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            IN THE UNITED STATES DISTRICT COURT
            FOR THE DISTRICT OF WYOMING


SECURITIES AND EXCHANGE COMMISSION,
    Plaintiff,

vs.

DANIEL E. SCHNEIDER, FINANCIAL ACQUISITION SOVEREIGN TRUST, and
GLOBAL AMERICAN PROSPERITY FOUNDATION,
    Defendants,

and

GORDON A. DUNLOP, FIRST CONSORTIUM INTERNATIONAL, NORMAN FADEL
and KEN KARLSON,
    Relief Defendants.

No. 98-CV-14-D

ORDER GRANTING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION,
DENYING RELIEF DEFENDANT KARLSON AND RELIEF DEFENDANT FADEL'S
OBJECTIONS BASED UPON PERSONAL JURISDICTION, AND GRANTING
PLAINTIFF'S MOTION TO MODIFY THE ASSET FREEZE AS TO GENESIS
INTERNATIONAL


    This matter comes before the Court on Plaintiff's Motion for
Preliminary Injunction, Relief Defendant Karlson's Motion to
Dismiss, Relief Defendant Fadel's objection to personal
jurisdiction, and Plaintiff's Motion to Modify the Asset Freeze
as to Genesis International. The Court, having carefully reviewed
the briefs and materials submitted in support of the Motions and
the opposition thereto, and being otherwise fully advised in the
premises, FINDS and ORDERS as follows:

                    Background

    Plaintiff filed its Complaint on January 20, 1998, asserting
that the named Defendants have perpetrated securities fraud in
violation of Rule 10(b) of the Securities Exchange Act of 1934,
Section 17(a) of the Securities Act of 1933, and Rule 10b-5. This
Court previously entered a Temporary Restraining Order pursuant
to F.R.C.P. 65, Section 20(b) of the 1933 Act, and Section 21(d)
of the 1934 ,act.

    Defendant Schneider procured, and otherwise channeled funds
from a variety of entities in conjunction with several multi-
level marketing arrangements, but primarily through two
investment schemes: a prime bank trading program and the sale of
railroad bonds. Defendant Schneider channeled these funds through
himself and the other named defendants to a variety of
individuals and entities in an array of transactions which are
more fully detailed in his deposition. See Government's Exhibit 1
and the Account Summaries contained in Government's Exhibits 3 &
4. Defendant Schneider apparently received and dispersed
commissions to others from the amounts that were channeled
through his bank accounts and other investment arrangements.

    Defendant Schneider maintains a bank account in Worland,
Wyoming under the name of Global American Prosperity Foundation
(GAPF). The record reflects that Defendant Schneider has also
used Defendant Financial Acquisition Sovereign Trust in
conjunction with the prime bank trading program, and it is
undisputed that a Genesis International bank account contains
about $25,000 to $30,000 in funds transferred from the GAPF
account. The GAPF account records and the deposition testimony
demonstrate that:

    a) Defendant Schneider received substantial sums from
investors and other entities in conjunction with the prime bank
trading program and the sale of Chicago and Saginaw Railroad
bonds (C&S bonds) which were deposited in the GAPF account;

    b) these funds included money deposited from Randall Smith
in conjunction with his purchase of C&S bonds from Defendant
Schneider, and money deposited from Michael Belcher in
conjunction with his (and his associates) investment in the prime
bank trading program;

    c) investor funds were commingled with a myriad of other
funds in the GAPF account;

    d) Defendant Schneider paid funds out of this account for
his personal use, including expenses, purchasing real property,
and various loans and other investments including Genesis
International; and

    e) Defendant Schneider paid funds out of this account to
Defendant First Consortium International, which Defendant Dunlop
is associated with, in conjunction with the prime bank trading
program.

    Defendant Schneider testified that he sold C&S bonds to
various individuals, including Winn Parker (individually, but who
is also associated with the West Texas Development Trust, and
also invested in them himself. See Schneider deposition at pp.
65-72. The purchase price was approximately $40,000 per bond.
According to Defendant Schneider, Relief Defendant Fadel was
associated with the sale of C&S bonds, including setting the
price of the bonds, paying Mr. Schneider's commission, and
possibly identifying sources to buy the bonds from (i.e. Relief
Defendant Karlson). Id. and pp.74, 81-84, 94.

    Defendant Schneider transferred approximately $482,000 to
Relief Defendant Fadel in June of 1997. See Government's Exhibit
4 and Relief Defendants Fadel and Karlson's responses to
Plaintiff's Request for Admissions arid Responses to
Interrogatories. Relief Defendant Fadel transferred $384,000 of
this $482,000 to Relief Defendant Karlson, who owned some C&S
bonds, having allegedly purchased them for about $1,500 per bond.
Relief Defendant Fadel kept the difference, transferring $21,000
of the remaining amount to other entities, and retaining the
balance as his "referral fee" (most of which has been dispersed).
Relief Defendant Karlson invested $350,000 of his $384,000 and
dispersed the remaining amount in loans to other entities and for
personal expenses. Only nominal amounts of these funds remain.

