U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18302 / August 22, 2003
SEC Obtains Civil Penalties, Disgorgement, and Permanent Injunction Against Participant in Fraudulent Offerings
Securities and Exchange Commission v. Michael I. Nnebe, Nelson C. Walker, Hildreth J. Fleming, Jr., Steven S. Bocchino, and Daniel M. Coyle. 01 Civ. 5247
On May 12, 2003, Judge Kimba Wood of the United States District Court for the Southern District of New York, entered a final judgment against defendant Daniel M. Coyle ("Coyle"), who, according to the Commission's complaint, made false and misleading statements to investors about an offering of securities and caused a private placement memorandum containing false and misleading statements to be sent to investors. The court permanently enjoined Coyle from future violations of the antifraud and registration provisions of the securities laws, ordered Coyle to disgorge ill-gotten gains plus prejudgment interest, and imposed a civil penalty of $25,000. Pursuant to Section 308 of the Sarbanes-Oxley Act of 2002, the court ordered that the civil penalty be paid to the court registry for the benefit of investors. Coyle consented to the entry of the judgment without admitting or denying the allegations in the Commission's complaint.
In its complaint, the Commission charged Coyle, along with Michael Nnebe ("Nnebe"), Nelson Walker ("Walker"), Hildreth Fleming, Jr. ("Fleming"), and Steven Bocchino ("Bocchino"), with participating in a fraudulent offering of Fargo Holdings, Inc. ("Fargo"), a company owned and controlled by Nnebe. Through this scheme, the defendants raised approximately $2 million from at least 118 investors, the majority of which was stolen by Nnebe. Coyle, a registered representative, solicited investors and received $7,000 from the offering proceeds.
According to the complaint, Coyle solicited investors to purchase Fargo stock by falsely stating that Fargo would be conducting an IPO in the near future and that the IPO would allow investors to resell their Fargo stock for a substantial profit. Coyle based these statements on information provided by Nnebe without doing any further inquiry about Fargo or the likelihood of a Fargo IPO. In addition, Coyle falsely told investors that purchasing Fargo stock was "risk free" because investor funds would be returned if Fargo did not conduct an IPO, and caused the Fargo private placement memorandum containing false statements about Fargo's purported business operations to be sent to investors. Coyle knew, or recklessly disregarded, that his statements to investors about the risk of investing in Fargo stock and the statements about Fargo's business operations in the offering documents were false because Coyle knew that Fargo had no business operations. Coyle also distributed a private placement memorandum to investors that misrepresented, among other things, the anticipated uses of investor proceeds and the levels of commissions paid for selling Fargo stock and falsely stated that Fargo operated various businesses, including a day-trading and import-export business. Coyle knew, or recklessly disregarded, that statements contained in the private placement memorandum were false.
The court permanently enjoined Coyle from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, 15 U.S.C. §§ 77e(a), 77e(c), and 77q(a), and Section 10(b) the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5. In addition, the court imposed a civil penalty of $25,000. Finally, the court ordered Coyle to pay $8,842.52, representing disgorgement of $7,000 in ill-gotten gains derived from his conduct, plus prejudgment interest of $1,842.52.
The litigation against Nnebe, Walker, Fleming, and Bocchino is continuing.