FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22740 / July 2, 2013
SEC Charges Armand R. Franquelin and Martin A. Pool with Violations of the Federal Securities Laws
On, July 2, 2013, the Securities and Exchange Commission filed a civil injunctive action against Armand R. Franquelin (Franquelin) and Martin A. Pool (Pool), alleging that Franquelin and Pool violated the federal securities laws in connection with the sale of securities by The Elva Group, LLC (Elva Group). Judith E. Franquelin, wife of Armand R. Franquelin, was named as a relief defendant.
In its Complaint, filed in the U.S. District Court for the District of Utah, the Commission alleges that from at least January 2006 through August 2010, Franquelin and Pool engaged in a Ponzi scheme and acted as unregistered broker-dealers by offering and selling more than $12 million in Elva Group securities to approximately 130 investors. The Complaint alleges Franquelin and Pool encouraged investors to convert funds held in Individual Retirement Accounts (IRAs) into self-directed IRAs through Destiny Funding, LLC, another company owned by Franquelin and Pool, before investing those funds with Elva Group. Franquelin and Pool claimed to use investor funds to develop real estate and guaranteed returns ranging from 10% to 240% per year. Instead of using investor funds as represented, it is alleged that Franquelin and Pool misappropriated investor money for their personal use, to make "interest" payments to earlier investors, and to pay for continuing Elva Group expenses.
The Commission alleges that by engaging in this conduct Franquelin and Pool violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The complaint seeks a permanent injunction as well as disgorgement, prejudgment interest and a civil penalty from Franquelin and Pool. The complaint also seeks disgorgement and prejudgment interest from Judith Franquelin.
Without admitting or denying the allegations in the Commission’s complaint, Pool has consented to the entry of a final judgment permanently enjoining him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder. Pool has also consented to pay disgorgement of $970,510.00, plus prejudgment interest of $418,935.05, but payment of disgorgement and prejudgment interest will be waived and no civil penalty will be imposed based on Pool’s current financial condition.
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission ("Commission") announced that on April 3, 2013, Chief Judge Norman A. Mordue entered a final judgment, against Prime Rate and Return, LLC ("Prime Rate"), individually and doing business as American Integrity Financial Company, in SEC v. Matthew John Ryan, et al. The Commission’s complaint alleges that Prime Rate defrauded investors through a multi-million dollar Ponzi scheme operated in the Albany-Troy area by Prime Rate’s sole owner and manager, Matthew Ryan.
Without admitting or denying the allegations of the complaint, Prime Rate, through its court-appointed receiver, Paul A. Levine, Esq., consented to the entry of a final judgment permanently enjoining it from 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 final judgment orders Prime Rate to pay disgorgement of $6.5 million and prejudgment interest of $616,662, but deems disgorgement satisfied by the $71,927 recovered by the receiver plus any additional amount the receiver recovers, after certain court-approved payments and fees, from the sale of a property in which Prime Rate owns an interest.
The Commission filed a complaint on May 3, 2010, alleging that from at least 2002, Ryan and Prime Rate, using a fictional entity called "American Integrity Financial Company" ("American Integrity") had raised more than $6.5 million from investors — many of them elderly — by promising them "guaranteed" fixed rates of return ranging from 3.85% to 9% annually. Ryan obtained these investments by fostering the false impression that American Integrity was a legitimate, substantial financial services firm, with numerous employees and for which he was merely an employee, and by offering safe, even guaranteed, investments, including qualified individual retirement accounts ("IRAs"). To perpetrate this fraud, Ryan used devices such as a phony Manhattan address and fictitious names and titles of purported American Integrity employees. Ryan also misrepresented to investors that their investments were safe and insured by the Federal Deposit Insurance Corporation ("FDIC") or the Securities Investor Protection Corporation ("SIPC") and that American Integrity was qualified to offer IRAs and other tax-deferred investments.
The Commission’s case is still pending against Matthew Ryan. Ryan has been convicted of securities fraud in a criminal case arising out of the same conduct underlying the Commission’s case and has been barred by the Commission from the securities industry.
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