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Securities and Exchange Commission

Litigation Release No. 17716 / September 10, 2002

Securities and Exchange Commission v. Shoreline Development Company, Todd J. Taylor, Derek K. Gradwell, Paul A. Barrios III, Dennis P. O'Connell, Jr., Epic Consulting Services, Inc., Coastal Resources, Inc., Northstar Acquisitions and Holdings, Inc., Shoreline Holdings and Acquisitions, Inc. and Spartan Consulting, Inc., (Case No. CV02-6695 RSWL (Ex)) (C.D. Cal.)

Commission Obtains Preliminary Injunction in a $3.8 Million Oil and Gas Well Telemarketing Scheme

On September 6, 2002, the Securities and Exchange Commission obtained a preliminary injunction in a $3.8 million securities fraud scheme run by Shoreline Development Company and four individuals.

The Commission's complaint alleges that since 2000, the defendants fraudulently misused over $3.8 million from investors, purportedly for investments in oil and gas wells. The defendants include: Shoreline Development Co., a Delaware company, headquartered in Costa Mesa, California; Todd J. Taylor, 36; Derek K. Gradwell, 29; Paul A. Barrios III, 40; and Dennis P. O'Connell, 47, all of Orange County, California. Taylor and Barrios are repeat securities law violators. In 1999, in a prior case brought by the Commission, Taylor was ordered by a federal district court not to sell securities without registering with the Commission as a broker-dealer. In 2000, Barrios was the subject of a cease-and-desist order issued by the Commission suspending him for twelve months from association with any broker or dealer.

In its complaint, the Commission alleges that during the offering, Shoreline, Taylor and Gradwell made misrepresentations about the performance of Shoreline's wells, a purported business relationship with El Paso Field Services, and their use of investor funds. These defendants concealed their misappropriation from investors of more than $1.2 million to pay for lavish vacations, a wedding and honeymoon, a vacation home, gambling debts, customized motorcycles and other luxury items.

The United States District Court for the Central District of California (1) granted the Commission's application for a preliminary injunction and appointment of a permanent receiver over Shoreline; (2) continued an asset freeze against the defendants; (3) prohibited the destruction of documents; and (4) ordered accountings.

The Commission obtained an order preliminarily enjoining Shoreline, Taylor and Gradwell from committing securities fraud in violation of 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. The Court's order also preliminarily enjoins Shoreline, Taylor, Gradwell, Barrios and O'Connell from violating the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act. The Court's order also preliminarily enjoins O'Connell and Barrios from committing violations of the broker-dealer registration provisions of Section 15(a) of the Exchange Act.

Furthermore, the Commission also obtained an order preliminarily freezing the assets of relief defendants Epic Consulting Services; Coastal Resources, Inc.; Northstar Acquisitions and Holdings, Inc.; Shoreline Holdings and Acquisitions, Inc.; and Spartan Consulting, Inc., who together received more than $1.3 million in cash from Shoreline during the scheme. The Commission seeks a final judgment against these relief defendants, ordering them to return all related earnings. The Commission does not allege that these relief defendants violated the securities laws, but rather that they received proceeds from the fraud.

In addition to the preliminary relief granted on September 6, 2002, the Commission seeks a final judgment against all the defendants permanently enjoining them from future violations of the securities and broker-dealer registration provisions, as well as the antifraud provisions, ordering the defendants to disgorge all ill-gotten gains, and assessing civil penalties against them.



Modified: 09/11/2002