FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Sept. 7, 2012 – The Securities and Exchange Commission announced an asset freeze against a San Diego-based firm and its owner accused of running a real estate investment fraud that raised approximately $50 million from hundreds of investors nationwide.
The SEC alleges that Western Financial Planning Corporation and Louis V. Schooler sold units in partnerships that Western had organized to buy vacant land in Nevada and hold for sale at a profit at a later date. Schooler and Western failed to tell investors that they were paying an exorbitant mark-up on the land, in some cases more than five times its fair market value. Schooler and Western also failed to tell investors that the land held by the partnerships was often encumbered by mortgages that Western used to help finance the initial purchase of the land.
"Schooler conned hundreds of people into investing with Western by leading them to believe that they were getting a good value for plots of vacant land," said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office. "What he didn’t tell them was that the land was worth only a small fraction of their investment and that he was profiting at their expense."
The SEC’s complaint filed in federal court in San Diego alleges that Western and Schooler misled investors since 2007 by providing them with comparative prices or "comps" of supposedly similar plots of land that had sold for prices higher than those offered by Western. In reality, the real estate comps that Schooler and Western provided were in no way comparable to the land sold by Western. The SEC also alleges that since the spring of 2011, Schooler paid "hush money" to silence investors who discovered they had been defrauded, allowing the scheme to continue.
The Honorable Larry A. Burns for the U.S. District Court for the Southern District of California yesterday granted the SEC’s request for a temporary restraining order and asset freeze against Schooler, Western, and all entities under Western’s control, and appointed Thomas C. Hebrank as a temporary receiver over Western and the entities. Judge Burns has scheduled a court hearing for Sept. 17, 2012, on the SEC’s motion for a preliminary injunction.
The SEC’s investigation was conducted by Sara Kalin and Carol Shau of the Los Angeles Regional Office. Molly White will lead the SEC’s litigation. Ron Warton, Andy Ganguly, Michelle Royston, and Karol Pollack conducted the SEC examination that prompted the investigation.
Thursday, September 20, 2012
Wednesday, September 19, 2012
THE BIOCHAR CHARCOAL SUBSTITUTE PONZI SCHEME
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Obtains Final Judgments Ordering More Than $135 Million in Monetary Relief in "Green" Investment Ponzi Scheme
The Securities and Exchange Commission announced that on September 13, 2012, the Honorable Christine M. Arguello, U.S. District Court Judge for the District of Colorado, entered final judgments against Troy B. Wragg, Amanda E. Knorr, Speed of Wealth, LLC, Wayde M. McKelvy, and Donna M. McKelvy ordering disgorgement, prejudgment interest, and civil penalties totaling more than $135 million. The Court ordered Wragg and Knorr to pay $37,031,035.36 in disgorgement plus interest of $3,713,772.06 jointly and severally with Mantria Corporation and a civil penalty of $37,031,035.36 each; Speed of Wealth and Wayde McKelvy to pay $6,273,632.78 in disgorgement plus interest of $869,141.87 jointly and severally and a civil penalty of $6,273,632.78 each; and Donna McKelvy to pay $429,731.84 in disgorgement plus interest of $55,172.93 and a civil penalty of $214,865.92.
The parties were originally charged in a Complaint filed on November 17, 2009. The Complaint alleged that Wayde and Donna McKelvy, through their Denver-based company Speed of Wealth LLC, as well as Mantria executives Wragg and Knorr, raised funds for numerous Mantria "green" initiatives such as a supposed "carbon negative" housing community in rural Tennessee and a "biochar" charcoal substitute made from organic waste. The SEC alleged that Mantria’s "green" representations were fraudulent and that investors were falsely promised enormous returns on their investments ranging from 17 percent to "hundreds of percent" annually. Mantria’s environmental initiatives did not generate any significant cash, and any returns paid to investors were funded almost exclusively from other investors’ funds. In addition, none of the relevant offerings were registered with the Commission, nor were any of the defendants registered as a broker-dealer or associated with a registered broker-dealer.
Upon the Commission’s motion, the Court entered a temporary restraining order on November 16, 2009, and an order of preliminary injunction on December 2, 2009. After entry of the September 13, 2012 final judgments, permanent injunctions have now been entered against all Defendants.
SEC Obtains Final Judgments Ordering More Than $135 Million in Monetary Relief in "Green" Investment Ponzi Scheme
The Securities and Exchange Commission announced that on September 13, 2012, the Honorable Christine M. Arguello, U.S. District Court Judge for the District of Colorado, entered final judgments against Troy B. Wragg, Amanda E. Knorr, Speed of Wealth, LLC, Wayde M. McKelvy, and Donna M. McKelvy ordering disgorgement, prejudgment interest, and civil penalties totaling more than $135 million. The Court ordered Wragg and Knorr to pay $37,031,035.36 in disgorgement plus interest of $3,713,772.06 jointly and severally with Mantria Corporation and a civil penalty of $37,031,035.36 each; Speed of Wealth and Wayde McKelvy to pay $6,273,632.78 in disgorgement plus interest of $869,141.87 jointly and severally and a civil penalty of $6,273,632.78 each; and Donna McKelvy to pay $429,731.84 in disgorgement plus interest of $55,172.93 and a civil penalty of $214,865.92.
The parties were originally charged in a Complaint filed on November 17, 2009. The Complaint alleged that Wayde and Donna McKelvy, through their Denver-based company Speed of Wealth LLC, as well as Mantria executives Wragg and Knorr, raised funds for numerous Mantria "green" initiatives such as a supposed "carbon negative" housing community in rural Tennessee and a "biochar" charcoal substitute made from organic waste. The SEC alleged that Mantria’s "green" representations were fraudulent and that investors were falsely promised enormous returns on their investments ranging from 17 percent to "hundreds of percent" annually. Mantria’s environmental initiatives did not generate any significant cash, and any returns paid to investors were funded almost exclusively from other investors’ funds. In addition, none of the relevant offerings were registered with the Commission, nor were any of the defendants registered as a broker-dealer or associated with a registered broker-dealer.
