Whenever rates of returns are offered to investors which are too good to be true guess what? Usually the investor is being set up to have his money stolen. After decades as both an investor and investment salesman I will always be amazed at how people who are really cautious about putting up money for an investment that earns a descent rate of return but, those same cautious investors will throw all into a game which promises rates of return which are more like gambling winnings than rates of return from an honest investment. In the following excerpt from the SEC web site the SEC alleges that a multi-million dollar Ponzi scheme was perpetrated on investors who thought they were going to earn a very large rate of return:
“Washington, D.C., April 29, 2011 — The Securities and Exchange Commission today announced that it has obtained a court order freezing the assets of China Voice Holding Corp., which trades in over-the-counter markets and has claimed to have a portfolio of telecommunications products and services in both the U.S. and China. The SEC alleges that China Voice's co-founder and his two associates are operating an $8.6 million Ponzi scheme and misusing its proceeds, in part, to help fund the company's operations.
The SEC alleges that David Ronald Allen, who also was China voice's chief financial officer, and his associates Alex Dowlatshahi and Christopher Mills promised investors in a series of offerings of limited partnerships that they would earn returns of at least 25 percent on their investments. Investors were falsely told that their money would be loaned to companies with a demonstrated track record and large profit margins. Instead, Allen and his cohorts used investor funds to pay back investors in earlier partnerships and funneled investor money to China Voice and a complicated web of other companies that Allen controls. Allen and his associates also siphoned investor money to enrich themselves and family members.
In order to maintain the scheme, Allen and his associates have increased the pace and size of the offerings to obtain a steady stream of proceeds from defrauded investors. They are planning or have begun to solicit funds from investors in at least two more limited partnerships in the ongoing fraud. The court order obtained late yesterday freezes the assets of Allen and several others in addition to China Voice. The court also temporarily enjoined these defendants from participating in the offering of securities like those used to perpetrate the fraudulent scheme as alleged by the SEC.
"These promoters falsely touted what they claimed to be a prudent investment with reliable returns through loans made to carefully selected businesses," said Stephen L. Cohen, Associate Director of the SEC's Division of Enforcement. "This fraud illustrates that when extraordinarily high returns are promised in a supposedly low-risk investment, that's a tell-tale sign that something likely is amiss."
In addition to the Ponzi scheme, the SEC's complaint filed in U.S. District Court for the Northern District of Texas (Dallas Division) charges China Voice, its former chairman and CEO William F. Burbank IV, and Allen, for a series of fraudulent company statements about its financial condition and business prospects. Among other things, the SEC alleges that China Voice greatly overstated the value of certain business relationships and misled investors by failing to disclose significant loans from related parties needed to fund its operations.
The SEC also alleges that beginning in at least September 2006, China Voice overstated its business in China by claiming to provide telephone and other communications software in China on a much more extensive basis than it actually did. Company press releases and public filings extensively publicized contracts signed by Chinese subsidiaries to provide services to the government and other entities in China, which would provide high levels of projected revenue to the company. But the company recanted in audited financial statements in June 2008, when it disclosed that the majority of the company's revenue came from its U.S. subsidiaries. Nevertheless, China Voice and its stock promotion campaigns continued to tout purported Chinese contracts.
The SEC's complaint additionally charges two China Voice shareholders, Gerald Patera and Ilya Drapkin, for helping Allen finance stock promotion campaigns to pump up the company's stock price. These campaigns included a blast fax campaign orchestrated by Robert Wilson, who also is charged in the SEC's complaint. The spam faxes were sent to thousands of people at once and contained false and misleading statements about China Voice and who was paying for the faxes. At the same time they were spending more than a million dollars on stock promotion, Patera and Drapkin dumped millions of shares of the company into the market.
The SEC's complaint charges Allen, Dowlatshahi, Mills, and various related companies with 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, and seeks a temporary restraining order, preliminary and permanent injunctions, disgorgement of unlawful proceeds plus prejudgment interest, and a financial penalty. The SEC's complaint charges Burbank, Patera, Drapkin, and Wilson with violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder for their roles in the scheme. With regard to them, the SEC seeks a permanent injunction, disgorgement of unlawful proceeds plus prejudgment interest, and a financial penalty. The SEC's complaint also seeks penny stock bars against Allen, Burbank, Patera, Drapkin, and Wilson as well as officer and director bars against Allen and Burbank.”
