SUBPRIME AUTO LOAN EXECUTIVES CHARGED WITH FRAUD

It seems like the allegations against sub-prime lenders will never stop. Although it might be a good thing that the SEC et. al. have been agresively pursuing these cases it is very sad that there are so many of them. The following is an alleged fraud scheme which has been excerpted fromt SEC web site:

April 14, 2011
"The Securities and Exchange Commission announced that it filed a civil injunctive action today in federal district court in Massachusetts charging Massachusetts-based subprime auto loan provider Inofin Inc. and three company executives with misleading investors about their lending activities and diverting millions of dollars in investor funds for their personal benefit. The SEC also charged two sales agents with illegally offering to sell company securities without being registered with the SEC as broker-dealers.
The SEC alleges that Inofin executives Michael Cuomo of Plymouth, Mass., Kevin Mann of Marshfield, Mass., and Melissa George of Duxbury, Mass., illegally raised at least $110 million from hundreds of investors in 25 states and the District of Columbia through the sale of unregistered notes. Investors in the notes were told that Inofin would use the money for the sole purpose of funding subprime auto loans. As part of the pitch, Inofin and its executives told investors that they could expect to receive returns of 9 to 15 percent because Inofin loaned investor money to its subprime borrowers at an average rate of 20 percent. But unbeknownst to investors, and starting in 2004, approximately one-third of investor money raised was instead used by Cuomo and Mann to open four used car dealerships and begin multiple real estate property developments for their own benefit.
Inofin is not registered with the SEC to offer securities to investors.
According to the SEC’s complaint filed in federal court in Boston, Inofin and the executives materially misrepresented Inofin’s financial performance beginning as early as 2006 and continuing through 2011. Inofin had a negative net worth and a progressively deteriorating financial condition caused not only by the failure of Inofin’s undisclosed business activities, but also by management’s decisions in 2007, 2008, and 2009 to sell some of its auto loan portfolio at a substantial discount to solve ever-increasing cash shortages that Inofin concealed from investors. Nonetheless, Inofin and its principal officers continued to offer and sell Inofin securities while knowingly or recklessly misrepresenting to investors that Inofin was a profitable business and sound investment.
The SEC further alleges that beginning in 2006 and continuing to April 2010, Inofin’s executives defrauded investors while maintaining Inofin’s license to do business as a motor vehicle sales finance company by preparing and submitting materially false financial statements to its licensing authority, the Massachusetts Division of Banks. The SEC’s complaint charges Cuomo, Mann, and George with violating the antifraud and registration provisions of the federal securities laws, and seeks civil injunctions, the return of ill-gotten gains plus prejudgment interest, and financial penalties.
The SEC’s charges against the two sales agents — David Affeldt and Thomas K. (Kevin) Keough — allege that they promoted the offering and sale of Inofin’s unregistered securities. They were unjustly enriched with more than $500,000 in referral fees between 2004 and 2009. Affeldt and Keough are charged with selling the unregistered Inofin securities and failing to register with the SEC as a broker-dealer, and the SEC seeks civil injunctions, the return of ill-gotten gains plus prejudgment interest, and financial penalties. Keough’s wife Nancy Keough is named in the complaint as a relief defendant for the purposes of recovering proceeds she received as a result of the violations.
The Commission’s complaint alleges that Inofin, Cuomo, Mann, and George violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and that Kevin Keough, and David Affeldt violated Sections 5(a), and 5(c) of the Securities Act and Section 15(a) of the Exchange Act. The Commission seeks the entry of a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and the imposition of civil monetary penalties against Inofin, Cuomo, Mann, George, Kevin Keough, and David Affeldt. Keough’s wife Nancy Keough is named in the complaint as a relief defendant for the purposes of recovering proceeds she received as a result of the violations.
The SEC appreciates the assistance of the Secretary of the Commonwealth of Massachusetts William F. Galvin, who today filed charges against Inofin, Cuomo, Mann, George, Affeldt, Kevin Keough, and Nancy Keough based on the same conduct. The SEC also appreciates the assistance of the Massachusetts Division of Banks, which previously took action requiring Inofin to surrender its license to operate as a subprime auto lender in Massachusetts.”

