UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 37674 / September 12, 1996 ADMINISTRATIVE PROCEEDING File No. 3-9027 -------------------------------- : In the Matter of : : MICHAEL J. EBERLE, : ORDER MAKING ROBERT D. HODGE, : FINDINGS AND IMPOSING THOMAS L. COSTELLO, : REMEDIAL SANCTIONS DONALD H. GILLILAND, : THOMAS J. VANECHO, AND : THOMAS J. WILLIAMSON : : Respondents. : : -------------------------------- I. In these proceedings ordered pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 (Exchange Act)-[1]-, Michael J. Eberle ("Eberle"), Robert D. Hodge ("Hodge"), Thomas L. Costello ("Costello"), Donald H. Gilliland ("Gilliland"), Thomas J. VanEcho ("VanEcho") and Thomas J. Williamson ("Williamson"), ("Respondents"), have submitted Offers of Settlement (Offers), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, the Respondents, by their Offers, without admitting or denying the Commission's findings contained in this Order, except the findings contained in Paragraphs II.A through I., which are admitted, consent to the entry of this Order making Findings and Imposing Remedial Sanctions. ---------FOOTNOTES---------- -[1]- An Order Instituting Proceedings in this matter was issued on June 20, 1996. ==========================================START OF PAGE 2====== II. On the basis of the Order Instituting Proceedings and the Offers, the Commission finds-[2]- that: A. At all relevant times Midwest Investments, Inc. (Midwest) was an Ohio corporation based in Columbus, Ohio. Midwest is licensed by the State of Ohio to sell securities as a broker-dealer but is not registered with the Commission. Midwest claims exemption from registration under Section 15(a)(1) of the Exchange Act as an intrastate broker-dealer. Midwest Management Company (MMC) owns Midwest. Prior to January 11, 1992, Midwest was called Columbus Skyline Securities (Skyline). The Ohio Division of Securities has issued an order revoking Skyline's license. B. Michael J. Eberle (Eberle), age 42, currently a resident of Westerville, Ohio, has been employed in the securities industry since April 1979. Eberle was formerly the vice president of Skyline and became the president of Midwest. Eberle was licensed to sell securities as a representative of Midwest, and was associated with Universal Funding Corporation (Universal), an unregistered entity proportedly in the business of raising money to develop wireless cable television stations. The Ohio Division of Securities has issued an order revoking Eberle's license. C. Robert D. Hodge (Hodge), age 37, currently a resident of Columbus, Ohio, has been employed in the securities industry since 1984. Hodge was formerly the senior vice president for Dublin Securities (Dublin), an Ohio intrastate broker-dealer. Hodge was licensed to sell securities as a representative by the State of Ohio but has never registered with the Commission. Hodge was a senior vice president of Midwest. Hodge is associated with Universal. D. Thomas L. Costello (Costello), age 43, currently a resident of Columbus, Ohio, has been employed in the securities industry since May 1987. Costello was formerly a director of corporate sales at Dublin. He was licensed to sell securities as a representative of Midwest by the State of Ohio but has never registered with the Commission. He was a sales manager at Midwest Investments and was formerly a director of corporate sales at Dublin. Costello is currently associated with Universal. ---------FOOTNOTES---------- -[2]- The findings herein are made pursuant to Respondents' Offers and are not binding on any other person or entity named as a respondent in this or any other proceeding. ==========================================START OF PAGE 3====== E. Donald H. Gilliland (Gilliland), age 56, is currently a resident of Columbus, Ohio. Gilliland was licensed to sell securities as a representative of Midwest by the State of Ohio but is not registered with the Commission. Gilliland was a sales manager at Midwest Investments and was formerly a vice president/sales manager at Dublin. Gilliland is currently associated with Universal. F. Thomas J. VanEcho (VanEcho), age 36, is currently a resident of Dublin, Ohio. VanEcho has been employed in the securities industry since 1986. VanEcho was formerly a vice president/sales manager for Dublin. He was licensed to sell securities as a representative of Midwest by the State of Ohio but has never registered with the Commission. VanEcho was an assistant vice president/sales manager at Midwest Investments. VanEcho was associated with Universal. G. Thomas J. Williamson (Williamson), age 31, is a resident of Columbus, Ohio. Williamson was licensed to sell securities as a representative of Midwest by the State of Ohio but is not registered with the Commission. Williamson was formerly a vice president/sales manager for Dublin and was an assistant vice president/sales manager at Midwest Investments. Williamson was associated with