Newspaper article THE JOURNAL RECORD

Westinghouse Credit Liable for $2 Million to Pepco Investors

Newspaper article THE JOURNAL RECORD

Westinghouse Credit Liable for $2 Million to Pepco Investors

Article excerpt

Westinghouse Credit Corp. has been found liable to investors of Norman-based Pepco Inc. as a co-conspirator in the sale of u nregistered securities, according to an order entered by Oklahoma County District Judge James Gullett.

According to Karen Howick, the attorney for 37 Pepco investors who filed the lawsuit, Westinghouse will be liable for over $2 million.

Westinghouse Credit, a subsidiary of Westinghouse Electric Corp. of Pittsburgh, made a profit of about $1.5 million in interest payments and loan origination fees as a result of a financing arrangement with Pepco.

Westinghouse Credit was pulled into the lawsuit after Pepco was placed in Chapter 11 bankruptcy.

In June, Pepco was found to have violated securities laws and held liable for selling partnership interests as unregistered securities. The automatic stay which protects companies in Chapter 11 from creditors was lifted so that Pepco's liability could be determined. Investors, however, could not collect on the damage award because of the company's bankrupt status.

In the Pepco decision, Gullett said the activities of Pepco and related entities in the sale of partnership interests constituted a conspiracy to sell unregistered securities.

The partnership interests were integrated into a single financing package and were sold to more investors than allowed under the integration doctrine adopted by the Securities and Exchange Commission, the court ruled. Pepco told investors that the securities were exempt from registration requirements.

The Oklahoma Department of Securities issued a permanent cease and desist order against Pepco on Oct. 8, 1985, and the firm was placed in state-court receivership.

Westinghouse Credit loaned money to the partnerships, putting Pepco and related companies in a position to sell additional unregistered securities and also freed its line of credit at Oklahoma Cityand Norman banks. …

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