Release: #4149-98 (CIV 96-74525)

For Release: June 2, 1998

MICHIGAN DISTRICT COURT PERMANENTLY BARS MECA INTERNATIONAL INC.,

GARY BERUS AND PATRICIA GALE FROM THE FUTURES INDUSTRY

CFTC Alleged that the Defendants Cheated and Defrauded Approximately 50 Elderly and Retired Michigan Residents to Invest Approximately $1 Million in Two Commodity Pools

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that U.S. District Judge Nancy G. Edmunds of the Eastern District of Michigan entered orders of permanent injunction by consent against Meca International, Inc., a Michigan corporation, Gary Berus of Warren, Michigan, and Patricia Gale of Gaylord, Michigan. The orders bar the defendants from the futures industry and permanently enjoin them from further violations of federal commodity law.

The court's orders, entered on May 20, 1998, stem from a seven-count civil injunctive action filed by the Commission on September 30, 1996, against Meca, Berus, and Gale, alleging that from October 1992 to September 1996, they violated the anti-fraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations (see CFTC news release #3946-96, October 1, 1996).

The complaint charged that Meca, Berus, and Gale fraudulently solicited approximately 50 elderly and retired Michigan residents to invest approximately $1 million in two pools to trade, among other things, commodity futures contracts.

The CFTC complaint also alleged that Berus and Meca fraudulently solicited approximately $376,000 from 10 individuals to trade commodity futures contracts in accounts managed by Berus. Further, the CFTC charged that the defendants violated registration, disclosure, reporting, and recordkeeping provisions of the CEA.

More specifically, the defendants were charged with cheating and defrauding customers and potential customers in the commodity pools by, among other things:

-- Misrepresenting that pool investors had achieved and would continue to achieve significant profits ranging from 12 to 24 percent annually with little or no risk;

-- Misrepresenting or failing to disclose the risks associated with commodity futures trading;

-- Misrepresenting the track record of Berus' previous trading;

-- Misrepresenting the performances of the two commodity pools in written and oral statements, by reporting large profits when, in fact, neither of the pools was ever profitable; and

-- Misappropriating investors' funds in the pools and converting the funds to their own use and to pay purported profits to other investors, in a manner akin to a Ponzi scheme.

Without admitting or denying the allegations of the complaint, Meca, Berus and Gale have agreed to the court's orders, which permanently enjoin them from further violating the provisions of the CEA alleged in the complaint. The orders also permanently prohibit all of the defendants from engaging in any activity in the futures industry for themselves or on behalf of others.

In addition, the order requires Berus to pay approximately $500,000 in restitution, but the court waived such payments in light of his financial circumstances. Gale is ordered to disgorge approximately $10,000, representing the commissions she received for introducing investors to Meca and Berus.