LITIGATION RELEASE NO. 17323 / January 16, 2002
SECURITIES AND EXCHANGE COMMISSION V. KURTIS KEITH LOWE, ET AL., CIVIL ACTION NUMBER 4:00-CV-0467-A (USDC/Northern District of Texas).
The Commission announced a settlement today in a nationwide ponzi scheme in which over $4.5 million was raised from 75 mostly elderly Texas investors. Under the terms of the settlement, defendants Kurtis Keith Lowe, Woody Keith Lowe, Jerry Lynn Ruyle and Robert Alen Blackburn, agreed to a permanent injunction against future violations of the securities laws. Previously, in a South Carolina criminal proceeding, all were ordered to disgorge commissions each received from their participation in the ponzi scheme. In that proceeding, Kurtis Keith Lowe was ordered to disgorge $244,084 in unlawful commissions, Woody Keith Lowe $365,560, Ruyle $135,000 and Blackburn $69,259. The Commission decided not to seek a civil penalty against each based upon his demonstrated financial inability to pay a penalty.
In its civil action, the Commission alleged that defendants sold promissory notes issued by Chemical Trust, a purported business trust, as part of a nationwide ponzi scheme. The promissory notes were claimed to be secured by surety bonds issued by United States Guarantee Corporation, an Arizona based surety company. In reality, the control persons behind Chemical Trust were diverting investor funds to their own use and the surety company was being run by a convicted felon and held no assets with which to secure the promissory notes. The Commission alleged that the defendants were in a position to learn of the issuer's fraudulent scheme, but failed to conduct any meaningful due diligence before selling the securities to their insurance clients. The Commission further alleged the defendants made fraudulent statements in connection with the sale of the Chemical Trust promissory notes and acted as unregistered brokers.
The defendants consented, without admitting or denying the allegations in the complaint, to the entry of a final judgment permanently enjoining each from future violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. The court entered the permanent injunction on January 2, 2002. In addition, each defendant consented to the entry of an administrative order barring him from association with any broker or dealer.