This is a photo of the National Register of Historic Places listing with reference number 7000063
Sunday, May 22, 2011
Saturday, May 21, 2011
SEC ISSUES ALERT ON FRAUDULANT PRE-IPO OFFERINGS
technology based social media companies are becoming prominent on many investors’ stock screen and the fraudsters are coming up with scams to steal money. According to the SEC there are fraudsters out there trying to take advantage of interested investors by selling them fake pre-IPO securities. The following excerpt is from the SEC web site:
"The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to warn you about investment scams that purport to offer investors the opportunity to buy pre-IPO shares of Facebook, Twitter, Groupon, or other popular companies. SEC staff is aware of a number of complaints and inquiries about these types of pre-IPO investment scams, which may be promoted on social media and Internet sites, by telephone, email, in person, or by other means.
In September 2010, a judgment order was entered in favor of the SEC based on allegations that a scam artist had misappropriated more than $3.7 million from 45 investors in four states by offering fake pre-IPO shares of companies, including Centerpoint, AOL/Time Warner, Inc., Google, Inc., Facebook, Inc., and Rosetta Stone, Inc. In addition, the Financial Industry Regulatory Authority (FINRA) issued a recent investor alert about these types of scams. While offerings of pre-IPO shares in a company are not uncommon, unregistered offerings may violate federal securities laws unless they meet a registration exemption, such as restricting the private offering to “accredited investors” -- investors who meet certain income or net worth requirements.
Investors should be mindful of the risks involved with an offer to purchase pre-IPO shares in a company. As with any investment, we encourage investors to research thoroughly both the investment product and the professional offering the product before making any investment decision."
"The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to warn you about investment scams that purport to offer investors the opportunity to buy pre-IPO shares of Facebook, Twitter, Groupon, or other popular companies. SEC staff is aware of a number of complaints and inquiries about these types of pre-IPO investment scams, which may be promoted on social media and Internet sites, by telephone, email, in person, or by other means.
In September 2010, a judgment order was entered in favor of the SEC based on allegations that a scam artist had misappropriated more than $3.7 million from 45 investors in four states by offering fake pre-IPO shares of companies, including Centerpoint, AOL/Time Warner, Inc., Google, Inc., Facebook, Inc., and Rosetta Stone, Inc. In addition, the Financial Industry Regulatory Authority (FINRA) issued a recent investor alert about these types of scams. While offerings of pre-IPO shares in a company are not uncommon, unregistered offerings may violate federal securities laws unless they meet a registration exemption, such as restricting the private offering to “accredited investors” -- investors who meet certain income or net worth requirements.
Investors should be mindful of the risks involved with an offer to purchase pre-IPO shares in a company. As with any investment, we encourage investors to research thoroughly both the investment product and the professional offering the product before making any investment decision."
Friday, May 20, 2011
POLITICIANS BEWARE: YOU MAY BE LOOSING SOME OF YOUR BRIBERY INCOME
Congress and other career politicians will not be at all happy with the rule outlined below. “Pay to Play” is a great source of political contributions (Income) for politicians. Any rule will hurt the purses of politicians however, any change can generate only good returns for the country. The following is an excerpt from the SEC web site:
“The Securities and Exchange Commission approved a new rule on June 30, 2010 to curb so-called “pay to play” practices in which investment advisers make campaign contributions to elected officials in order to influence the award of contracts to manage public pension plan assets and other government investment accounts.
Why did the SEC adopt the new rule?
The rule is intended to combat pay to play arrangements in which advisers are chosen based on their campaign contributions to political officials rather than on merit. The potential for fraud to invade the various, intertwined relationships created by pay to play arrangements is without question, and the new rule is meant to reduce the occurrence of fraudulent conduct resulting from these practices and to protect public pension plans, beneficiaries, and other investors from the resulting harms.
