LITIGATION RELEASE NO. 16979 / April 30, 2001
SECURITIES AND EXCHANGE COMMISSION V. THE GATEWAY ASSOCIATION, THE GATEWAY ASSOCIATION (ILLINOIS), RICHARD J. COLLINS, BILL WILSON, JEROME COPPAGE, DAVID A. MORGENSTERN, WILLIAM J. WINDSOR, LINDA A. FEHL, MALCOLM SILVERMAN, JANET COLLINS AND CHRISTINE J. TODD (United States District Court for the Northern District of Illinois, 01C 3085)
The Commission announced today the filing of a civil fraud action in the United States District Court for the Northern District of Illinois against two corporations and three individuals for the fraudulent sale of over $10 million in non-existent prime bank securities. According to the complaint, The Gateway Association Inc., and Illinois corporation, and The Gateway Association (Illinois) Inc., a Florida corporation, (collectively Gateway); Richard J. Collins (Collins), of Naperville, Illinois; Bill Wilson (Wilson), of Elmhurst, Illinois; and Jerome Coppage (Coppage), of Schererville, Indiana sold over $10 million in non-existent prime bank securities. The Commission alleges that the defendants violated the securities registration and antifraud provisions of the federal securities laws in connection with their offer and sale of these alleged prime bank instruments. At least six relief defendants received investor funds from Gateway. David A. Morgenstern (Morgenstern), of Ft. Lauderdale, Florida, is alleged to have received approximately $1.7 million of these funds; William J. Windsor (Windsor), of Kissimmee, Florida, is alleged to have received approximately $325,000 of these funds; Linda A. Fehl (Fehl), of Alphraretta, Georgia, is alleged to have received approximately $1.7 million of these funds; Malcolm Silverman (Silverman), of Arlington Heights, Illinois, is alleged to have received approximately $120,000 of these funds; Janet Collins, Collins' wife, and a resident of Naperville, Illinois, is alleged to have received approximately $325,000 of these funds; and Christine J. Todd, Collins' daughter, and a resident of Plainfield, Illinois, is alleged to have received approximately $200,000 of these funds.
The Commission's complaint alleges that from approximately November 1997 through March 1999, Gateway, Collins, Wilson and Coppage solicited primarily Hispanic investors to invest in a fictitious prime bank trading program. Specifically, Gateway, Collins, Wilson and Coppage made misrepresentations and omitted to state material facts to investors relating to, among other things: the rates of return on the Gateway trading program; the existence of prime bank securities; the risks of the trading program; the location of investors' deposits; and the use of the proceeds. At meetings held across the country, the defendants described the Gateway investment as a guaranteed, risk-free, high yield trading program in which a $100,000 initial investment would yield $1.25 million in ten months. Promotional materials provided to investors by Gateway representatives explained to investors that their funds would be pooled to invest in an overseas bank debenture trading program involving medium-term bank debentures issued by the "top one hundred world banks." Approximately 400 investors invested more than $10 million in the Gateway program. In fact, this type of investment program does not exist and the investors' funds were simply used to fund various individual and corporate accounts, to purchase cars, and to pay for various other personal expenses.
The Commission's complaint alleges that in connection with this scheme, the defendants engaged in transactions, acts, practices and courses of business which constitute violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (Securities Act), Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 promulgated thereunder.
The Commission seeks a permanent injunction prohibiting the defendants from violating the securities registration and antifraud provisions of the Securities Act and the Exchange Act. In addition, the Commission seeks disgorgement of ill-gotten gains from Defendants Gateway, Collins, Wilson and Coppage and from Relief Defendants Morgenstern, Windsor, Fehl, Silverman, Janet Collins and Christine Todd, and the imposition of civil monetary penalties against all the primary defendants pursuant to Section 20(d) of the Securities Act and Section 21(d)(3) of the Exchange Act.