SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17608 / July 12, 2002
SEC v. Terry V. Koontz, et al., Civil Action No. 98cv11904NG (D. Mass., Sept. 17, 1998)
The Securities and Exchange Commission ("Commission") announced today that on June 28, 2002, Judge Nancy Gertner of the United States District Court for the District of Massachusetts entered final judgments against all remaining defendants and relief defendants in the Commission's civil enforcement action charging a $20 million fictitious prime bank offering fraud. Specifically, Judge Gertner granted the Commission's motions for summary judgment against Defendant Terry V. Koontz, the architect of the fraud, and his company Zone Productions, Inc. ("Zone") and against Relief Defendants Marilyn Koontz, Dorothy Gerodemos, Helen Smith, and Anastasia Brooks. Judge Gertner also granted the Commission's motion for entry of final judgments by default against Defendant Kurt Fox and Relief Defendants Emanon II, Inc., Stewart A. Koral, and Nancy Chamich. The judgment against Terry Koontz permanently enjoins him from committing violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and orders him to pay disgorgement, jointly and severally with Zone, of $20,000,000 plus prejudgment interest of $6,850,585.53, for a total of $26,850,585.53. The judgment against Fox permanently enjoins him from committing violations of the same provisions as well as Section 15(a) of the Exchange Act and orders him to pay disgorgement and prejudgment interest totaling $108,442.81. The judgments against the Relief Defendants, who all received ill-gotten gains from Terry Koontz, order them to pay disgorgement and prejudgment interest as follows: Marilyn Koontz -- $1,226,116; Gerodemos -- $4,229,873; Smith -- $724,865; Brooks -- $1,178,553; Emanon II -- $2,550,805.61; Koral -- $976,018.78; and Chamich -- $1,364,216.49.
The Commission alleged in SEC v. Koontz, et al. (D. Mass., filed Sept. 17, 1998), that Terry Koontz orchestrated a scheme in which more than 80 individuals in 16 states were induced to invest over $19 million in a fictitious "international bank debenture trading" program called Private Pool, LLC. The Commission further charged that several sales agents utilized by Terry Koontz (including Defendant Fox) made various false representations to potential investors about Private Pool, including representations that investors would earn a return of 1% per week for a 40-week trading period, that their funds would be secured by government bonds in a two-to-one ratio, and that investors would receive a security interest in the bonds evidenced by a UCC-1 financing statement filed with the State of New York. The Commission further alleged that Koontz falsely represented himself to be affiliated with Barclays Bank and that he traded "international bank debentures." In fact, international bank debentures do not exist, and Koontz was not affiliated with Barclays. Moreover, the Commission charged that Koontz used the invested funds to pay other investors and sales commissions and that he dissipated at least $9.9 million of investor funds for personal purposes.
In addition to the civil enforcement action, the U.S. Attorney's Office for the Middle District of Florida (Tampa) filed criminal actions against Terry Koontz (charging him with conspiracy, securities fraud, and wire fraud) and four other individuals involved in this scheme: Stewart Koral (false statements), Joseph Papasidero (misprision of a felony), Richard J. Fulcher (mail fraud), and Jeffrey A. DeVille (securities and wire fraud). All five have pled guilty. Terry Koontz was sentenced to 15 years, eight months in prison, and Fulcher and DeVille were each sentenced to two years in prison. Koral and Papasidero were sentenced to probation.
SEC v. Terry V. Koontz, et al., Civil Action No. 98cv11904NG (D. Mass.), Lit. Rel. No. 15892.