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U.S. Securities and Exchange Commission


Litigation Release No.17224 / November 7, 2001

Securities and Exchange Commission v. Mustang Development Corporation, Tower Operating Company, Neal B. Stein, Cary S. Greene and Samuel Embras, Jr., Civil Action No. 97-0440 JGD (CTx) (C.D. Cal.)

The Securities and Exchange Commission ("Commission") and the United States Attorney for the Central District of California today announced the filing of civil and criminal contempt proceedings in federal court in Los Angeles against recidivist Cary S. Greene, age 40, of Studio City, California.

These proceedings are based on Greene's violation of a civil judgment entered against him in April 1997, in a Commission enforcement action entitled SEC v. Mustang Development Corporation, et al. In the Mustang action, Greene was charged with securities fraud in the offer and sale of oil and gas limited partnership interests. Greene was an officer, director and part owner of Mustang, which raised about $139 million from thousands of investors nationwide. While investors were told that their funds would be used to purchase oil and gas properties, in fact, Greene: 1) commingled the assets of the partnerships; 2) operated a ponzi scheme by using millions of dollars from new investors to pay old investors their purported "returns;" and 3) misappropriated millions of dollars from investors for personal uses. Greene was also barred from the securities industry in a related Commission administrative proceeding.

In the contempt proceedings, the Commission and U.S. Attorney's court filings allege that during a telephone conversation with a Postal Inspector posing as a prospective investor, Greene claimed that he was not a securities broker but instead represented himself to be a "founder" of and a "consultant" to Broadband Concepts & Technologies, Inc., based in Glendale, California. The filings further allege that Greene represented that Broadband had approximately 120 investors and that he believed the return on the investment would be 100 to 1 within 18 months.

During this same conversation, Greene made the following false statements:

  • He falsely claimed that former U.S. Treasury Secretary Robert E. Rubin, represented by Insight Venture Partners, was in a "bidding war" to purchase Broadband shares. In fact, neither Robert Rubin nor Insight Venture Partners have invested in or with Broadband and have not made any proposals or commitments to invest in or with Broadband.

  • He falsely stated that the royal family of Saudi Arabia, purportedly represented by an entity named Xenel, was in a "bidding war" to purchase Broadband shares. In fact, Xenel Industries, Ltd., the Xenel company identified in materials Greene subsequently sent, has no affiliation with the Saudi Arabian royal family, has not invested in or with Broadband and has not made any proposals or commitments to invest in or with Broadband.

  • Finally, he denied that he was criminally charged as a result of his conduct in the Mustang fraud, when in fact he pleaded guilty to securities fraud and tax evasion in May 2000, and is scheduled to be sentenced on November 5, 2001.

The U.S. Attorney's filing also alleges that Greene claimed that Bill Simon, a Republican candidate for Governor of California, and his firm, William E. Simon & Sons, was one of the early investors in Broadband. In fact, neither Bill Simon nor William E. Simon & Sons has invested any money in Broadband and never had any intention to do so.

By engaging in the above conduct, the Commission and the U.S. Attorney charge Greene with engaging in the fraudulent offer of securities in violation of the antifraud provisions, Section 17(a) of the Securities Act of 1933, and in violation of the SEC's civil judgment.

The Commission's civil contempt motion requests that the Court order Greene to provide an accounting of his financial condition and to notify all prospective and actual investors to whom he offered or sold securities. The U.S. Attorney issued a criminal complaint charging Greene with one count of criminal contempt. United States of America v. Cary S. Greene. Special agents of the United States Postal Inspection Service and the Internal Revenue Service arrested Greene without incident at his home. Greene made his initial appearance in federal court on November 2, 2001, where he was ordered detained pending trial. He is scheduled to be arraigned on November 19, 2001. There is no maximum penalty or fine on the criminal contempt charge. Greene faces a maximum sentence of 15 years and a fine of $1.1 million for the Mustang conviction.


Modified: 11/08/2001