    The West Texas Development Trust has been identified as a
purchaser of C&S bonds from Relief Defendants Fadel and Karlson.
Relief Defendants Fadel and Karlson acknowledge selling C&S bonds
to the Trust, but deny selling bonds to Defendant Schneider,
despite having admitted to receiving about $482,000 directly from
Defendant Schneider and retaining nearly all of that amount as
referral fees and sale proceeds. According to Winn Parker (on
behalf of the Trust), no representations were made by Karlson or
Fadel concerning the C&S bonds, and no purchasers have expressed
any concern regarding the investment or requested a refund of
their money.

    Randall Smith testified in his deposition that Defendant
Schneider made several representations to him regarding the C&S
bonds. See Government's Exhibit 2 at pp. 9-30. Defendant
Schneider represented that the bonds were, in aggregate, worth
between $105 million and $110 million. See also Schneider
deposition at p. 75. Defendant Schneider contends this valuation
was based on a report he received from a Mr. Dobbins.

    Mr. Smith's understanding of the arrangement, based on
Defendant Schneider's representations, was that the bonds had
accrued (and were accruing) about 7% interest per year since
their issuance in 1872. As a result, the bonds could be cashed at
a bank for a discounted price of $2 - $5 million per bond (2 - 5%
of the bond's value). Defendant Schneider represented that the
bonds were backed by gold bullion and/or coins. See also
Schneider deposition at p. 76. Based on the foregoing
representations, Mr. Smith purchased seven bonds from Defendant
Schneider at $40,000 per bond. Mr. Smith wired the purchase money
directly to the GAPF bank account.

    Defendant Schneider also represented to Mr. Smith that his
bonds were being held for safekeeping in San Francisco and were
being pooled somehow in the West Texas Development Trust,
possibly involving some contract arrangement with the Trust, to
be cashed in. Smith deposition at pp. 23-29. According to Mr.
Smith, Mr., Parker, on behalf of the Trust, called Mr. Smith and
confirmed this information and that further information on the
bonds was being collated so that the bonds could be cashed in at
a bank. Mr. Smith testified that Mr. Parker obtained his name and
number from Defendant Schneider. At the time of his deposition,
Mr. Smith had not asked to receive any of his money back.

    Defendant Schneider also apparently represented to some
investors that he was working with Relief Defendant Fadel to "put
[the C&S bonds] into a program..." arrangement through a company,
government or trust arrangement. Schneider deposition at pp. 80-
8l, 93-99. According to Defendant Schneider, people associated
with Relief Defendant Fadel, which Mr. Fadel had directed that
Defendant Schneider call, represented to him that these programs
had been successful in the past. Schneider deposition at p. 82.

    Despite the purported (and convenient) "satisfaction" of
purchasers such as the West Texas Development Trust, Relief
Defendants Karlson and Fadel's activities in conjunction with the
West Texas Development Trust and the C&S bonds certainly do not
pass this Court's "smell" test based on the circumstantial
evidence and testimony contained in the record. In addition to
the above testimony, Defendant Schneider has implicated Mr.
Parker in placing the C&S bonds in some form of trading program.
Schneider deposition at 88-89. Richard Michael Gaddy, presumably
Mike Gaddy (a trustee of the Trust), also wired funds directly to
the GAPF account.

    Michael Belcher testified in his deposition, and at the
preliminary injunction hearing, that Defendant Schneider made
several representations to him regarding the prime bank trading
program. See Defendant's Exhibit 1. Based on these
representations, Mr. Belcher understood that he would be
investing in high yield medium term notes or bonds associated
with overseas banks. (Several exhibits contained in the record
describe this arrangement in more detail) Mr. Belcher would
receive a 15 - 50% yield per month, depending on the frequency
and amount of the purported trades. Defendant Schneider
represented that these "programs" had been successful in the
past, and that there was "minimal risk" associated with such
programs. In addition, the notes, etc. were backed by a 60 day
performance bond, which meant that the principal amount invested
was protected--if there was no trade within sixty days, the
principal would be returned, with interest.

    Based on Defendant Schneider's representations, Mr. Belcher
(and others associated with him) invested $195,000 (which was
wired to the GAPF account) and at one point received $37,500 in
"return" on the investment. Mr. Belcher understood that the money
deposited with GAPF would be sent out of the country to Canada.
London, and other locations. Defendant Schneider admits that
money from the GAPF account was transferred to various entities
outside the country.  He further represented to investors that
there could be delays in receiving money back, as trading
depended on the frequency of trades and how many trades were
completed. Defendant Schneider represented to Mr. Belcher that
the investments were "doing good," that he had received no
complaints, and that he would get Mr. Belcher's principal back
for him.

