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SEC LITIGATION RELEASE
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EXTRACTED KEY WORDS
EDWARDS INVESTORS EXCHANGE COMPLAINT EXCHANGE COMMISSION CHEDESTER FIRST AMERICAN ACT LUNA MOREHOUSE DISTRICT COMPLAINT ALLEGES THEREUNDER CALIFORNIA DEFENDANTS SOLD PRIME BANK SCHEMES OFF-BALANCE SHEET DEBT GOLD DEBENTURES VIOLATING UNITED STATES DISTRICT STATES DISTRICT COURT EASTERN DISTRICT ISSUING SELLING SHEET DEBT OBLIGATIONS ASSISTANCE |
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SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 15111 / October 7, 1996
SECURITIES AND EXCHANGE COMMISSION v. KENNETH E. EDWARDS, ROGER
S. CHEDESTER, DONALD E. LUNA, A.R. GRANT MOREHOUSE, AND THE FIRST
AMERICAN COMPANIES, INC., United States District Court for the
Eastern District of California, CIV-s-96 1716 GEB GGH.
The Securities and Exchange Commission announced the filing
of a complaint with the United States District Court for the
Eastern District of California against Kenneth E. Edwards and
Roger S. Chedester of the Sacramento, California area, and Donald
E. Luna, A.R. Grant Morehouse and the First American Companies,
Inc. of Hilton Head, South Carolina. The Commission's complaint
alleges that each of the defendants engaged in securities fraud
by making misrepresentations in issuing or selling securities.
The complaint alleges that from July 1994 through January
1995, Edwards sold over $3 million of "prime bank" securities in
three separate, but related, schemes. In the schemes at issue,
investors' money was purportedly to be used to trade actively in
the off-balance sheet debt obligations of unnamed "prime banks"
to generate profits of between 100 percent a year to 570 percent
over a 19 week period. In each case, investors were also told
that their funds were completely safe, as the underlying
investment was secured by gold, treasury bills or letters of
credit. In reality, the off-balance sheet debt obligations
purportedly being traded do not exist, and the securities sold to
investors a sham.
The complaint further alleges that the first of the three
investments sold by Edwards, with assistance from Chedester,
involved $1.2 million of debentures issued by First American, led
by Luna and assisted by Morehouse. The debentures offered
returns of 100 percent per year, with no risk to principal as the
debentures were secured by gold or gold certificates. In the
second scheme, Edwards induced investors to place $700,000 with
an entity operating out of Switzerland for trading in "prime
bank" debt. In the third, Edwards devised his own "Private
Investment Program" for which he and Chedester raised
approximately $1.1 million. Of the $3 million raised,
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