The corrupting influence of pay to play practices could, for example, lead a political official to choose an investment adviser with higher fees or inferior investment performance because the adviser contributed funds to the official’s election campaign. Choosing an adviser with higher fees or weaker performance could reduce the amount of money available to plan participants. Moreover, advisers’ participation in pay to play activities may diminish investor confidence, as pay to play practices are inconsistent with the high standards of ethical conduct required of investment advisers.
Pay to play practices often are not explicit, but appear to be widespread. In recent years, the SEC has brought enforcement actions against investment advisers involved in pay to play activities. In addition, other authorities in various states have brought civil and criminal cases alleging pay to play activities.
Who might be affected by the new rule?
The new rule, adopted under the Investment Advisers Act of 1940, applies to SEC-registered investment advisers and certain advisers exempt from registration with the SEC who provide investment advisory services, or are seeking to provide investment advisory services, to government entities. The rule will subject these advisers to certain restrictions (described below) designed to curb pay to play activities.
The rule will help protect the interests of government entities that hire investment advisers and others, including participants in public pension plans and state-sponsored college savings plans (known as 529 plans). It will also help level the playing field so that the advisers selected to manage retirement funds and other investments for the public are more likely to be selected based on the quality of their advisory services.
What does the new rule do?
The new rule:
Prohibits an investment adviser from providing advisory services for compensation to a government entity, either directly or through a pooled investment vehicle, for two years after the adviser or certain of its executives or employees makes a political contribution to an elected official or candidate for political office who is in a position to influence that government entity’s selection of the adviser;
Prohibits an investment adviser and certain of its executives and employees from paying or agreeing to pay a third party placement agent or “finder” to solicit business from a government entity on the adviser’s behalf unless the third party is a registered broker-dealer or SEC-registered investment adviser subject to pay to play restrictions; and
Prohibits an investment adviser and certain of its executives and employees from soliciting or coordinating contributions (i.e., “bundling”) from others to a political official, candidate or political party in a state or locality where the adviser provides or is seeking to provide advisory services.
An SEC-registered investment adviser subject to the rule also will have to maintain certain records under a related amendment to the Investment Advisers Act recordkeeping rule that the Commission adopted along with the new rule.”
Now if only some of the politicians receive some serious jail time would our nation move back to a sound financial footing. Unfortunately, many of the same people who want to balance the budgets in state and federal governments also are vehemently against any rules that curtail the bribes these politicians are taking. The government of the United States is not the problem; crooked politicians are the problem.
“The Securities and Exchange Commission approved a new rule on June 30, 2010 to curb so-called “pay to play” practices in which investment advisers make campaign contributions to elected officials in order to influence the award of contracts to manage public pension plan assets and other government investment accounts.
Why did the SEC adopt the new rule?
The rule is intended to combat pay to play arrangements in which advisers are chosen based on their campaign contributions to political officials rather than on merit. The potential for fraud to invade the various, intertwined relationships created by pay to play arrangements is without question, and the new rule is meant to reduce the occurrence of fraudulent conduct resulting from these practices and to protect public pension plans, beneficiaries, and other investors from the resulting harms.
The corrupting influence of pay to play practices could, for example, lead a political official to choose an investment adviser with higher fees or inferior investment performance because the adviser contributed funds to the official’s election campaign. Choosing an adviser with higher fees or weaker performance could reduce the amount of money available to plan participants. Moreover, advisers’ participation in pay to play activities may diminish investor confidence, as pay to play practices are inconsistent with the high standards of ethical conduct required of investment advisers.
Pay to play practices often are not explicit, but appear to be widespread. In recent years, the SEC has brought enforcement actions against investment advisers involved in pay to play activities. In addition, other authorities in various states have brought civil and criminal cases alleging pay to play activities.
Who might be affected by the new rule?
The new rule, adopted under the Investment Advisers Act of 1940, applies to SEC-registered investment advisers and certain advisers exempt from registration with the SEC who provide investment advisory services, or are seeking to provide investment advisory services, to government entities. The rule will subject these advisers to certain restrictions (described below) designed to curb pay to play activities.
The rule will help protect the interests of government entities that hire investment advisers and others, including participants in public pension plans and state-sponsored college savings plans (known as 529 plans). It will also help level the playing field so that the advisers selected to manage retirement funds and other investments for the public are more likely to be selected based on the quality of their advisory services.
What does the new rule do?