    The Court's findings as previously stated on the record in
conjunction with Plaintiff's Motion for Temporary Restraining
Order, and Plaintiff's Motion for Preliminary Injunction, as well
as all exhibits received or appended to the respective Motions,
are incorporated herein by reference.

            Standard for Preliminary Injunction

    Both Securities Acts provide that the SEC may, upon a proper
showing, seek to enjoin any person who is engaged or about to
engage in any acts or practices which constitute or will
constitute a violation of the Acts or any rule or regulation
prescribed pursuant thereto. See 15 U.S.C. ºº 77t(b) and 78(u).

    A "proper showing" requires a prima facie case of previous
violations, and a reasonable and substantial likelihood that the
defendants, if not enjoined, will violate securities laws in the
future. See S.E.C. v. Unifund Sal, 920 F.2d 1028 (2nd Cir. 1990);
S.E.C. v, Pros Intern., Inc., 994 F.2d 767 (10th Cir. 1993).
Determination of the likelihood of future violations requires
analysis of several factors, such as the seriousness of the
violation, the degree of scienter, whether defendant's occupation
will present opportunities for future violations and whether
defendant has recognized his conduct and gives sincere assurances
against future violations. Pros Intern, Inc., 994 F.2d at 769.
Although no single factor is determinative, the degree of
scienter bears heavily on the decision. Id.

                A. Prima Facie Case

    To establish liability for the equitable relief sought, a
plaintiff must show the following under º 10(b) and Rule 10b-5:
1) that the defendant made an untrue statement of material fact,
or failed to state a material fact; 2) that the conduct occurred
in connection with the purchase or sale of a security; 3) that
the defendant made the statement or omission with scienter; and
4) that the investor relied on the misrepresentation.  Anixter v.
Home-Stake Production, 77 F.3d 1215, 1225 (10th Cir 1996).
Recklessness satisfies the scienter requirement under º 10(b).
Recklessness is defined as conduct that is an extreme departure
from the standards of ordinary care, and which presents a danger
of misleading buyers or sellers that is either known to the
defendant or is so obvious that the actor must have been aware of
it. Anixter, 77 F.3d at 1232. Scienter is not required under
Section 17 of the 1933 Act.

    Based on the record before the Court, Defendant Schneider
made untrue statements of material fact, and/or failed to state
material facts in conjunction with the sale of C&S bonds and the
prime bank trading program. It is apparently undisputed that both
the bonds and the trading program are "securities." Defendant
Schneider made the representations, as previously described, to
investors despite (or in spite of) the following:

    a) The record reflects that the C&S bonds have no value,
other than that of a collectible. The C&S bonds were discharged
in an 1876 bankruptcy proceeding (Richardson v, Green, 130 U.S.
104 (1889)), which has also been confirmed by the CSX railroad.
In fact, these bonds could be purchased from a museum in Michigan
for about $29.95 each.

    Defendant Schneider contends that he based the bonds'
valuation on a report from Mr. Dobbins, but did no further
investigation into the basis of the report's valuation or to
independently verify the accuracy of the valuation. Schneider
deposition at pp. 74-76.
Defendant Schneider's representations regarding the bonds' value
were based solely on this report.

    b) The record reflects that prime bank trading schemes are
fictitious according to readily available information.

    Therefore, based on the evidence contained in the record,
Defendant Schneider's material representations to investors were
untrue and/or Defendant Schneider failed to state material facts
to the investors in making these representations.

    Defendant Schneider was, at the very minimum' reckless in
making representations to investors. Schneider deposition at pp.
31-34, 39-47, 75-78. He failed to conduct meaningful independent
research to verify the material representations he made to
investors despite readily available information to the contrary,
and proceeded to recklessly cultivate investors based on others'
alleged unsubstantiated representations to him, and his false
representations to investors. Information as to the value of
and/or return to be received on an investment, as well as the
risks of the investment, is information which would clearly
mislead investors.

    The gross disparity between the purchase price of the bonds
and the valuation which Defendant Schneider represented to other
investors evidences Defendant Schneider's recklessness, as does
the purported offer to place the bonds into some kind of
"program." If the bonds were truly worth what Defendant Schneider
represented them to be, why would others even sell them to him,
and why would he sell them for 2% of their alleged value to
investors? The standards of ordinary care would certainly dictate
some form of independent verification, given this gross
disparity.

