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U.S. Agency Halts Effort to Jail Three

Times Staff Writer

The Securities and Exchange Commission has dropped its effort to jail three Orange County businessmen, who were accused of bilking more than 400 investors out of $8 million, after the men filed for bankruptcy and agreed not to violate federal securities laws.

Those actions close the books on Newport Interstate Investments, which the SEC alleged had sold unregistered securities, principally investments in commercial real estate.

Richard J. Lorenat of El Toro, Michael Joyce of Santa Ana, and Kenneth L. Shattuck of El Toro allegedly violated federal anti-fraud statutes and ignored laws on securities registration and licensing, according to a civil lawsuit filed by the SEC last summer.

In August, Lorenat, Joyce and Shattuck agreed to a preliminary injunction in which they acknowledged no past wrongdoing but promised not to violate federal securities laws in the future. They also agreed to take NII into bankruptcy.

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James Shalvoy, SEC attorney in the case, later filed a contempt of court motion, alleging that NII had not been declared bankrupt. The three men faced jail time and a daily $500 fine until they took their company into bankruptcy.

But last week, Shalvoy said, the three NII officials brought proof to court that they had indeed filed for liquidation, or Chapter 7 of the U.S. Bankruptcy Code, and signed a consent decree agreeing that they would break no laws.

Times staff writer John Spano contributed to this story.


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