The new rule:
Prohibits an investment adviser from providing advisory services for compensation to a government entity, either directly or through a pooled investment vehicle, for two years after the adviser or certain of its executives or employees makes a political contribution to an elected official or candidate for political office who is in a position to influence that government entity’s selection of the adviser;
Prohibits an investment adviser and certain of its executives and employees from paying or agreeing to pay a third party placement agent or “finder” to solicit business from a government entity on the adviser’s behalf unless the third party is a registered broker-dealer or SEC-registered investment adviser subject to pay to play restrictions; and
Prohibits an investment adviser and certain of its executives and employees from soliciting or coordinating contributions (i.e., “bundling”) from others to a political official, candidate or political party in a state or locality where the adviser provides or is seeking to provide advisory services.
An SEC-registered investment adviser subject to the rule also will have to maintain certain records under a related amendment to the Investment Advisers Act recordkeeping rule that the Commission adopted along with the new rule.”
Now if only some of the politicians receive some serious jail time would our nation move back to a sound financial footing. Unfortunately, many of the same people who want to balance the budgets in state and federal governments also are vehemently against any rules that curtail the bribes these politicians are taking. The government of the United States is not the problem; crooked politicians are the problem.
SEC ALLEGES UPSTATE NEW YORK REAL ESTATE FUNDS WERE FRAUDULENT
The following is an excerpt from the SEC web site:
“On May 13, 2011, the Securities and Exchange Commission filed a civil injunctive action charging Monticello, New York investment adviser Lloyd V. Barriger with fraud in connection with two upstate New York real estate funds he managed – the Gaffken & Barriger Fund, LLC (the G&B Fund or the Fund), and Campus Capital Corp. (Campus). According to the complaint, the G&B Fund raised approximately $20 million from January 1998 until March 2008, and Campus raised approximately $12 million from October 2001 until July 2008. The Commission charged Barriger with defrauding the funds and their investors and prospective investors to whom he offered and sold interests in these funds.
The SEC’s complaint, filed in federal court in Manhattan, alleges that from at least July 2006 until March 5, 2008, when he froze the Fund and disclosed to investors its true financial condition, Barriger defrauded investors and prospective investors in the G&B Fund by misrepresenting that the Fund was a relatively safe and liquid investment that paid a minimum “Preferred Return” of 8% per year. The complaint further alleges that Barriger made these misrepresentations knowing, or recklessly disregarding, that the Fund’s actual performance did not justify these performance claims, and without disclosing information about the Fund’s true performance and financial condition – which rapidly deteriorated in 2007 and early 2008 as Barriger continued to raise money from new and existing investors.
The complaint also alleges that Barriger defrauded the G&B Fund itself by (a) allocating the Preferred Return to investors when the Fund did not have sufficient income to justify the allocation; and (b) by, when the Fund lacked the income to support those allocations and payments causing the Fund to pay cash distributions of the Preferred Returns to those Fund investors who requested them, and to redeem investors at values reflecting the purported accrued 8% per year Preferred Return.
Finally, the complaint alleges that Barriger defrauded Campus and its prospective investors by causing Campus to inject a total of nearly $2.5 million into the G&B Fund between August 2007 and April 2008 at a time when the G&B Fund was in distress, and by raising money for Campus without disclosing to investors his use of Campus’s assets to prop up the ailing G&B Fund. The complaint also alleges that Barriger caused Campus to engage in other transactions that personally benefitted Barriger, none of which he disclosed to prospective Campus investors.
The complaint alleges that Barriger violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.
In its complaint, the SEC seeks a final judgment permanently enjoining Barriger from future violations of the foregoing provisions and ordering him to pay civil penalties and disgorgement of ill-gotten gains with prejudgment interest.
The SEC acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of New York.”
“On May 13, 2011, the Securities and Exchange Commission filed a civil injunctive action charging Monticello, New York investment adviser Lloyd V. Barriger with fraud in connection with two upstate New York real estate funds he managed – the Gaffken & Barriger Fund, LLC (the G&B Fund or the Fund), and Campus Capital Corp. (Campus). According to the complaint, the G&B Fund raised approximately $20 million from January 1998 until March 2008, and Campus raised approximately $12 million from October 2001 until July 2008. The Commission charged Barriger with defrauding the funds and their investors and prospective investors to whom he offered and sold interests in these funds.
