U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19009 / December 22, 2004
Securities and Exchange Commission v. Southern Financial Group, Inc., Richard M. Wooten, Charles Dennis McKittrick and Gerald F. Hunter, Jr.,United States District Court for the District of South Carolina, Charleston Division, Civil Action File No. 2:02-1806-18
Federal Judge Permanently Enjoins Southern Financial Group, Inc., Richard M. Wooten and Charles Dennis McKittrick
The Securities and Exchange Commission announced that the Honorable David C. Norton, United States District Judge for the District of South Carolina, Charleston Division, entered Final Judgments as to Defendants Southern Financial Group, Inc. (Southern), Richard M. Wooten (Wooten) and Charles Dennis McKittrick (McKittrick). Southern was enjoined from future violations of Section 17(a) of the Securities Act of 1933 (Securities Act), Sections 10(b), 15(c)(3) and 17(a)(1) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 15c3-1, 15c3-3, 17a-3, 17a-5 and 17a-11 thereunder. Wooten and McKittrick were enjoined from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and from aiding and abetting violations of Sections 15(c)(3) and 17(a)(1) of the Exchange Act and Rules 15c3-1, 15c3-3, 17a-3, 17a-5 and 17a-11 thereunder.
The Court ordered disgorgement and prejudgment interest against Wooten in the amount of $499,071, but waived payment due to Wooten's demonstrated inability to pay, and did not impose a civil penalty. The Court ordered disgorgement and prejudgment interest against McKittrick, but waived payment of all but $165,918 due to his demonstrated inability to pay, and did not impose a civil penalty. Southern, Wooten and McKittrick consented to the entries of the judgments without admitting or denying any of the allegations of the Commission's Complaint.
The Commission's Complaint alleged that defendants McKittrick, Gerald F. Hunter, Jr., Southern and Wooten raised at least $25 million through a fraudulent scheme involving the sale of short-term notes on behalf of UC Properties LLC. The Complaint alleged that the defendants operated these note offerings as a Ponzi scheme, using funds raised from current note offerings to pay principal and interest to investors in prior offerings, and that at least $5 million was transferred to relief defendant Springdale Investments, Inc. The Complaint further alleged that Southern operated in violation of the net capital rule since at least October 2001, and that the firm's FOCUS reports and other books and records have been inaccurate since that time.