SEC SHUTS DOWN REAL ESTATE INVESTMENT SCHEME

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
 
The Securities and Exchange Commission today announced charges and an emergency asset freeze against a Redondo Beach, Calif., resident and his companies for defrauding seniors and other investors in a real estate investment scheme.

The SEC alleges that Alvin R. Brown has raised more than $3 million from investors who were falsely promised high profits for investing in his companies that were purportedly funding commercial and residential rental properties in California and other western states. Brown and his companies - First Choice Investment and Advanced Corporate Enterprises (ACorp) - instead used investor funds to make Ponzi-like payments to pre-existing investors, and Brown routinely withdrew cash for personal use. The ACorp website prominently displayed the seals of the SEC and the State of California as well as the NYSE, NASDAQ, and the Better Business Bureau to falsely imply to investors that these investments were endorsed by these organizations. In reality, the investment offerings were not registered with the SEC under the federal securities laws.

According to the SEC's complaint unsealed today in U.S. District Court for the Central District of California, Brown particularly targeted an elderly investor suffering from a stroke and dementia. After the investor made a $30,000 initial investment, his daughter advised ACorp to stop contacting her father because she had power of attorney, but Brown nonetheless e-mailed him forms to close his brokerage account and move the money to an IRA account that would then invest in ACorp. The investor's daughter replied to Brown again to remind him that she had power of attorney and he should cease-and-desist from contacting her father. But ACorp eventually succeeded in circumventing the daughter to get the investor's signature as well as an additional $45,000 investment. The investor's daughter requested the return of her father's money, but it was never returned.

The SEC alleges that Brown and First Choice lured investors beginning in January 2011 by falsely promising 10 percent annual returns and a planned initial public offering (IPO) at the end of 2012 that would net investors 150 percent of their original investment. They touted Brown's management experience but failed to disclose to investors that he had twice filed for personal bankruptcy. Brown also falsely stated that ACorp's assets guaranteed the investments and misled investors into believing their money was safe and secure.

According to the SEC's complaint, the promised IPO and accompanying investment returns never materialized. Besides making Ponzi-like payments to earlier investors, Brown routinely drains First Choice's bank accounts each month. Therefore, Brown and First Choice have relied on capital infusions from business cash advance providers as lenders of last resort to keep the scheme afloat.

The Honorable Audrey B. Collins for the U.S. District Court for the Central District of California granted the SEC's request for a temporary restraining order and asset freeze against Brown, ACorp, and First Choice, and appointed Krista Freitag as a temporary receiver over the companies. A court hearing has been scheduled for March 18, 2013, on the SEC's motion for a preliminary injunction.

The Commission's complaint alleges that Brown, ACorp, and First Choice violated 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; and seeks preliminary and permanent injunctions, appointment of a permanent receiver, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties, against each of them.

SEC ALLEGES A FRAUD SCHEME AGAINST SENIORS

Criminals, like other predators, will often target those they consider to be weak. The elderly and the poorly educated seem to be favorite targets of those with the twin gifts of persuasiveness and complete lack of compassion and pity for fellow human souls. In the case below the SEC has alleged that a Connecticut man used misrepresentations to illicit funds from elderly investors. The following case is an excerpt from the SEC website:

“The Securities and Exchange Commission announced that, on June 20, 2011, it filed an emergency enforcement action in federal district court in Connecticut and obtained a temporary restraining order, asset freeze, and other emergency relief against Florin S. Ilovici, of Avon, Connecticut, in connection with a scheme to defraud investors. The Commission’s Complaint alleges that, since at least 2007, Ilovici made material misrepresentations in raising over $1 million in investment funds from at least two elderly Connecticut women who lived alone, had little or no family, and had health problems. Instead of investing these funds on their behalf as he promised, Ilovici transferred the investor funds to his personal bank and brokerage accounts where he either lost the funds in risky securities or foreign currency exchange trading or spent the funds on personal expenses, including mortgage and credit card payments, travel, and home improvements, all without the knowledge or authorization of his investors.
The Commission’s complaint alleges that Ilovici’s conduct violates Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also names Ilovici’s wife, Diana Ilovici, as a Relief Defendant. The Honorable Warren W. Eginton issued a temporary restraining order, prohibiting Ilovici from directly or indirectly continuing to violate the foregoing statutory provisions, and an order freezing Ilovici’s assets, as well as certain assets of his wife that are believed to be derived from the proceeds of Ilovici’s fraudulent scheme. The Court’s order further provides that Ilovici is prohibited from soliciting or accepting additional investor funds and from altering or destroying any relevant documents, and the order also requires Ilovici to provide an accounting of his assets and his use of investor funds. The Court’s order also permits the Commission to conduct expedited discovery and provides other relief. In its action, the Commission seeks the entry of a preliminary injunction against Ilovici upon the expiration of the temporary restraining order, the entry of a permanent injunction against Ilovici, disgorgement of ill-gotten gains by both Ilovici and his wife plus pre-judgment interest thereon, and the imposition of a civil monetary penalty against Ilovici. A hearing on the Commission’s request for a preliminary injunction has been scheduled for July 8, 2011.
The Commission acknowledges the assistance of the United States Postal Inspection Service. The Commission’s investigation is ongoing.”