The SEC’s complaint, filed in federal court in Manhattan, alleges that from at least July 2006 until March 5, 2008, when he froze the Fund and disclosed to investors its true financial condition, Barriger defrauded investors and prospective investors in the G&B Fund by misrepresenting that the Fund was a relatively safe and liquid investment that paid a minimum “Preferred Return” of 8% per year. The complaint further alleges that Barriger made these misrepresentations knowing, or recklessly disregarding, that the Fund’s actual performance did not justify these performance claims, and without disclosing information about the Fund’s true performance and financial condition – which rapidly deteriorated in 2007 and early 2008 as Barriger continued to raise money from new and existing investors.
The complaint also alleges that Barriger defrauded the G&B Fund itself by (a) allocating the Preferred Return to investors when the Fund did not have sufficient income to justify the allocation; and (b) by, when the Fund lacked the income to support those allocations and payments causing the Fund to pay cash distributions of the Preferred Returns to those Fund investors who requested them, and to redeem investors at values reflecting the purported accrued 8% per year Preferred Return.
Finally, the complaint alleges that Barriger defrauded Campus and its prospective investors by causing Campus to inject a total of nearly $2.5 million into the G&B Fund between August 2007 and April 2008 at a time when the G&B Fund was in distress, and by raising money for Campus without disclosing to investors his use of Campus’s assets to prop up the ailing G&B Fund. The complaint also alleges that Barriger caused Campus to engage in other transactions that personally benefitted Barriger, none of which he disclosed to prospective Campus investors.
The complaint alleges that Barriger violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.
In its complaint, the SEC seeks a final judgment permanently enjoining Barriger from future violations of the foregoing provisions and ordering him to pay civil penalties and disgorgement of ill-gotten gains with prejudgment interest.
The SEC acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of New York.”
SEC CHARGES FORMER BROOKE CORPORATION EXECUTIVES WITH FRAUD
Misrepresentation of financial records is a serious violation of the law. In the following excerpt from the SEC web site the SEC alleges that six executives at an insurance agency franchisor violated disclosure rules:
May 4, 2011
“The Securities and Exchange Commission today charged six former senior executives of Kansas-based Brooke Corporation and its other, publicly-traded subsidiaries, Brooke Capital Corporation, an insurance agency franchisor, and Aleritas Capital Corporation, a lender to insurance agency franchises and other businesses, with conducting an extensive financial and disclosure fraud. The Complaint alleges that in SEC filings and other public statements for year-end 2007 and the first and second quarters of 2008, senior executives at the Brooke companies misrepresented, among other things, the number of Brooke Capital franchisees and their financial health, the deterioration of Aleritas’ corresponding loan portfolio, and the increasingly dire liquidity and financial condition of the Brooke companies.
According to the SEC’s Complaint filed in federal court in Kansas, Brooke Capital’s former management inflated the number of franchise locations by including failed and abandoned locations in totals. They also concealed the nature and extent of Brooke Capital’s financial assistance to its franchisees, which included making franchise loan payments on behalf of struggling franchisees. Aleritas’ former management hid the company’s inability to repurchase millions of dollars of short-term loans sold to its network of regional lenders. They also sold or pledged the same loans as collateral to more than one lender, and improperly diverted payments from borrowers for the company’s operating expenses. Aleritas’ former management also concealed the rapid deterioration of the company’s loan portfolio by falsifying loan performance reports to lenders, understating loan loss reserves, and by failing to write-down its residual interests in securitization and credit facility assets.