SEC ALLEGES SUBPRIME AUTO LENDER WITH FRAUD
The Securities and Exchange Commission has found fraud in the sub prime housing market and this next case involves alleged fraud in the sub prime auto loan industry. The following case is an excerpt from the SEC web site:

“ Washington, D.C., April 14, 2011 — The Securities and Exchange Commission today charged Massachusetts-based sub prime auto loan provider Inofin Inc. and three company executives with misleading investors about their lending activities and diverting millions of dollars in investor funds for their personal benefit. The SEC also charged two sales agents with illegally offering to sell company securities without being registered with the SEC as broker-dealers.


The SEC alleges that Inofin executives Michael Cuomo of Plymouth, Mass., Kevin Mann of Marshfield, Mass., and Melissa George of Duxbury, Mass., illegally raised at least $110 million from hundreds of investors in 25 states and the District of Columbia through the sale of unregistered notes. Investors in the notes were told that Inofin would use the money for the sole purpose of funding subprime auto loans. As part of the pitch, Inofin and its executives told investors that they could expect to receive returns of 9 to 15 percent because Inofin loaned investor money to its subprime borrowers at an average rate of 20 percent. But unbeknownst to investors, starting in 2004 approximately one-third of investor money raised was instead used by Cuomo and Mann to open four used car dealerships and begin multiple real estate property developments for their own benefit.
Inofin is not registered with the SEC to offer securities to investors.
“Whether selling stock or notes, public and private companies alike must play it straight with investors or be held accountable for their misconduct,” said David Bergers, Director of the SEC’s Boston Regional Office. “Inofin and some top executives violated investors’ trust by misusing their funds to bankroll their personal business ventures.”
According to the SEC’s complaint filed in federal court in Boston, Inofin and the executives materially misrepresented Inofin’s financial performance beginning as early as 2006 and continuing to 2011. Inofin had a negative net worth and a progressively deteriorating financial condition caused not only by the failure of Inofin’s undisclosed business activities, but also by management’s decisions in 2007, 2008, and 2009 to sell some of its auto loan portfolio at a substantial discount to solve ever-increasing cash shortages that Inofin concealed from investors. Inofin and its principal officers continued to offer and sell Inofin securities while knowingly or recklessly misrepresenting to investors that Inofin was a profitable business and sound investment.
The SEC further alleges that beginning in 2006 and continuing to April 2010, Inofin’s executives defrauded investors while maintaining Inofin’s license to do business as a motor vehicle sales finance company by preparing and submitting materially false financial statements to its licensing authority, the Massachusetts Division of Banks. The SEC’s complaint charges Cuomo, Mann, and George with violating the antifraud and registration provisions of the federal securities laws, and seeks civil injunctions, the return of ill-gotten gains plus prejudgment interest, and financial penalties.
The SEC’s charges against the two sales agents — David Affeldt and Thomas K. (Kevin) Keough — allege that they promoted the offering and sale of Inofin’s unregistered securities. They were unjustly enriched with more than $500,000 in referral fees between 2004 and 2009. Affeldt and Keough are charged with selling the unregistered Inofin securities and failing to register with the SEC as a broker-dealer, and the SEC seeks civil injunctions, the return of ill-gotten gains plus prejudgment interest, and financial penalties. Keough’s wife Nancy Keough is named in the complaint as a relief defendant for the purposes of recovering proceeds she received as a result of the violations.
The SEC appreciates the assistance of the Secretary of the Commonwealth of Massachusetts William F. Galvin, who today filed charges against Inofin, Cuomo, Mann, George, Affeldt, Kevin Keough, and Nancy Keough based on the same conduct. The SEC also appreciates the assistance of the Massachusetts Division of Banks, which previously took action requiring Inofin to surrender its license to operate as a subprime auto lender in Massachusetts.”

Although it is difficult to find many sub prime mortgage loans being offered today it there are still sub prime auto loans being promoted. Of course repossessing an automobile is much less time consuming than repossessing a house: that is if the automobile can be located and the delinquent purchaser is literally not gunning for a fight.