The Securities and Exchange Commission has filed a complaint against five individuals and three business entities linked to a bankrupt Bowie firm that lost investors at least $57 million.
The 20-page civil action was unveiled Tuesday in U.S. District Court in Baltimore and focuses on Governmental Financial Services Inc., a company associated with several unsuccessful equipment-leasing ventures.
Charles A. Oglebay III, Ralph E. McKittrick, Thomas L. Oglebay, Harold M. Covert Jr., Glenn E. Dawson, Harold M. Covert & Assoc., McKittrick & Briggs Securities Inc. and Reliance Leasing Co. were named as defendants.
They are accused of fraudulently offering and selling roughly $57 million in securities to about 800 investors through GFS beginning in May 1983 and ending in November 1987, according to the complaint.
Investors were told that their money would be used by GFS to purchase equipment leases and that rental income from the leases would result in periodic income, but investor funds and rental income actually were pooled into one GFS account, the complaint said.
Charles Oglebay and Mr. McKittrick are accused of siphoning off more than $2.8 million from that account and redirecting the money into businesses ventures in which the two men had ownership interests, according to the SEC court filing.
Among other things, the complaint seeks a "permanent injunction against future violations" of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisors Act of 1940 on the part of the defendants.
GFS oversold nearly $10 million in leases to raise additional cash, the complaint alleges.
Officials began to look at the company in November 1987, when a disgruntled Maryland investor went to state authorities, said Ellyn L. Brown, commissioner of the state Division of Securities.
"We had a complainant come in and talk to us about his concern about not getting promised payments," Ms. Brown said. "Investigators went through subpoenaed records at GFS.
"What became clear to us very quickly was that the scope of the investigation was going to be fairly broad. We knew that we had investments and deals being done in a number of states. At that point, we brought the SEC in and worked with them."
Ms. Brown said it is "extremely likely" that Maryland will initiate its own civil action in the case.
GFS filed for bankruptcy in December 1987. A court-appointed trustee, Lawrence H. Levy, was brought in to liquidate the company's assets.
Mr. Levy said yesterday that he was working on a liquidating Chapter 11 for GFS and was studying claims against the defunct company.
Asked how much he could salvage for investors, Mr. Levy said, "It is still too early to estimate a return, because I have several major assets that I haven't reduced to cash. ... It will not be a large payment."
Mr. Levy said he didn't know the total of claims against GFS and the defendants, but he said they exceed $70 million. Most of the investors are from Maryland and Pennsylvania, he added.
Bankruptcy records indicate that USF&G Corp. invested more than $25 million through GFS Leasing Inc., a Pikesville-based subsidiary of GFS, and other related companies. USF&G was left holding the bag for $6.3 million, making it the largest creditor, according to court documents.
Attempts to reach the five individuals named in the SEC complaint were unsuccessful yesterday.