The SEC’s Complaint charges the following former Brooke executives:
Robert D. Orr, founder and former chairman of the board of Brooke Corporation, former chief executive officer and chairman of the board of Brooke Capital, and former chief financial officer of Aleritas
Leland G. Orr, former chief executive officer, chief financial officer, and vice-chairman of the board of Brooke Corporation, and former chief financial officer of Brooke Capital
Michael S. Lowry, former chief executive officer and member of the board of Aleritas
Michael S. Hess, former chief executive officer and member of the board of Aleritas
Kyle L. Garst, former chief executive officer, president, and member of the board of Brooke Capital
Travis W. Vrbas, former chief financial officer of Brooke Corporation and Brooke Capital
As alleged in the Commission’s Complaint, each of the defendants violated Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5 and 13b2-1 thereunder, and aided and abetted violations by Brooke Corporation, Brooke Capital, and/or Aleritas of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. The Complaint also alleges that Robert Orr violated Exchange Act Section 16(a) and Rule 16a-3 thereunder; Robert Orr, Leland Orr, Lowry, Hess, and Garst violated Exchange Act Rule 13b2-2; Robert Orr, Leland Orr, Hess, Garst, and Vrbas violated Exchange Act Rule 13a-14 and aided and abetted violations by Brooke Corporation and Brooke Capital of Rule 13a-1; and Robert Orr and Hess aided and abetted violations by Aleritas of Exchange Act Rule 13a-11.
The Commission seeks permanent injunctions, civil penalties, and officers and director bars against each defendant, and disgorgement with prejudgment interest against Robert Orr, Leland Orr, and Lowry.
Robert Orr, Leland Orr, Lowry, Hess, and Vrbas agreed to settle the SEC’s charges without admitting or denying the allegations in the Complaint. These settlements are subject to approval by the Court. Each of the defendants consented to be permanently enjoined from violating or aiding and abetting all of the provisions that the Commission alleges they violated, and to officer and director bars. Lowry also consented to pay a $175,000 civil penalty and disgorgement of $214,500, with prejudgment interest of $24,004.91, Hess consented to pay a $250,000 civil penalty, and Vrbas consented to pay a $130,000 civil penalty. Robert Orr and Leland Orr consented to pay civil penalties and disgorgement in amounts to be determined by the Court.”
May 4, 2011
“The Securities and Exchange Commission today charged six former senior executives of Kansas-based Brooke Corporation and its other, publicly-traded subsidiaries, Brooke Capital Corporation, an insurance agency franchisor, and Aleritas Capital Corporation, a lender to insurance agency franchises and other businesses, with conducting an extensive financial and disclosure fraud. The Complaint alleges that in SEC filings and other public statements for year-end 2007 and the first and second quarters of 2008, senior executives at the Brooke companies misrepresented, among other things, the number of Brooke Capital franchisees and their financial health, the deterioration of Aleritas’ corresponding loan portfolio, and the increasingly dire liquidity and financial condition of the Brooke companies.
According to the SEC’s Complaint filed in federal court in Kansas, Brooke Capital’s former management inflated the number of franchise locations by including failed and abandoned locations in totals. They also concealed the nature and extent of Brooke Capital’s financial assistance to its franchisees, which included making franchise loan payments on behalf of struggling franchisees. Aleritas’ former management hid the company’s inability to repurchase millions of dollars of short-term loans sold to its network of regional lenders. They also sold or pledged the same loans as collateral to more than one lender, and improperly diverted payments from borrowers for the company’s operating expenses. Aleritas’ former management also concealed the rapid deterioration of the company’s loan portfolio by falsifying loan performance reports to lenders, understating loan loss reserves, and by failing to write-down its residual interests in securitization and credit facility assets.
The SEC’s Complaint charges the following former Brooke executives:
Robert D. Orr, founder and former chairman of the board of Brooke Corporation, former chief executive officer and chairman of the board of Brooke Capital, and former chief financial officer of Aleritas
Leland G. Orr, former chief executive officer, chief financial officer, and vice-chairman of the board of Brooke Corporation, and former chief financial officer of Brooke Capital
Michael S. Lowry, former chief executive officer and member of the board of Aleritas
Michael S. Hess, former chief executive officer and member of the board of Aleritas
Kyle L. Garst, former chief executive officer, president, and member of the board of Brooke Capital
Travis W. Vrbas, former chief financial officer of Brooke Corporation and Brooke Capital
As alleged in the Commission’s Complaint, each of the defendants violated Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5 and 13b2-1 thereunder, and aided and abetted violations by Brooke Corporation, Brooke Capital, and/or Aleritas of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. The Complaint also alleges that Robert Orr violated Exchange Act Section 16(a) and Rule 16a-3 thereunder; Robert Orr, Leland Orr, Lowry, Hess, and Garst violated Exchange Act Rule 13b2-2; Robert Orr, Leland Orr, Hess, Garst, and Vrbas violated Exchange Act Rule 13a-14 and aided and abetted violations by Brooke Corporation and Brooke Capital of Rule 13a-1; and Robert Orr and Hess aided and abetted violations by Aleritas of Exchange Act Rule 13a-11.