Universal. H. On March 16, 1995, the Honorable George C. Smith, United States District Judge for the United States District Court of the Southern District of Ohio, in the case of Securities and Exchange Commission v. Midwest Investments, Inc., Robert D. Hodge, Michael J. Eberle, Thomas J. VanEcho, Thomas L. Costello, Donald H. Gilliland, and Thomas J. Williamson, (Case No. C-2-93- 389), entered a Final Judgment and Order of Permanent Injunction against Midwest, Hodge, Eberle, VanEcho, Costello, Gilliland, and Williamson, enjoining them from further violations of Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Exchange Act of 1934 (Exchange Act) and Rule 10b-5 promulgated thereunder. In addition, the Court permanently enjoined Midwest, its officers, agents, servants, employees, attorneys, and those persons in active concert or participation with them, from further violations of Sections 15(c)(1) and 15(g) of the Exchange Act and Rules 15c1-2, 15g-3 through 15g-6 and 15c2-6 (since August 11, 1993, redesignated at 15g-9) promulgated thereunder. I. In the action described in Paragraph H. above, the District Court found that, during the period from at least January 15, 1993, to April 12, 1993, the Respondents, while associated with Midwest, participated in sales of 365,300 shares of Reitz Data Communications, Inc. (Reitz), a penny stock, which raised over $1.3 million from numerous investors. The Court further found that the Respondents sold these shares to the ==========================================START OF PAGE 4====== public at artificially inflated and manipulated prices, and at prices which included excessive undisclosed markups. J. From at least January 15, 1993, to April 12, 1993, the Respondents manipulated the price of Reitz stock. The Respondents first obtained control of Reitz stock by accumulating approximately 270,000 shares of Reitz stock and 160,000 Reitz warrants. The Respondents obtained the stock and warrants from Dublin employees, relatives and friends, and Reitz shares and warrants owned by the Respondents, at a cost of $1 per share and $.25 per warrant. The Respondents then arbitrarily set prices of Reitz stock sold to the public at bid prices of $2.75 and at ask prices ranging from $3.50 to $4.00. The Respondents based these prices on Midwest's costs of doing business, not on the free market forces of supply and demand. K. From at least January 15, 1993, to April 12, 1993, the Respondents charged investors excessive undisclosed markups in the sale of Reitz stock. Respondents sold Reitz stock at prices ranging from as high as $3.50 to $4.00 per share without first disclosing either their contemporaneous cost or the amount of the markup. Thus, Respondents charged investors excessive undisclosed markups ranging from 152% to 188%. L. During the period from at least January 15, 1993, to April 12, 1993, the Respondents willfully violated Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act in that, in the offer and sale of securities, they, directly and indirectly, made use of the mails and of the means and instruments of transportation and communication in interstate commerce to employ devices, schemes and artifices to defraud; to obtain money and property by means of untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and engaged in transactions, practices and courses of business which operated and would operate as a fraud and deceit upon purchasers and prospective purchasers of Reitz stock, as described in Paragraphs I. through K. above. M. During the period from at least January 15, 1993, to April 12, 1993, the Respondents willfully violated Sections 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder, in that, in connection with the purchase and sale of securities, they, directly and indirectly, made use of the mails and of the means and instrumentalities of interstate commerce to employ devices, schemes and artifices to defraud; to make untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and engaged in acts, practices and courses of business which operated and would operate as a fraud and deceit upon purchasers and ==========================================START OF PAGE 5====== sellers and prospective purchasers and sellers of Reitz stock, as described in Paragraphs I. through K. above. ==========================================START OF PAGE 6====== III. In view of the foregoing it is in the public interest to impose the sanctions specified in the Offers of Settlement. Accordingly, IT IS ORDERED THAT: A. Respondents Eberle, Hodge, Costello, Gilliland, VanEcho, and Williamson are barred from association with any broker, dealer, municipal securities dealer, investment adviser or investment company; and B. Respondents Eberle, Hodge, Costello, Gilliland, VanEcho, and Williamson are barred from participating in any offering of penny stock. For the Commission, by its Secretary, pursuant to delegated authority. Jonathan G. Katz Secretary