U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission

Washington, D.C. 20549

LITIGATION RELEASE NO. 16807 / November 21, 2000

SECURITIES AND EXCHANGE COMMISSION v. JEFFREY L. LEACH, HUBERT A. LEACH AND LMC ASSETS CORP., United States District Court for the Eastern District of Pennsylvania, Civil Action No. 00 CV 5928


The Securities and Exchange Commission today announced the filing of a lawsuit against Jeffrey L. Leach, his brother Hubert A. Leach, both of whom are residents of Philadelphia, Pennsylvania, and LMC Assets Corp., for fraud in connection with three mini tender offers. The Complaint alleges that Jeffrey and Hubert Leach, president and former vice-president of LMC Assets, made millions of dollars in unlawful profits, and caused investors to suffer millions of dollars in losses, by making fraudulent mini tender offers for shares of Fleming Companies, Inc., Fruit of the Loom, Ltd., and Mattel, Inc. Mini tender offers are offers for less than five percent of a class of securities registered with the Commission. The fraudulent offers were made through two shell corporations that Jeffrey Leach created and controlled - defendant LMC Assets and Carnegie Investment Management, Ltd., a Cayman Islands company that recently filed a petition for bankruptcy.

The Complaint alleges that all three tender offers were fraudulent for several reasons, including:

  • The offering documents contained material omissions and false statements about the offeror's intent in making the offer, its ability to pay for the tendered shares, and other material matters.

  • The defendants made numerous false and misleading statements outside of the offering documents; in particular, they made many false promises to tendering shareholders that they would be paid for their shares, typically by a date certain, and simply never paid for many shares tendered.

  • The defendants structured the offers without the use of any escrow account or independent receiving agent, and failed to disclose that they could not pay for the shares; thus, they gained control of the shares before payment and obtained the equivalent of an unsecured loan and a free call option on the tendered shares. The defendants then used the unpaid-for shares as collateral to receive millions of dollars in cash from margin loans and to engage in extremely risky margin trading schemes.

  • The defendants engaged in other practices that are specifically unlawful in connection with tender offers. For example, the defendants unlawfully amended the Mattel offer by changing the offering price but failing to give shareholders sufficient time to consider the amended offer. The defendants also unilaterally and illegally amended the Fruit of the Loom offer five weeks after its purported closing, and coerced shareholders into accepting a significantly lower price or the return of their shares. And, in connection with all three offers, the defendants failed to pay for or return the shares promptly after the close of each offer.

The Commission's Complaint seeks to permanently enjoin Jeffrey Leach, Hubert Leach and LMC Assets from violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14e-1 thereunder. The Complaint also seeks disgorgement of all ill-gotten gains and losses avoided, prejudgment interest, and civil monetary penalties against the defendants.