SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 17574 / June 19, 2002

Securities and Exchange Commission v. Southern Financial Group, Inc., Richard M. Wooten, Charles Dennis McKittrick and Gerald F. Hunter, Jr., Defendants, and Springdale Investments, Inc., Relief Defendant, United States District Court for the District of South Carolina, Charleston Division, Civil Action File No. 2:02-1806-18

The Securities and Exchange Commission ("Commission") announced that on June 10, 2002, the Honorable David C. Norton, United States District Judge for the District of South Carolina, Charleston Division, entered orders of preliminary injunction and other relief as to defendants Southern Financial Group, Inc. ("Southern") and Richard M. Wooten ("Wooten") and relief defendant Springdale Investments, Inc. ("Springdale"). The orders restrained and enjoined Southern and Wooten from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court also ordered a freeze of assets held or controlled by Southern, Wooten and Springdale, and required them to submit accountings of all monies received from the scheme and of the disposition and use of said funds. The accountings are to be submitted to the Court within 30 days of the date of the Court's order.

Southern, Wooten and Springdale consented to the relief without admitting or denying the allegations set forth in the Commission's complaint, filed on May 24, 2002. The complaint alleged that defendants Southern, Wooten, Charles Dennis McKittrick, and Gerald F. Hunter, Jr. raised at least $25 million through a fraudulent scheme involving the sale of short-term notes on behalf of UC Properties LLC. The complaint alleged that the defendants operated these note offerings as a Ponzi scheme, using funds raised from current note offerings to pay principal and interest to investors in prior offerings, and that at least $5 million was transferred to relief defendant Springdale. The complaint further alleged that Southern operated in violation of the net capital rule since at least October 2001, and that the firm's FOCUS reports and other books and records have been inaccurate since that time.

On May 24, 2002, the Court entered an order for the defendants and relief defendant to show cause as to why a preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure should not be granted, as requested by the Commission.

See also: L.R. 17535 (May 28, 2002); L.R. 17569 (June 17, 2002).