SEC CHARGES AIC INC OF PONZI SCHEME INVOLVING THE ELDERLY

Anyone with elderly parents has to worry that they might become a victim of a financial fraudster. This is especially so because the elderly who have any savings at all, often receive unsolicited phone calls, e-mails and, land mail from people purporting to be from their bank, stock broker, insurance company etc. The following case is an excerpt from the sec web site. In it the SEC is alleging that a financial services company and others had set up a Ponzi scheme with many of the victims being the elderly:

April 18, 2011
“The Securities and Exchange Commission announced today that it filed a civil action in the United States District Court for the Eastern District of Tennessee against AIC, Inc., a financial services holding company for three broker-dealers and an investment adviser based in Richmond, Virginia, and its President and CEO, Nicholas D. Skaltsounis. The Complaint alleges that Skaltsounis devised and orchestrated an offering fraud and Ponzi scheme by offering and selling more than $7.7 million in AIC promissory notes and stock. Also named in the Complaint are AIC’s subsidiary, Community Bankers Securities, LLC (“CB Securities”), a broker-dealer, along with associated stockbrokers John B. Guyette, of Greeley, Colorado, and John R. Graves, of Pensacola, Florida, who was also an investment adviser.

The Complaint alleges that, from at least January 2006 through November 2009, Skaltsounis, directly and through registered representatives associated with CB Securities, including Guyette and Graves, fraudulently offered and sold AIC promissory notes and stock to at least 74 investors in at least 14 states, many of whom were elderly, unsophisticated brokerage customers of CB Securities. Skaltsounis, Guyette, and Graves misrepresented and omitted material information to investors relating to, among other things, the safety and risk associated with the investments, the rates of return on the investments, and how AIC would use the proceeds of the investments.

The Complaint also alleges that AIC promised to pay interest and dividends ranging from 9 to 12.5 percent on the promissory notes and stock knowing that it did not have the ability to pay those returns. AIC and its subsidiaries were never profitable. AIC earned de minimis revenue and its subsidiaries did not earn sufficient revenue to meet its expenses. Skaltsounis used the money raised from new investors to pay back principal and returns to existing investors in the nature of a Ponzi scheme. By early December 2009, Skaltsounis’ scheme collapsed when he could no longer solicit investments and recruit new investors to pay back existing investors.

The Commission seeks permanent injunctions and civil penalties against Skaltsounis, AIC, CB Securities, Guyette, and Graves for violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission also charged Graves with violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The Commission also seeks disgorgement plus prejudgment interest against Skaltsounis, AIC, CB Securities, and Guyette. In addition, the Commission has charged AIC subsidiaries, Allied Beacon Partners, Inc. (f/k/a Waterford Investor Services, Inc.), Advent Securities, Inc., and CBS Advisors, LLC, as relief defendants seeking disgorgement of funds received from the fraudulent scheme.”