SECURITIES AND EXCHANGE COMMISSION

LITIGATION RELEASE NO. 16996 / May 10, 2001

SEC v. Guido Bensberg, et al., 97 CV1684 (S.D. Calif.) (May 13, 2001)

On May 6, 2001, the U.S. District Court for the Southern District of California released a decision awarding relief sought by the SEC in its recent fraud trial against Guido Bensberg. The Court granted the SEC's request for $16,593,396 in disgorgement and $10,571,261 in civil penalties, one of the largest penalty awards in a case that has gone to trial. The court also enjoined Bensberg from further violations of the securities laws. The trial took place from March 7-14, 2001.

Bensberg, a German financier and sometimes Canadian resident, was charged with violating the principal antifraud provisions of the U.S. securities laws, section 17(a) of the Securities Act of 1933 and section 10(b) of the Securities Exchange Act of 1934. Judge Rudi M. Brewster in deciding for the Commission held that Bensberg participated in a fraudulent scheme to "lease" temporary physical possession of stock certificates representing millions of restricted shares of U.S. public companies, and one Canadian entity whose stock traded in the U.S. Thereafter, on two separate occasions, Bensberg misrepresented that he owned the stock and pledged it as collateral to unwitting financial institutions, obtaining more than $10 million in loans that he refused to repay. The defrauded parties in this case were Lehman Bros. and Bank Leu, a Swiss private bank controlled by Credit Suisse/First Boston.

Judge Brewster wrote "at trial, the SEC proved that Bensberg engaged repeatedly, in egregious acts and practices in violation of the antifraud provisions of the federal securities laws." The Court noted that Bensberg since has attempted several other frauds. With respect to the eight-figure penalty award Judge Brewster stated that "Bensberg deserves the maximum penalty allowed under the penalty provisions of the Securities Act and the Exchange Act...The recidivist nature of the conduct, the lack of remorse or attempt to offer explanation and the potential for recurrence justify the maximum allowable penalty of $10,571,261."