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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 14719 / November 15, 1995

UNITED STATES SECURITIES AND EXCHANGE COMMISSION v. JOHN L. FAULS
III (U.S.D.C. N.D. Illinois, Civil Action No. 95C5206, filed
September 12, 1995)

     The United States Securities and Exchange Commission
(Commission) announces the filing of a civil complaint seeking a
permanent injunction against John L. Fauls, III (Fauls).  The
Commission's Complaint alleges that Fauls, while a senior vice
president, registered representative and 10% owner of a broker-
dealer, engaged in a three year trading scheme to the detriment
of the Union Carbide Corporation's Employee Pension Fund (Pension
Fund), a customer, in violation of Section 17(a) of the
Securities Act of 1933, Section 10(b) of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder.  

     Fauls, along with an associated person of a registered
investment adviser, engaged in a series of day trading in United
States government securities involving the Pension Fund and a
Midwest Bank, for which the associated person served as a
Director.  Fauls and the associated person would interposition
the broker-dealer and the Bank between the Pension Fund and the
market, needlessly increasing the transaction costs for the
Pension Fund and causing the Pension Fund to obtain less than the
best market price.  In addition, Fauls and the associated person
executed transactions but did not identify the customer until
after they determined whether the transaction was profitable. 
All profitable transactions were allocated to the Bank.  Fauls
paid cash kick-backs and items such as a car and a boat to the
associated person for directing the Pension Fund's trading
through the broker-dealer. 

     On May 4, 1994, Fauls was found guilty by a jury of mail
fraud, securities fraud, pension fund bribery and racketeering
and was later sentenced to 57 months incarceration and ordered to
pay $3.32 million in restitution and to forfeit $3.32 million. 
His conviction was upheld on appeal.