The Commission seeks permanent injunctions, civil penalties, and officers and director bars against each defendant, and disgorgement with prejudgment interest against Robert Orr, Leland Orr, and Lowry.
Robert Orr, Leland Orr, Lowry, Hess, and Vrbas agreed to settle the SEC’s charges without admitting or denying the allegations in the Complaint. These settlements are subject to approval by the Court. Each of the defendants consented to be permanently enjoined from violating or aiding and abetting all of the provisions that the Commission alleges they violated, and to officer and director bars. Lowry also consented to pay a $175,000 civil penalty and disgorgement of $214,500, with prejudgment interest of $24,004.91, Hess consented to pay a $250,000 civil penalty, and Vrbas consented to pay a $130,000 civil penalty. Robert Orr and Leland Orr consented to pay civil penalties and disgorgement in amounts to be determined by the Court.”
Thursday, May 19, 2011
SEC ALLEGES SECURITIES FRAUD INVOLVING AN IPO
Becoming very rich by getting investors to place their savings in investments that are mainly non-existent is the modern definition of entrepreneurialism. In the old days such behavior was known as fraud and was generally frowned upon by society. Today such individuals are said to be great capitalist who are willing to take chances. Of course the chances these so called capitalists take is that they may be discovered, pay heavy fines and/or, go to jail. In the following excerpt from the SEC web site the SEC alleges fraud in the matter of an Initial Public Offering:
“Washington, D.C., May 11, 2011 – The Securities and Exchange Commission today charged the co-founders of a New York-based beverage and food carrier company with orchestrating an $8 million securities fraud and spending at least half of investor money for their personal use.
The SEC alleges that Angelo Cuomo of Staten Island and George Garcy of Aventura, Fla., fraudulently obtained investments in E-Z Media Inc. while falsely telling investors that their company owned several patents for beverage and food carriers and had contracts to sell its carriers to such major companies as Heineken, Anheuser Busch, and Aramark Corporation. They also misrepresented their plans to conduct an initial public offering (IPO), their use of offering proceeds, and the projected share price. E-Z Media never actually had any contracts or other agreements to sell its carriers to any major company, including the brand-name companies that Cuomo and Garcy touted to investors. E-Z Media never took even the basic steps to prepare for a purported IPO.
“Garcy and Cuomo conducted an offering fraud that was rife with false statements and omissions to entice unsuspecting investors,” said George S. Canellos, Director of the SEC’s New York Regional Office. “Instead of using the offering proceeds to develop their business, Garcy and Cuomo treated E-Z Media’s bank account as a personal slush fund and diverted millions of dollars to line their pockets.”
According to the SEC’s complaint filed in the U.S. District Court for the Eastern District of New York, E-Z Media designs carriers for use at concession stands at stadiums, arenas, movie theaters, and similar venues. E-Z Media is not registered nor does it file reports with the SEC.
The SEC alleges that Cuomo and Garcy (also known as Jorge Garcia) conducted their scheme from at least 2003 to 2009, making false statements and omissions about their company’s business prospects, assets, and liabilities. E-Z Media never disclosed that its claimed ownership of its main asset – certain patents for the carriers – was contingent on E-Z Media’s payment of $14.5 million to Cuomo, or that E-Z Media’s ownership of those patents may not have been valid in the first place.
The SEC further alleges that E-Z Media also had no reasonable basis for the post-IPO price projections that Garcy and Cuomo presented to investors, because the company had no significant assets or revenues and had substantial liabilities. They never told investors that the SEC sanctioned Garcy in 1997 for improperly offering and selling stock of another company to the public.
