SEC v. Hancher, Case No. 5:11-cv-04005 (N.D. Iowa Filed Jan 14, 2011) names as defendants Lowell Hancher, his company Commerce Street, Edward Whelan and his company, Grace Holdings, Inc. The complaint alleges three fraudulent schemes: 1) An investment fraud scheme beginning in 2005 and continuing in 2007 in which Mr. Hancher, through his company Commerce Street, raised over $1.8 million from at least 60 investors based on misrepresentations which included a claim that a 50% return would be paid after the company went public. The money was misappropriated. 2) A manipulation scheme in which Mr. Hancher directed defendant Whelan and others to place 18 matched orders for more than 60,000 shares of LMWW Holdings, Inc to prop up its share price. At least two of the orders were placed through an account in the name of Mr. Whelan’ company, Grace Holdings. 3) A third scheme involve the misappropriation of money from Cycle Country Accessories. Here the complaint claims Mr. Hancher, a director and audit committee member, obtained the funds based on a claim that it would be used for a stock repurchase. Instead Messrs. Hancher and Whelan misappropriated the money using false documents. Mr. Hancher also lied to the external auditor according to the SEC.
Each defendant settled with the Commission, consenting to the entry of a permanent injunction. As to Mr. Hancher the injunction was based on Securities Act Section 17(a) and Exchange Act Sections 10(b), 13(a), 13(b)(5) and 15(a)(1). As to Mr. Whelan it was based on Exchange Act Section 10(b). The injunction against Commerce Street was based on Securities Act Section 17(a) and Exchange Act Sections 10(b) and 15(a)(1) while for Grace Holdings it was predicated on Section 10(b). Mr. Hancher also agreed to pay disgorgement and prejudgment interest of $2,988,405 and a civil penalty of $130,000 while Mr. Whelan consented to pay disgorgement and prejudgment interest of $17,340 and a civil penalty of $20,000.