former president and director of Towne Bancorp, is a resident of Bowling Green, Ohio. The Order permanently enjoins Bechstein from further violations of several antifraud and reporting provisions of the federal securities laws. The Order also imposed a civil penalty of $25,000 against Bechstein. Bechstein consented to the entry of the Order without admitting or denying the allegations in the Complaint.

The Commission alleges that Towne Bancorp's registered "mini-max" offering required the company to raise $4 million by June 30, 1994, subject to an extension, or else the offering would terminate and all funds paid by subscribers would be returned with interest. Towne Bancorp raised only $2.5 million by June 30, 1994 and it did not extend the offering. However, Bechstein failed to return funds to investors as promised and improperly continued to sell Towne Bancorp stock subscriptions through November 1995, raising the total subscriptions to over $4 million. During that time, Bechstein failed to disclose to investors that the offering was not extended past June 30, 1994; that investors' funds were not returned; and that Towne Bancorp, thus, had a significant outstanding liability. Further, Towne Bancorp, through Bechstein, did not properly report the outstanding liability in its filings with the Commission. The Complaint specifically alleges that Bechstein violated Sections 5(b), 10(a)(3) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5 and 10b-9 promulgated thereunder, and from aiding and abetting an issuer's violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 promulgated thereunder.