U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18869 / September 2, 2004
SECURITIES AND EXCHANGE COMMISSION V. ACI, INC. AND CLARENCE E. LONG, Defendants, and JON G. ERVIN, SR., Relief Defendant, Civil Action No. 6:03-CV-01343-JTM-DWB (USDC/D.KAN/Wichita Div.)
On August 26, 2004, the Honorable J. Thomas Maten, U.S. District Judge, District of Kansas, entered a Final Judgment Granting Permanent Injunction and Other Relief as to Defendants ACI, Inc. and Clarence E. Long, a securities law recidivist. The Final Judgment orders that ACI and Long are jointly and severally liable to pay disgorgement in the amount of $7,756,750, the sum Defendants' fraudulently collected from investors, plus prejudgment interest in the amount of $1,253,700.
The Commission's Complaint, filed September 25, 2003, alleges that ACI and Long, from October 2000 through September 2001, engaged in the fraudulent offer and sale of interests in high yield trading programs to at least 586 investors located throughout the United States. The Commission alleged, specifically, that Long misled investors by stating, falsely, that ACI's trading programs were paying weekly returns of up to 45 percent and that investors were "guaranteed" return of their principal plus 6½ percent at the end of the program's 13-month term. None of the investors' funds were invested as promised; rather, Long used the funds to make Ponzi payments couched as "trading profits" and misappropriated most of the remaining funds. Finally, the Commission alleged that Long favorably portrayed his background and experience without disclosing to investors that he had previously been civilly enjoined and criminally convicted for securities fraud.
ACI failed to answer the Commission's Complaint and default judgment was entered by the Court on January 9, 2004. On August 12, 2004, the Court entered an order striking Long's answer and entering default against him, based on Long's willful failure to respond to discovery and fulfill other pretrial obligations.
In addition to ordering the Defendants to disgorge the funds collected from defrauded investors, the Final Judgment orders ACI to pay a civil penalty of $600,000 and Long to pay a civil penalty of $120,000. Moreover, in addition to generally enjoining the Defendants from further violations of the antifraud provisions of the federal securities laws, the Final Judgment enjoins Long from engaging in the offer or sale of a security in any unregistered transaction while acting in association with an issuer, underwriter, broker, or dealer.
The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for Arizona and the Securities Division of the Arizona Corporation Commission.