According to the SEC’s complaint, Garcy and Cuomo misappropriated and diverted at least $4 million of funds obtained from investors to make payments on personal loans, private school tuition, and rent and mortgages as well as other personal uses. The SEC’s complaint also names four relief defendants for the purposes of recovering fraudulently transferred assets: Cuomo’s sons Ralph Cuomo and Vincent Cuomo, Cuomo’s sister Judith Guido, and New York-based attorney Joseph Lively.
The SEC’s complaint seeks a final judgment permanently enjoining Garcy and Cuomo from future violations of the federal securities laws, barring Garcy and Cuomo from acting as officers and directors of any public company, requiring Garcy and Cuomo to pay financial penalties, and requiring the defendants and relief defendants to disgorge all ill-gotten gains plus prejudgment interest, among other relief.
The SEC thanks the U.S. Attorney’s Office for the Eastern District of New York and the Internal Revenue Service for their assistance in this matter.”
The SEC and other governmental agencies have been working very hard at uncovering cases of fraud however; many in Congress want to stop the SEC and others from doing their jobs by defunding the agencies.
“Washington, D.C., May 11, 2011 – The Securities and Exchange Commission today charged the co-founders of a New York-based beverage and food carrier company with orchestrating an $8 million securities fraud and spending at least half of investor money for their personal use.
The SEC alleges that Angelo Cuomo of Staten Island and George Garcy of Aventura, Fla., fraudulently obtained investments in E-Z Media Inc. while falsely telling investors that their company owned several patents for beverage and food carriers and had contracts to sell its carriers to such major companies as Heineken, Anheuser Busch, and Aramark Corporation. They also misrepresented their plans to conduct an initial public offering (IPO), their use of offering proceeds, and the projected share price. E-Z Media never actually had any contracts or other agreements to sell its carriers to any major company, including the brand-name companies that Cuomo and Garcy touted to investors. E-Z Media never took even the basic steps to prepare for a purported IPO.
“Garcy and Cuomo conducted an offering fraud that was rife with false statements and omissions to entice unsuspecting investors,” said George S. Canellos, Director of the SEC’s New York Regional Office. “Instead of using the offering proceeds to develop their business, Garcy and Cuomo treated E-Z Media’s bank account as a personal slush fund and diverted millions of dollars to line their pockets.”
According to the SEC’s complaint filed in the U.S. District Court for the Eastern District of New York, E-Z Media designs carriers for use at concession stands at stadiums, arenas, movie theaters, and similar venues. E-Z Media is not registered nor does it file reports with the SEC.
The SEC alleges that Cuomo and Garcy (also known as Jorge Garcia) conducted their scheme from at least 2003 to 2009, making false statements and omissions about their company’s business prospects, assets, and liabilities. E-Z Media never disclosed that its claimed ownership of its main asset – certain patents for the carriers – was contingent on E-Z Media’s payment of $14.5 million to Cuomo, or that E-Z Media’s ownership of those patents may not have been valid in the first place.
The SEC further alleges that E-Z Media also had no reasonable basis for the post-IPO price projections that Garcy and Cuomo presented to investors, because the company had no significant assets or revenues and had substantial liabilities. They never told investors that the SEC sanctioned Garcy in 1997 for improperly offering and selling stock of another company to the public.
According to the SEC’s complaint, Garcy and Cuomo misappropriated and diverted at least $4 million of funds obtained from investors to make payments on personal loans, private school tuition, and rent and mortgages as well as other personal uses. The SEC’s complaint also names four relief defendants for the purposes of recovering fraudulently transferred assets: Cuomo’s sons Ralph Cuomo and Vincent Cuomo, Cuomo’s sister Judith Guido, and New York-based attorney Joseph Lively.
The SEC’s complaint seeks a final judgment permanently enjoining Garcy and Cuomo from future violations of the federal securities laws, barring Garcy and Cuomo from acting as officers and directors of any public company, requiring Garcy and Cuomo to pay financial penalties, and requiring the defendants and relief defendants to disgorge all ill-gotten gains plus prejudgment interest, among other relief.
The SEC thanks the U.S. Attorney’s Office for the Eastern District of New York and the Internal Revenue Service for their assistance in this matter.”
The SEC and other governmental agencies have been working very hard at uncovering cases of fraud however; many in Congress want to stop the SEC and others from doing their jobs by defunding the agencies.
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