    Further, Defendant Schneider procured investors for the
prime bank trading program, promising an exorbitant rate of
return despite not knowing how it worked, who performed the
"trades," and failing to otherwise conduct research to verify the
representations he made. Defendant Schneider admits to having
questions in this regard, but his cohorts refused to provide him
further information. Perhaps the $300,000 Defendant Schneider
received in referral fees associated with this transaction
soothed his "concerns."

    Mr. Smith and Mr. Belcher testified that they relied on
Defendant Schneider's representations in purchasing the C&S bonds
and investing in the prime bank trading program.
In any event, plaintiff has certainly met its prima facie burden
under Section 17 of the 1933 Act.

            B. Likelihood of Future Violations

    Defendant Schneider was, at the very least, highly reckless
as to both investment schemes. In addition, Defendant Schneider
continues to engage in numerous multilevel marketing
"businesses," including Genesis International. He testified that
most of his contacts associated with the "investments" in this
case came from engaging in this type of business. Defendant
Schneider, in association with a myriad of other entities and
individuals, also haphazardly channeled voluminous investor funds
through the GAPF account.

    Due to the high degree of recklessness exhibited, the state
of the record, and the nature of Defendant Schneider's business
interests and previous channeling of investor funds, the Court
finds that a reasonable and substantial basis exists that the
named defendants, if not enjoined will continue to violate the
Securities Acts.

                C. Relief Defendants

    Plaintiff has not alleged that the Relief Defendants
violated the Securities Acts, but has alleged that the Relief
Defendant received investor funds connected with the named
Defendants' Securities Acts violations. Relief Defendant Karlson
contends that he does not have sufficient contacts with the
District of Wyoming for this Court to exercise personal
jurisdiction over him, properly serve him, and that venue is
improper as a result. Relief Defendant Fadel asserts essentially
the same objections.

    When the personal jurisdiction of a federal court is invoked
based upon a federal statute providing for nationwide service of
process (a statute providing for service in any district in which
the defendant is an inhabitant or may be found), the relevant
inquiry is whether that party has had sufficient minimum contacts
with the United States. Therefore, specific contacts with the
district in which enforcement is sought, the District of Wyoming,
are unnecessary. Id, at 417.
It is undisputed that these Relief Defendants had sufficient
contacts with the United States in conjunction with the
transactions involved in this matter. Therefore, the Relief
Defendant's respective motions are DENIED.

    Based on the evidence presented, Relief Defendants Fadel and
Karlson have been sufficiently linked with this case to justify
the asset freeze and other conditions imposed by this Court
pursuant to its equitable powers. Mr. Fadel received funds
directly from the GAPF account and/or Defendant Schneider, and
transferred most of these funds directly to Mr. Karlson. While
this alone may be sufficient, Defendant Schneider's testimony
further links Mr. Fadel, and others (including Mr. Karlson), to
the transactions at issue and to Defendant Schneider. Mr. Smith's
testimony corroborates this.

    The remaining Relief Defendants have not appeared in this
action, and have not otherwise denied that they received funds
from the GAPF account in conjunction with the prime bank trading
program. The Court suspects that they played a more meaningful
role than this.

    Therefore, all of the relief defendants are properly
subjected to the asset freeze and other conditions imposed by
this Court.

                    Conclusion

Based on the evidence contained in the record, this Court
believes that plaintiff has convincingly demonstrated the
existence of an elaborate shell game designed to defraud easily-
duped investors. The layered relationship between and among the
named Defendants and Relief Defendants is likely intended to
shield some or all of the investment schemers from being
implicated in a criminal conspiracy to defraud investors. At the
very least, Plaintiff has persuaded this Court that there are
some cold-blooded, conniving crooks in this misbegotten cast of
characters. Until the Court is able to cull the dishonest players
from the duped ones, a Preliminary Injunction is amply justified.

    THEREFORE, it is hereby

    ORDERED that Plaintiff's Motion for Preliminary Injunction
is GRANTED, and the terms of this Court's previous Temporary
Restraining Order shall be continued pending trial, or further
Order of this Court. It is further

    ORDERED, that Relief Defendant Karlson's Motion to Dismiss
is DENIED. It is further

    ORDERED that Defendant Fadel's objection based on a lack of
personal jurisdiction is similarly DENIED. It is further

    ORDERED that Plaintiff's Motion to Modify the Asset Freeze
as to Genesis International is GRANTED to the extent specified in
the Motion. Rather than resorting to continued ex parte contacts
with the Court regarding the asset freeze in this case, and
pending the accountings to be performed pursuant to this Court's
Orders, the parties should first attempt to resolve resulting
differences among themselves, and if necessary have their
respective attorneys file motions with the Court.

    DATED this 13th day of February, 1998.


                        /s/ William F. Downes
                        United States District Judge