JACKSON, Miss. (AFX) - Two brothers involved in multibillion dollar development projects on the Mississippi Gulf Coast owe millions to the federal government over a stock market manipulation scheme, documents show.
But officials in south Mississippi say it's an old issue and they don't anticipate any problems with the developments Richard S. Kern and Donald R. Kern are pushing in the hurricane-ravaged area.
The Kerns, both of Florida, are part owners of Fort Lauderdale-based Paradise Properties Group, which has sought regulatory approval of high-rise condominiums, apartments and commercial projects in Hancock County.
Paradise spokeswoman Angela Kurlander says the Kerns' pasts have been brought up and unfairly characterized in recent weeks by environmental groups opposed to the company's projects, which would include more than 2,000 units.
Securities and Exchange Commission records show the Kerns, along with two other men, ran into trouble with the regulatory agency in the late 1990s.
An SEC inquiry into companies once owned by the brothers led to a federal court ruling in 2003 that identified the Kerns in a scheme that bilked investors out of nearly $12 million, documents show.
The Kerns and Charles Wilkins, of Scottsdale, Ariz., were ordered to repay almost $9 million in disgorgement, interest and civil penalties while another man was sentenced to prison, according to SEC documents.
Kurlander said the money would be repaid, but the Kerns are waiting to see how much can be recouped from Peter C. Lybrand, the man the brothers say is responsible for the scheme.
The SEC complaint filed in February 2000 alleges the Kerns and Wilkins helped Lybrand make unregistered stock sales for three shell companies the brothers owned.
Lybrand, also known as Peter C. Tosto, is serving an 87-month prison sentence for his part in the scheme and other violations, according to SEC records.
Hancock County Attorney Ronnie Artigues said the Kerns' past business dealings won't effect their projects on the coast 'as long as they comply with local rules and regulations.'
Paradise Properties plans to build several luxury buildings in Mississippi that feature 'alternative state-of-the-art building techniques for hurricane resistance' and will be 'engineered to 180 mph windloads,' according to the company's Web site.
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