SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17365 / February 19, 2002
Securities and Exchange Commission v. Don Haywood Pace (Civ. No. 96-2416) (USDC/DC)
On January 28, 2002, the United States District Court for the District of Columbia entered a Final Judgment of Permanent Injunction against Don Haywood Pace. Don Pace was the chief executive officer and a director of Pace American Group, Inc., a holding company that wrote surety bonds and insurance products through wholly-owned subsidiaries. Pace American and its chief financial officer had previously been sanctioned in settled actions.
The Commission filed this civil lawsuit against Pace in October 1996. The complaint alleged violations of the antifraud, proxy, books and records and other provisions of the federal securities laws. The Commission's lawsuit was stayed for several years pending the outcome of Pace's criminal trial in U.S. District Court in Tucson, Arizona on related criminal charges. After a jury trial in the criminal case in late 2000, Pace was convicted on some wire fraud and tax fraud charges, and acquitted on others. He was found to have diverted for his own use more than $36,000 in bond premiums that a Mexican surety insurance company had deposited into two of the company's corporate financial accounts in Mexico. On July 23, 2001, the criminal court sentenced Pace to serve four months in prison and four months house arrest, and it ordered him to pay restitution of the $36,659.28 that he was found to have taken from Pace American. Pace has appealed his criminal conviction.
Following the criminal trial, the Commission amended its civil complaint, leaving the two allegations on which Pace was tried criminally. The Commission then sought summary judgment on the allegation related to the criminal conviction. On November 29, 2001, United States District Judge James Robertson granted summary judgment in favor of the Commission on that allegation. The court ruled that Pace had committed antifraud violations by failing to disclose in Pace American's annual reports, proxy materials and registration statements filed with the Commission that he had received these bond premiums, and that Pace had caused Pace American to maintain false books and records because he failed to have the company's books and records reflect that he diverted these bond premiums to his personal bank account. Accordingly, on January 28, 2002, the court entered a Final Judgment of Permanent Injunction enjoining Pace from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(b)(5) and 14(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13b2-1 and 14a-9 thereunder. Having obtained substantial injunctive relief, the Commission determined not to pursue the other allegation. This concludes the Commission's actions against Pace, Pace American and other associated parties.