U.S. Securities and Exchange Commission
Litigation Release No. 18674A / April 22, 2004
SECURITIES AND EXCHANGE COMMISSION v. William E. Lyons (E.D.Va., Civil Action No. 04-CV-459)
S.E.C. Charges Former Broker With Attempting to Sell A Phony Prime Bank Guarantee
The Commission announced today that it has filed a securities fraud lawsuit in the United States District Court for the Eastern District of Virginia charging William E. Lyons (Lyons) with offering to sell Bear Stearns & Co. (Bear Stearns) and three other financial institutions a fraudulent foreign bank guarantee for $200 million that Lyons claimed would be worth $220 million in one year. Without admitting or denying the allegations in the Commission's complaint, the defendant consented to the entry of a final judgment that permanently enjoins Lyons from future violations of Section 17(a) of the Securities Act of 1933 and Section 15(a) of the Securities Exchange Act of 1934, and imposes a $25,000 monetary penalty on Lyons. Further, Lyons agreed to the entry of an administrative order, following entry of the injunction, that bars Lyons from association with any broker-dealer with a right to reapply after five years.
The Commission's complaint alleges that in September 2002, Lyons, operating through SV Group, approached a senior managing director at Bear Stearns - where Lyons had previously been employed as a broker - to sell Bear Stearns a purported "zero coupon bank guarantee note" for $200 million, saying it would be worth $220 million one year after its purchase. Lyons provided Bear Stearns with documentation describing the purported bank guarantee and the transaction that Lyons claimed he and his associates would coordinate in order for Bear Stearns to obtain a bank guarantee issued by a third party. Lyons had obtained the offering materials and other information that he provided to Bear Stearns from a network of individuals and entities located in Europe. Despite significant training and experience in the financial services industry, Lyons failed to conduct any type of independent inquiry into the purported bank guarantees or into the individuals and entities that claimed that they could furnish them. In fact, the investment opportunity that Lyons offered to Bear Stearns did not exist.
The Commission's complaint further alleges that during the time that Lyons, through SV Group, were offering the bank guarantee to Bear Stearns and the three other financial institutions, SV Group was not registered with the SEC or the NASD as a broker-dealer and Lyons was associated with an unregistered broker-dealer.
For more information about prime bank frauds, visit the SEC's "Prime Bank Information Center" at http://www.sec.gov/divisions/enforce/primebank.shtml. To report suspicious activity involving possible Internet fraud, visit http://www.sec.gov/complaint.shtml.