SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17241 / November 19, 2001
SECURITIES AND EXCHANGE COMMISSION V. JAMES A. NIES, JEFFREY DENE LEADER AND HAROLD DALTON DAVLIN, Civil Action No. 3:00-CV-465-MU (W.D.N.C.)
SEC OBTAINS PERMANENT INJUNCTIONS AGAINST THREE DEFENDANTS
The Securities and Exchange Commission ("Commission") announced today that on November 1, 2001, the Honorable Graham C. Mullins of the United States District Court for the Western District of North Carolina entered individual orders of permanent injunction and other relief against defendants James A. Nies ("Nies") of San Francisco, California, Jeffrey Dene Leader ("Leader") of Mt. Kisco, New York and Harold Dalton Davlin ("Davlin") of Ellicott City, Maryland for engaging in violations of the antifraud provisions of the securities laws in a mutual banks conversion scheme. Judge Mullins's orders permanently enjoined Nies, Leader and Davlin from further violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Nies was ordered to pay disgorgement in the amount of $300,000 with prejudgment interest thereon, but payment was waived for the amount exceeding $40,000 based upon his demonstrated inability to pay. Leader was ordered to pay disgorgement in the amount of $193,000 with prejudgment interest thereon, but payment was waived for the amount exceeding $125,000 based upon his demonstrated inability to pay. Davlin was ordered to pay disgorgement in the amount of $17,072 along with prejudgment interest, but payment was waived for prejudgment interest based upon Davlin's inability to pay beyond the amount of disgorgement. Civil penalties were not imposed against the defendants based upon each defendant's inability to pay. Each defendant consented to the entry of his respective order, without admitting or denying the allegations of the Commission's complaint.
The Commission previously sued the defendants alleging that from early 1995 through early 1997, Nies and Leader, aided and abetted by Davlin, all registered representatives of broker-dealers registered with the Commission, orchestrated the fraudulent exercise of stock subscription rights in connection with at least seventeen mutual thrift conversions in eleven states. Under applicable federal and state banking regulations, when a savings and loan association, savings bank, or thrift converts to a publicly traded company, account holders are given the first opportunity to purchase stock, but are prohibited from transferring their stock purchase rights or entering into pre-issuance arrangements to sell the stock. The complaint alleged that Nies, Leader and Davlin developed an elaborate scheme to purchase shares in converting mutual thrifts for themselves or certain of their customers who were not legally entitled to do so, by submitting Stock Order Forms to the thrifts in the names of eligible thrift depositors. The Stock Order forms did not disclose the fact that ineligible persons were funding the stock purchase and would retain sole discretion to sell the stock.
See also: L.R. 16714 (September 20, 2000)