U.S. Securities and Exchange Commission
Litigation Release No. 18151 / May 20, 2003
Securities and Exchange Commission v. Greenline Capital Corporation, Merrell W. Williams and Timothy C. Olk, Civil Action No. 3:03-CV1033-R, United States District Court for the Northern District of Texas, Dallas Division.
On May 15, 2003, the Commission filed a civil securities fraud action in the United States District Court for the Northern District of Texas (Dallas Division) against Greenline Capital Corporation, a Dallas, Texas company, and Merrell W. Williams, and Timothy C. Olk, both of Texas.
The Commission charges that Greenline, its president, Williams, and its sales agent, Olk, fraudulently raised over $2.1 million from approximately 25 investors, most of them elderly or retired, by selling them investment contracts in the form of limited partnership interests from April 1998 through July 2000.
The Commission's complaint alleges that, in connection with the offering, Greenline, Williams and Olk made false and misleading statements to investors regarding the use of investor funds, and the liquidity, potential returns and risks associated with the investment. In particular, according to the Commission's complaint, Williams and Olk told investors that Greenline would generate annual returns ranging from 12-16% by using 82% of the investors' funds to purchase discounted used automobile notes. In reality, the Commission alleges that no more than 30% of investors' funds were actually used to purchase auto receivables, and Williams and Olk used the vast majority of investor funds to enrich themselves and pay personal and business expenses. Moreover, according to the Commission's complaint, Williams and Olk failed to disclose that investor funds were used to make "Ponzi" payments to earlier investors. Williams and Olk, both licensed insurance agents, promoted the Greenline interests as liquid investments, assuring investors that they could liquidate their investments at any time during the term of the investment with 30-day notice. In reality, according to the Commission's complaint, the investments were a sham, and the assurances of liquidity were false, inasmuch as only $541,000 of the $2.1 million invested has been returned to the investors.
The Commission's complaint charges that Greenline, Williams and Olk violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint also charges that Olk violated Section 15(a) of the Exchange Act. The Commission seeks a permanent injunction, an accounting, disgorgement with pre-judgment interest and civil money penalties.
The Federal Bureau of Investigation referred this matter to the Commission and the Commission wishes to acknowledge the Bureau's assistance.