SEC Accuses Santa Clara Professor in Stock Sales

A Santa Clara University business school professor has been accused of fraud by the Securities and Exchange Commission in connection with stock he sold to his undergraduate students.

The SEC alleged that Ronald J. Mitchellette, an adjunct professor at the university’s Leavey School of Business, sold students $24,000 worth of stock in a start-up Internet company without disclosing that he’d previously been convicted of perjury and enjoined for fraud.

Mitchellette, 63, was using the start-up company--Virtual Education Network Inc.--as a case study in his Santa Clara classes, the SEC said. The Silicon Valley company was set up to offer online college courses.

“Students look up to their professors, and we think that he really took unfair advantage of the trust of people he was charged with teaching,” said Helane L. Morrison, district administrator of the SEC’s San Francisco office.

Mitchellette, who lives in San Rafael, settled the charges without admitting or denying wrongdoing, the SEC said. He agreed to a court order permanently enjoining him from future violations of anti-fraud and registration provisions of federal securities laws.

He also agreed to a permanent bar from acting as an officer or director of a publicly traded company, the SEC said. The SEC stated that it did not pursue a fine because of Mitchellette’s “demonstrated financial inability to pay.”

Mitchellette, who is not represented by a lawyer, could not be reached for comment. Officials at Santa Clara University also could not be reached for comment.

During the SEC investigation, Mitchellette voluntarily returned all the money he raised from his students, the SEC said. His company returned other proceeds from a private placement of preferred stock, less money already spent on business expenses, the SEC said.

The SEC alleged that in June and July of last year Mitchellette and Virtual Education conducted a private placement of preferred stock, raising $320,000 from investors, including $24,000 from sales of founders’ stock to the students in Mitchellette’s undergraduate courses.

In connection with the stock sales, Mitchellette distributed materials touting his years of experience in banking and finance. The materials did not disclose that Mitchellette pleaded guilty in 1997 to perjury in a federal bankruptcy case, the SEC said.