U.S Securities and Exchange Commission.
Litigation Release No. 17304 / January 11, 2002
Securities and Exchange Commission v. Genesis Leasing IX, Inc., Kadie Corp., George Robert Hoffman, Lisa Klinger Paonessa, Brian Dominick Paonessa, Rainwater Investment Group Holdings XI LLC, Excalibur Investment Group Holdings PAIF II, Inc., Excalibur Investment Group Holdings, Inc., Excalibur Investment Group, Inc., Trident/KD Investment Group, Inc., and Endeavor Investment Group, Inc., Civil Action File No. 01-9111-CIV-Hurley (S.D. Fl.) (Filed December 27, 2001)
The Securities and Exchange Commission ("Commission") announced that on December 27, 2001, the Honorable Daniel P. Hurley, United States District Judge for the Southern District of Florida, entered an order granting a temporary restraining order and other relief against Genesis Leasing IX, Inc.; Kadie Corp.; George Robert Hoffman; Lisa Klinger Paonessa ("Klinger"); Brian Dominick Paonessa; Rainwater Investment Group Holdings XI LLC; Excalibur investment Group PAIF II, Inc.; Excalibur Investment Group Holdings, Inc.; Excalibur Investment Group, Inc.; Trident/KD Investment Group, Inc.; and Endeavor Investment Group, Inc.
The Court's order froze the assets of the defendants. On January 4, 2002, the defendants consented to the entry of a preliminary injunction and other relief without admitting or denying the allegations of the complaint.
The Commission's complaint alleges that individual defendants Hoffman, Klinger, and Paonessa controlled and caused the corporate defendants to make at least 21 fraudulent mini-tender offers for the securities of five publicly traded limited partnerships since 1997. The complaint alleges that defendants made the mini-tender offers by means of separate, but substantially similar three-page offering circulars. The complaint further alleges that the defendants deliberately designed the circulars to conceal from investors the true offering price by stating a certain offering price in large, bold print on the first page and burying deductions in very small, closely spaced print on the second page. According to the complaint, the defendants paid investors who tendered their limited partnership units pursuant to such mini-tender offers only a small fraction of the offering price stated on the first page of the circular because of deductions buried on the second page of the circular. As a result of the fraudulent mini-tender offers, the defendants obtained more than 80,000 units of five limited partnerships from more than 4,000 investors. Based on the prices the defendants actually paid for the units and the market prices of the units, the defendants appear to have profited by more than $2 million.
The complaint seeks permanent injunction against defendants to prevent future violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also seeks an accounting, disgorgement with prejudgment interest, and civil penalties against the defendants. The complaint also seeks a civil penalty against Paonessa based upon his violation of a prior cease-and-desist order entered against him by the Commission. See Stuart, Coleman & Co., Inc., Exchange Act Rel. No. 37199 (May 10, 1996).