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November 1, 1984

Securities and Exchange Commission
Champion Sports Management, Inc., et al.

The opinion of the court was delivered by: WARD

Opinion of WARD, District Judge.

In August 1983, Champion Sports Management, Inc. ("Champion"), a Virginia corporation, filed a registration statement with the Securities and Exchange Commission (the "Commission") pursuant to Section 5 of the Securities Act of 1933, 15 U.S.C. § 77(e), on Form S-1, 17 C.F.R. § 239.11, with respect to its proposed initial public offering.

 During the period from August, 1983, through January, 1984, Champion filed with the Commission five amendments to the initial registration statement. The registration statement was declared effective on January 19, 1984.

 Thereafter, three post-effective amendments were filed with the Commission, on March 5, March 9, and March 19, 1984 respectively. The Champion prospectus dated January 13, 1984, as amended March 19, 1984, was filed as a part of the registration statement and was distributed to the public in connection with the offering. A prospectus supplement was filed with the Commission and was attached to the prospectus on July 10, 1984.

 Richard Hirschfeld ("Hirschfeld") is an attorney. He has been a member of the Virginia bar for the past thirteen years, practicing primarily in the areas of real estate and corporate law. Hirschfeld is the president, treasurer, chief operating officer and a director of Champion. In addition, Hirschfeld is also the secretary-treasurer and a director of Hirsch-Chemie, Ltd. ("Hirsch-Chemie"), a public company with its principal office located at the same address in Virginia Beach, Virginia, as Champion's principal offices.

 Hirschfeld holds 26.5 percent of the outstanding shares of Hirsch-Chemie, which in turn is a major shareholder and a creditor of Champion.

 Until on or about March 24, 1984, Hirsch Capital Corporation ("Hirsch Capital") was a wholly-owned subsidiary of Hirsch-Chemie. Hirsch Capital is a major shareholder of Champion, owning 9.5 percent of Champion's outstanding shares. By virtue of his 26.5 percent interest in Hirsch-Chemie, Hirschfeld is a major shareholder of Champion. His ownership is not disclosed in the Champion prospectus nor does the prospectus adequately disclose the relationship among Champion, Hirsch-Chemie and Hirsch Capital.

 Champion, which was organized to engage in the recruitment, training and promotion of professional boxers, has a board of directors which includes several famous boxing personalities. Included among the officers and directors listed in the prospectus are: Muhammed Ali, chairman of the board, Jabir Herbert Muhammad, chief executive officer and director, Sheldon Saltman, executive vice-president, Henry C. Grooms, senior vice-president, Ernie Shavers, vice-president, and Howard Bingham, vice-president. Jabir Herbert Muhammad, who is listed as Champion's chief executive officer and a director, has attended only two board meetings, as has Ali. Although Muhammad is the chief financial officer of Champion, Muhammad testified that he is for the most part unaware of the financial liabilities of the company since Hirschfeld conducts all loan transactions.

 The prospectus was drafted by counsel for Champion. Hirschfeld reviewed the prospectus and played an integral part in its final preparation.Neither Ali nor Muhammad had any part in the preparation of the prospectus, nor does the Court find them to have acted wrongfully.

 The $600,000 Note

 On August 19, 1983, Champion, through Hirschfeld, entered into an agreement with Edward S. Garcia, Sr. ("Garcia") and Sandra H. Garcia to purchase an 88-acre country estate near Virginia Beach. In connection with his sale of the real estate to Champion, Garcia agreed to accept a $600,000 promissory note bearing the Swiss prime rate. He did so because Hirschfeld told him the Swiss prime rate was the rate "the people in Europe wanted to put on the note. . . ."

 Champion agreed to make an initial down payment of $100,000 and obligated itself to pay a total purchase price of $1.7 million in installments. The first payment was in fact made by an entity called Ottimo Stabilmente Immobiliere ("Ottimo"), by check drawn on the Bank of Virginia Beach (the "Bank").

 Between August, 1983, and December, 1983, Champion paid a total of $600,000 in nonrefundable monthly installments.

 In or about August, 1983, Hirschfeld, together with his family, moved on to the estate. They continued to live on the estate until May, 1984, when Garcia's lawyers told them to move.

 In January, 1984, Champion found itself with insufficient funds with which to continue to make payments on the property. On or about January 15, 1984, Hirschfeld requested that Garcia agree to the assignment of the purchase agreement. This assignment was effected by a letter agreement dated January 15, 1984, from Hirschfeld to Garcia, wherein Hirschfeld advised Garcia that the ownership of the property should vest and title in a new entity to be formed called CSM Properties, Inc. ("CSM"). In consideration for the sum of $1, Garcia agreed to the assignment. Garcia testified that he believed at the time he agreed to assign the purchase agreement to CSM that CSM was a holding company for the real estate of Champion. Hirschfeld admits that he formed CSM on January 16, 1984, solely for the purpose of acquiring the rights and obligations of Champion under the real estate contract.

 On February 16, 1984, a meeting of the board of directors of CSM was held. According to the minutes of the meeting, Hirschfeld was the only person present and acted as chairman. Hirschfeld elected Janice and Walter Smith as officers and directors of CSM, and resolved to issue the aforementioned promissory note for $600,000 to Champion in connection with the purchase of the real estate contract. Although Hirschfeld resigned as a director, he continued to act on behalf of CSM and to serve as CSM's agent for service of process.

 First Leisure International, Inc. ("First Leisure"), a purported Utah corporation with which the Smiths were associated, was a comaker of the $600,000 note. At the time CSM issued this note to Champion, Hirschfeld knew that CSM had no assets other than its right to purchase the Garcia property. As far as First Leisure was concerned, Hirschfeld knew that its principal, Ron L. Smith, was in Utah State Prison on what appears to have been a charge of issuing a bad check. In fact, in or about January, 1984, Hirschfeld visited Smith ...

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