The Commission Stated: " 1. This is a governmental enforcement action seeking injunctive and other equitable relief against three defendants based upon their fraudulent offer and sale of an unregistered security. Between August 1, 2003 and September 26, 2003, defendants Presidents Trust Company LLC ("Presidents Trust"), a South Dakota-chartered trust company, and its control persons Jon Patrick Pierce ("Pierce") and David D. Klasna ("Klasna"), offered and sold to the public an unregistered financial instrument that they called "Fixed Income Trust-Secured" ("the Trusts"). The defendants sold the Trusts to approximately 150 investors nationwide, raising approximately $14 million. On September 26, 2003, a cease-and-desist order was entered by South Dakota against Presidents Trust, which curtailed sales of the Trust program nationwide. 2. Although depicted in sales literature as a "secured" and conservative trust instrument offering higher rates of return than conventional bank CDs, the Trusts were in economic reality unsecured promissory notes issued by Presidents Trust. Contrary to representations in the offering documents that investors' funds would be placed into a diversified portfolio of investments which would guarantee not only annual income but the return of 100% of their invested principal, the defendants immediately diverted a significant portion of the offering proceeds into two highly risky ventures: Presidents Trust itself, which was strapped for cash, and a speculative debt collection business. The proposed defendants misrepresented Presidents Trust's financial condition to investors, and failed to disclose any financial information about the debt collection business. 3. Offering documents provided to prospective investors in the Trusts also falsely described the Trusts as "secured" and emphasized that the investment would avoid the risks associated with the stock and bond markets. These representations were false. No security arrangements for the Trusts existed. The Trusts were essentially unsecured promissory notes of Presidents Trust, and in fact exposed investors to risks equal to or greater than those of stock or bond investments. 4. The Trusts program constituted an unregistered investment company. During all relevant periods, more than forty percent of its assets were invested in the securities of other issuers. Presidents Trust failed to register the Trusts with the Commission as required. 5. Through these actions, defendants Presidents Trust, Pierce and Klasna have violated, and unless restrained and enjoined will continue to violate, the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, as amended ("Securities Act") [15 U.S.C. §77q(a)], Section 10(b) of the Securities Exchange Act of 1934, as amended ("Exchange Act") [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].