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U.S. Securities and Exchange Commission


Litigation Release No. 16362 / November 18, 1999

SECURITIES AND EXCHANGE COMMISSION v. PASCHAL GENE ALLEN, Civil Action No. 1 99-CV-2986 (N.D. Ga.) (Nov. 18, 1999).

Banker to Pay $20,000 Penalty

The Securities and Exchange Commission today announced the filing of a complaint against Paschal Gene Allen, a former public finance banker in the Atlanta office of Stephens Inc., for taking undisclosed payments in connection with a securities investment he recommended to his financial advisory client, Fulton County, Georgia. The complaint also charges Allen with taking undisclosed compensation from underwriter's counsel in connection with five local bond issues in Georgia.

The complaint, filed in the Northern District of Georgia, alleges the following: In the Fall of 1994, Allen recommended to Fulton County that it take certain County funds and invest them in a portfolio of long-term United States Treasury securities and an associated put option. The County adopted Allen's recommendation, and the transaction closed on November 29, 1994. Allen did not disclose, however, that he arranged to take, and subsequently took, $20,970.10 in payments in connection with the transaction. Allen's failure to disclose the arrangement, the payment, and the actual and potential conflicts of interest created thereby violated the following antifraud provisions of the federal securities laws: Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. By 1998, Allen had paid the $20,970.10 over to Stephens, after disclosing the payments to the firm. In other conduct occurring between September 1991 and April 1993, Allen also received undisclosed compensation totaling $10,900 from underwriter's counsel in connection with five separate municipal securities offerings in Georgia. In these offerings, Stephens served as underwriter and a Georgia law firm served as underwriter's counsel. In each offering, the issuer paid the underwriter's counsel fees of the law firm. Yet, Allen, who served as Stephens' lead banker on the transactions, did not disclose his payment arrangement with the law firm to the issuers or in the bonds' offering documents. Allen's failure to disclose this compensation violated Section 15B(c)(1) of the Exchange Act and Rule G-17 of the Municipal Securities Rulemaking Board.

Simultaneously with the filing of the complaint, without admitting or denying the complaint's allegations, Allen agreed to the entry of a final judgment permanently enjoining him from future violations of Sections 10(b) and 15B(c)(1) of the Exchange Act and Rule 10b-5 thereunder, as well as MSRB Rule G-17. In addition, Allen agreed to pay (1) disgorgement to Fulton County totaling $6,216.84, consisting of prejudgment interest on the $20,970.10 in undisclosed payments he received, during the period he retained those payments, and (2) a civil penalty of $20,000. As part of his settlement with the Commission, Allen has also agreed to the entry of a Commission order barring him from associating with any securities broker or dealer or municipal securities dealer.

SEC Complaint in this matter



Modified: 04/04/2008