The Securities and Exchange Commission announced yesterday it has obtained a permanent injunction barring securities law violations by American Realty Trust and its president, Thomas J. Broyhill.
The injunction ends a five-year legal battle between the SEC and the Virginia real estate firm.
The SEC accused American Realty of failing to disclose important information to investors who bought $15 million worth of the firm's debentures in 1974.
In settling the complaint, the SEC said, American Realty agreed to tighten its restrictions on dealings with persons and companies affiliated with it. The SEC said American Realty also has recouped about $70,000 owed to it by Virginia Hotel Management Co., which once was an affiliate of American.
U.S. District Court Judge Richard B. Kellam, who issued the injunction in Arlington on Feb. 28, imposed no other penalties on American and Broyhill.
The SEC had originally accused Broyhill and his company of five securities law violations. The case was dismissed by the district court, then reinstated after the SEC appealed.
While the injunction closed the long-standing SEC case, it did not end the difficulties of American Realty or the investors who put money into the firm.
Tomorrow the company is supposed to pay back $3.5 million that is due on debentures, but last Friday American Realty announced that it may not be able to repay the money.
The company said it lost $1.6 million in the three months ended Dec. 31 and "does not presently anticipate having sufficient cash on hand" to pay the debt.
The company said it is searching for ways to repay the money, either by borrowing funds or by selling some property it owns.
The main reason for the large deficit in the last quarter of 1978, American Realty said, was that the company lost a $2 million lawsuit filed by Chase Manhattan Bank. The bank accused American Realty of fraud for not disclosing details of its operations on a loan application.
American Realty is now facing another and even bigger lawsuit, a $33.5 million legal action brought by Joel T. Broyhill, a former congressman and cousin of Thomas Broyhill.
Joel Broyhill in his lawsuit also accused his cousin and American Realty of hiding negative information from investors.