Pryor Counts Must Pay $40,000 to Settle SEC Securities Fraud Case

WASHINGTON - The Securities and Exchange Commission has censured and imposed a $40,000 civil penalty on Pryor, Counts & Co. -- formerly Pryor, McClendon, Counts & Co. -- to settle charges that the firm defrauded Atlanta through an investment scheme and also violated Rule G-37 by making secret campaign contributions to New York City candidates and then underwriting municipal bonds for the city.

"Glad its over. We neither admit nor deny the charges . It's taken us eight and a half years" to resolve the case, Malcolm Pryor, the chairman and chief executive office of the Philadelphia-based firm, said yesterday. The firm is no longer in the municipal securities business, he said.

The SEC began investigating the case in 1993 and then filed charges against the firm; its former vice chairman, Raymond J. McClendon; its ex-president, Allen W. Counts, who is ill; and Atlanta's former investment officer, Theresa Stanford, in April 1999. SEC securities fraud and rule violations are still pending against McClendon, Counts, and Stanford. "We're hopeful of resolving all three of the matters that are outstanding in the near future," said John Hunter, SEC assistant chief litigation counsel.

McClendon and Stanford are currently serving prison sentences of 80 months and 46 months respectively, while appealing their convictions of fraud by a federal jury in Atlanta in August 2000.

The SEC charged that Stanford channeled about $9.8 billion of Atlanta's Strips transactions to Pryor McClendon between March 1992 and April 1994, in return for about $316,000 in payments and fees that the firm awarded to Stanford's husband, Charlie, and his company, Montclaire Financial Group Inc. Stanford and Pryor McClendon churned the account, generating more than $15.3 million in revenue for the firm.

The commission also charged Pryor McClendon funneled political contributions through conduits to the campaign offices of candidates for New York City offices in May 1994 and July 1997, falsely claimed to the city that it made no contributions, and then violated the Municipal Securities Rulemaking Board's Rule G-37, which is designed to prevent pay-to-play practices.