Securities and Exchange Commission
Washington, D.C.

Litigation Release No. 17432 / March 22, 2002

United States District Court for the Northern District of California, Civil
Action No. C-00-4802 (CRB)

Court Enjoins Municipal Underwriter in Real Estate Financing Fraud

   A federal district judge in San Francisco enjoined Pacific Genesis
   Group, Inc., a municipal securities underwriting firm based in
   Alameda, California, and its former lead underwriter, David E.
   Fitzgerald. On March 20, 2001, United States District Judge Charles R.
   Breyer entered judgments ordering the firm and Fitzgerald to refrain
   from future fraudulent conduct in violation of the federal securities
   laws. The judgments also require Fitzgerald to pay $300,000 in
   disgorgement, interest and penalties.

   In December 2000, the Commission brought suit against Pacific Genesis
   and Fitzgerald in connection with a series of bond offerings to
   finance a residential development in southern California. The
   Commission alleged that Pacific Genesis and Fitzgerald had
   underwritten over $70 million in tax-exempt municipal bonds to finance
   the Rancho Lucerne Master Planned Community, about 50 miles northeast
   of the City of San Bernardino, California. However, according to the
   Commission's filings, not a single road had been paved, no homes had
   been built and not a single residential lot had been sold to a
   homebuilder. The Commission alleged that Pacific Genesis and
   Fitzgerald intentionally or recklessly misrepresented or omitted
   material facts in the offering documents concerning the value of the
   land used as security for the bonds, the status of the project and the
   likelihood that the bonds would be repaid from the revenues of the
   project.

   A portion of the case was brought to trial in early 2001. On February
   16, 2001, Judge Breyer ordered that all proceeds of the latest bond
   offering be returned to investors. The order also prohibited Pacific
   Genesis and Fitzgerald from selling more bonds on the Rancho Lucerne
   project by means of fraud and misrepresentation. As part of a
   settlement of the remaining issues in the case, Pacific Genesis and
   Fitzgerald consented to the judgments entered this week.

   In its complaint, the Commission alleged violations of Section 17(a)
   and the Securities Act of 1933 and Sections 10(b) and 15B(c)(1) of the
   Securities Exchange Act of 1934 ("Exchange Act"), Rule 10b-5 and
   Municipal Securities Rulemaking Board Rule G-17.