The following is an excerpt from the SEC website:
“The Securities and Exchange Commission announced today that the United States District Court for the District of Kansas entered a judgment, dated September 8, 2011, against Kyle L. Garst, the former chief executive officer of Kansas-based Brooke Capital Corporation (“Brooke Capital”). Brooke Capital was an insurance agency franchisor and a subsidiary of Brooke Corporation, a Kansas company founded by Robert Orr. Garst, without admitting or denying the Commission’s allegations, consented to a judgment enjoining him from future violations of the federal securities laws.
According to the SEC’s Complaint, in SEC filings signed by Garst, Brooke Capital’s former management inflated the number of reported insurance agency franchise locations by including failed and abandoned locations in totals set forth in SEC filings for year-end 2007 and the first quarter of 2008. The Complaint also alleges that Brooke Capital’s former management, among other things, concealed the nature and extent of Brooke Capital’s financial assistance to its franchisees, which included making franchise loan payments on behalf of struggling franchisees, and failed to disclose the company’s dire liquidity and financial condition.
Specifically, the judgment enjoins Garst from violating Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5, 13b2-1, 13b2-2, and 13a-14 thereunder, and from aiding and abetting violations Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. In addition to the injunction, the judgment bars Garst from serving as an officer or director of a public company and imposes a $130,000 civil penalty.”
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