U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18580 / February 18, 2004
Securities and Exchange Commission v. Security Asset Capital Corporation, et al., Civil Action No. 04-683 (LD)(E.D. Pa.)
COMMISSION SUES SECURITY ASSET CAPITAL CORPORATION, APACOR FINANCIAL, INC. AND OTHERS FOR FRAUD IN THE OFFERING OF NINE-MONTH PROMISSORY NOTES
The Securities and Exchange Commission announced the filing, on February 18, 2004, of securities fraud charges against Security Asset Capital Corporation ("Security Asset"), Apacor Financial, Inc. ("Apacor") and other individuals and entities involved in the offering of nine-month promissory notes. The Commission's complaint was filed in the United States District Court for the Eastern District of Pennsylvania, and seeks permanent injunctions, civil money penalties, disgorgement of ill-gotten gains, and bars preventing certain of the defendants from acting as an officer or director of a public company.
The complaint alleges that defendants made material misrepresentations and omissions in the offering of the promissory notes, whereby investors were promised secure investments with 12% (or more) annual returns, but instead lost all or the vast majority of their money. The complaint further alleges that, in these offerings of nine-month promissory notes, Security Asset raised approximately $7 million from December 1998 through January 2001, and Apacor raised approximately $1.5 million from August 2000 through March 2001. The complaint also alleges that no registration statement was in effect as to these promissory notes; nor were they exempt from registration.
Named as defendants in the Commission's complaint are:
The complaint charges all defendants with violations of 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 defendants Security Asset, Musick, Wensel, Continental Capital, Carlson, Secure Investments, Spirk, Apacor and Wallace with violations of Sections 5 (a) and 5(c) of the Securities Act (securities registration provisions), and defendants Wensel, Continental Capital, Carlson, Secure Investments, and Spirk with violations of Section 15(a)(1) of the Exchange Act (broker-dealer registration provisions).
The Commission acknowledges the assistance of the Pennsylvania Securities Commission, the U.S. Attorney's Office in Harrisburg, Pennsylvania, and the Federal Bureau of Investigation in the Middle District of Pennsylvania.