TWO FORMER OFFICERS OF DEFUNCT COMPANY CHARGED FOR PARTICIPATING IN FRAUDULENT PENNY STOCK SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

SEC Charges Former Officers and Investor in Houston Company in Fraudulent Penny Stock Scheme

The Securities and Exchange Commission today charged two former officers of now-defunct PGI Energy, Inc., as well as an investor in the company, for their roles in a fraudulent penny stock scheme to issue purportedly unrestricted PGI Energy shares in the public markets.

The SEC's complaint, filed in U.S. District Court for the Southern District of Texas, alleges that starting in 2011, PGI Energy's former Chief Investment Officer Robert Gandy and former CEO and Chairman Marcellous McZeal engaged in a scheme that included creating false promissory notes, signing misleading certifications, and altering the company's balance sheet to cause its transfer agent to issue millions of PGI Energy common stock shares without restrictive legends. The SEC also charged investor Alvin Ausbon for his role in the scheme, which included signing false promissory notes and diverting proceeds from the sale of PGI Energy stock back to the company and Gandy.

Gandy is also the CEO of Houston-based Pythagoras Group, which purports to be an "investment banking firm." McZeal is an attorney licensed in Texas. The complaint alleges that Gandy and McZeal made material misstatements and provided false documents to attorneys and a transfer agent who relied on them to conclude that PGI Energy shares could be issued without restrictive legends. The SEC alleges that Gandy and McZeal backdated promissory notes that purported to memorialize debt supposedly owed by PGI Energy and a prior business venture. They also are alleged to have added false debt to PGI Energy's balance sheet, and signed bogus "gift" letters and certifications of non-shell status, all in an effort to get unrestricted, free-trading PGI Energy shares unlawfully released into the market. Ausbon is charged with furthering the scheme by signing bogus promissory notes and remitting proceeds from the sale of PGI Energy shares back to the company and Gandy.

According to the complaint, the scheme collapsed in February 2012 when the SEC ordered a temporary suspension of trading in PGI Energy's securities, due to questions regarding the accuracy and adequacy of the company's representations in press releases and other public statements.

The SEC's complaint charges all defendants with violating Sections 5 and 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The complaint seeks permanent injunctions, disgorgement plus prejudgment interest, a financial penalty, and penny stock bars against all three defendants and officer and director bars against Gandy and McZeal.

Without admitting or denying the allegations in the SEC's complaint, McZeal has consented to the entry of a final judgment enjoining him from future violations of Sections 5 and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. He has also agreed to pay disgorgement plus prejudgment interest thereon of $19,919.37 and a civil penalty of $70,000. In addition, McZeal has agreed to permanent officer and director and penny stock bars. This settlement is subject to court approval. Subject to final settlement of the district court proceeding, McZeal has also agreed to the institution of a settled administrative proceeding pursuant to Rule 102(e) of the SEC's Rules of Practice, pursuant to which he would be barred from appearing before the SEC as an attorney.