Sharp Capital, Inc.

LITIGATION RELEASE NO. 18325 / September 5, 2003

SECURITIES AND EXCHANGE COMMISSION v. SHARP CAPITAL, INC., ET AL. Civil Action No. 3:98-CV2792-G [USDC/NDTX/Dallas Division]

DALLAS LAW FIRM AGREES TO PAY $2 MILLION FOR VIOLATING COURT ORDER IN SEC ENFORCEMENT ACTION

The Securities and Exchange Commission announced today that Gardere Wynne Sewell LLP, a Dallas-based law firm, has agreed to pay $2 million for alleged violations of a federal court order issued by the U.S. District Court for the Northern District of Texas in an SEC enforcement action.

The settlement arises from a civil enforcement action against Sharp Capital, Inc. and Mauricio Gutierrez, both of which are former clients of Gardere. During the course of the SEC litigation, Gardere failed to produce to a court-appointed Special Master, Ralph S. Janvey, approximately 42,000 pages of Sharp's records that Gardere maintained in its possession; concealed the existence of approximately $148,000, which was derived from Sharp's operations and held in a Gardere client trust account for the benefit of Gutierrez; and failed to disclose the existence of an offshore bank account controlled by Gutierrez and which held approximately $450,000 that was derived from Sharp's operations.

The SEC and Special Master contend that Gardere's conduct violated the court order appointing Mr. Janvey as Special Master. Pursuant to the order, Gardere was required to deliver to the Special Master all of Sharp's business records and restrained Gardere from concealing any of Sharp's assets.

In addition to the payment of $2 million, which includes the reimbursement of attorneys fees for the Special Master, Judge Barbara Lynn ordered Gardere to institute a formal, firm-wide policy and procedure regarding future document productions to insure that these types of professional lapses do not recur.

Sharp is a former registered investment adviser that catered to Mexican and other Latin American investors. The SEC lawsuit against Sharp alleged that the company and Gutierrez lost as much as $80 million of client funds in highly leveraged investments in speculative securities of Eastern European and South American companies without client knowledge or authorization.

In November 1998, the SEC obtained emergency orders from the U.S. District Court for the Northern District of Texas freezing Sharp's assets and appointing a Special Master to collect and maintain the assets of Sharp for the benefit of its advisory clients. Among other things, the orders directed Sharp, Gutierrez, and their agents immediately to provide to the Special Master all non-privileged books, records and documents relating to Sharp's activities and to preserve all of Sharp's assets pending the outcome of the civil litigation.

As their attorney, Gardere negotiated the terms and language of the orders on behalf of Sharp and Gutierrez. Gardere, however, failed to turn over to the Special Master 27 boxes of Sharp's records until 18 months after the entry of the orders. The boxes contained relevant documents not previously produced to the Special Master. Gardere also failed to disclose to the Special Master and the SEC that it had unearned legal fees in its trust account of approximately $148,000, and that Gutierrez controlled an offshore bank account that had approximately $450,000 on deposit, when the court ordered the asset freeze. Gutierrez subsequently used these funds for his personal legal defense and other expenses.

As a result of Gardere's violations of the court orders, the Special Master's efforts to administer the assets maintained for investors was significantly impaired. The SEC and Special Master believe that the $2 million being paid is appropriate compensation for the damages caused by Gardere's failure to comply with the court orders.

Previously in the Sharp litigation, the Special Master recovered more than $17 million, much of which already has been distributed to victims of the scheme. In addition, Gutierrez has pled guilty to criminal fraud charges brought by a federal grand jury in conjunction with the U.S. Attorney's Office for the Northern District of Texas and is awaiting sentencing. For further information about the Sharp litigation, see SEC Litigation Release No. 17584 and 16946.