Litigation Release No. 17456 / April 3, 2002
Accounting And Auditing Enforcement Release No. 1541 / April 3, 2002
Securities and Exchange Commission v. J. Donald Nichols, Jeb L. Hughes, and C. Sheldon Whittelsey, IV, Civil Action No. 1:02-CV-478 (NDGA March 19, 2002)
The Securities and Exchange Commission ("Commission") announced today that the Honorable Jack T. Camp, United States District Judge for the Northern District of Georgia, entered Final Judgments of Permanent Injunction and Other Relief Against Defendants J. Donald Nichols ("Nichols"), Jeb L. Hughes ("Hughes") and C. Sheldon Whittelsey, IV ("Whittelsey"), restraining and enjoining them from further violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5) and 14(a) of the Securities Exchange Act of 1934, and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-1, 13b2-2 and 14a-9 thereunder.
Nichols, Hughes, and Whittelsey consented to the entries of the judgments without admitting or denying any of the allegations of the Commission's complaint. Further, the Court ordered civil penalties against Nichols, Hughes, and Whittelsey in the amounts of $110,000, $60,000, and $60,000, respectively. The Court further ordered that Hughes and Whittelsey be barred from acting as an officer or director of any issuer having a class of securities registered with the Commission.
On February 20, 2002, the Commission alleged in its complaint that the three defendants, all former officers of JDN Realty Corporation, a public company, arranged for cash and property to be transferred to Hughes and Whittelsey from third parties who sold real estate to JDN Realty. Nichols, Hughes, and Whittelsey failed to inform JDN Realty's accounting department of this compensation arrangement, and they also failed to disclose certain other related-party transactions. As a result, JDN Realty's public filings failed to disclose the executive officer compensation and related-party transactions, and by not properly accounting for the compensation, JDN Realty materially misstated its 1994 through 1997 annual financial statements and two quarterly financial statements in 1998.
See also: L. R. 17366 (February 20, 2002).