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U.S. Securities and Exchange Commission

Securities and Exchange Commission

Litigation Release 17328 / January 22, 2002

SEC v. World Homes, Inc., Merle Ferguson and Susan Donohue, Civil Action No. CV-S-01-0658-PMP-LRL (USDC D. Nev.)

On January 14, 2002, the Honorable Phillip M. Pro issued final judgments of permanent injunction against World Homes, Inc., currently known as Composite Industries of America, Inc., and Merle Ferguson, its President and Chief Executive Officer, enjoining them from future violations of the securities registration and antifraud provisions fo the federal securities laws. In addition, Susan Donohue, the company's Secretary-Treasurer, was enjoined from future violations of the securities registration provisions. The defendants consented to the orders without admitting or denying the Commission's allegations. Ferguson was also ordered to pay a civil money penalty in the amount of $120,000.

The Complaint alleges that from approximately January 2000 through February 2001, World Homes, through Ferguson, distributed several false and misleading press releases misrepresenting, among other things, the following material facts: 1) that World Homes operated and maintained a production facility for its cement product; 2) that World Homes had obtained financing loans of fifteen million dollars; and 3) that World Homes had generated over $480 million in contracted business. These false press releases resulted in an increase in the price of World Homes= common stock and an increase in the volume of shares traded on the OTC Bulletin Board. In doing so, the complaint alleges World Homes and Ferguson violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

In addition, it is alleged that from on or about July 16, 1999, through on or about February 20, 2001, World Homes made nine filings with the Commission on Form S-8, registering 4,892,977 of its shares with a stated maximum value of $3,777,313. It is further alleged that many of these shares were issued to Ferguson and Donahue, or entities controlled by them. Ferguson and Donahue sold these shares into the market and remitted most of the proceeds to World Homes, which used the funds to finance the issuer's operations. The complaint alleges this conduct by World Homes, Ferguson and Donahue violated Section 5 of the Securities Act.



Modified: 01/23/2002