Upon the Commission’s motion, the Court entered a temporary restraining order on November 16, 2009, and an order of preliminary injunction on December 2, 2009. After entry of the September 13, 2012 final judgments, permanent injunctions have now been entered against all Defendants.
Tuesday, September 18, 2012
TOOL COMPANY SETTLES CASE OF RACE-BASED HIRING DISCRIMINATION
FROM: U.S. DEPARTMENT OF LABOR
Meyer Tool will pay $325,000 to 60 African-American applicants to settle US Labor Department allegations of racial discrimination at Cincinnati plant
CINCINNATI — The U.S. Department of Labor's Office of Federal Contract Compliance Programs has reached an agreement with federal contractor Meyer Tool Inc. to settle findings of race-based hiring discrimination. Under a consent judgment approved by a Labor Department administrative law judge, Meyer Tool will pay $325,000 in back wages and interest to 60 qualified African-American applicants who were rejected for entry-level machinist positions at the company's manufacturing plant in Cincinnati. Meyer Tool also will extend job offers to at least 11 members of the original class as positions become available.
"Workers should never be denied a fair shot at employment because of factors that have absolutely nothing to do with their ability to do the job," said OFCCP Director Patricia A. Shiu. "I am pleased that we were able to reach a fair settlement with Meyer Tool — one that will provide remedies to the affected workers and guarantee that, going forward, qualified applicants of all races and backgrounds will have the opportunity to compete on a level playing field for good jobs."
Based on a compliance review of the facility, OFCCP investigators determined that Meyer Tool had failed to ensure qualified job applicants received equal consideration for employment without regard to race as required by Executive Order 11246. The department filed an administrative complaint on Nov. 19, 2010, alleging systematic discrimination on the part of the company.
Under the terms of the consent judgment, Meyer Tool not only will provide financial remedies and job offers to the affected workers, but also will maintain employment records as required by law, provide equal employment opportunity training to all employees involved in the hiring process and submit detailed progress reports on this front to OFCCP for the next two years.
Cincinnati-based Meyer Tool manufactures engine parts, primarily for the aerospace industry, and is one of the area's largest private companies. During the period of OFCCP's review, Meyer Tool held contracts worth nearly $300,000 to provide engines and engine parts to the U.S. Army.
In addition to Executive Order 11246, OFCCP enforces Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans' Readjustment Assistance Act of 1974. As amended, these three laws require those who do business with the federal government, both contractors and subcontractors, to follow the fair and reasonable standard that they not discriminate in employment on the basis of sex, race, color, religion, national origin, disability or status as a protected veteran.
Meyer Tool will pay $325,000 to 60 African-American applicants to settle US Labor Department allegations of racial discrimination at Cincinnati plant
CINCINNATI — The U.S. Department of Labor's Office of Federal Contract Compliance Programs has reached an agreement with federal contractor Meyer Tool Inc. to settle findings of race-based hiring discrimination. Under a consent judgment approved by a Labor Department administrative law judge, Meyer Tool will pay $325,000 in back wages and interest to 60 qualified African-American applicants who were rejected for entry-level machinist positions at the company's manufacturing plant in Cincinnati. Meyer Tool also will extend job offers to at least 11 members of the original class as positions become available.
"Workers should never be denied a fair shot at employment because of factors that have absolutely nothing to do with their ability to do the job," said OFCCP Director Patricia A. Shiu. "I am pleased that we were able to reach a fair settlement with Meyer Tool — one that will provide remedies to the affected workers and guarantee that, going forward, qualified applicants of all races and backgrounds will have the opportunity to compete on a level playing field for good jobs."
Based on a compliance review of the facility, OFCCP investigators determined that Meyer Tool had failed to ensure qualified job applicants received equal consideration for employment without regard to race as required by Executive Order 11246. The department filed an administrative complaint on Nov. 19, 2010, alleging systematic discrimination on the part of the company.
Under the terms of the consent judgment, Meyer Tool not only will provide financial remedies and job offers to the affected workers, but also will maintain employment records as required by law, provide equal employment opportunity training to all employees involved in the hiring process and submit detailed progress reports on this front to OFCCP for the next two years.
Cincinnati-based Meyer Tool manufactures engine parts, primarily for the aerospace industry, and is one of the area's largest private companies. During the period of OFCCP's review, Meyer Tool held contracts worth nearly $300,000 to provide engines and engine parts to the U.S. Army.
In addition to Executive Order 11246, OFCCP enforces Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans' Readjustment Assistance Act of 1974. As amended, these three laws require those who do business with the federal government, both contractors and subcontractors, to follow the fair and reasonable standard that they not discriminate in employment on the basis of sex, race, color, religion, national origin, disability or status as a protected veteran.
Sunday, September 16, 2012
ATTORNEY AND COMPANY EXECS. CHARGED IN ALLEGED $27.5 MILLION INVESTMENT SCHEME
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Sept. 5, 2012 – The Securities and Exchange Commission today charged an attorney and two others living in South Florida for their roles in a $27.5 million investment scheme that led investors to believe they were purchasing securities consisting of "pre-sold" commodities contracts with a pre-determined profit. However, the supposed profits actually distributed to investors were largely taken from other investors’ funds.
The SEC halted the scheme last year when it obtained an asset freeze and a court-appointed receiver over the companies involved: Commodities Online LLC and Commodities Online Management LLC. The SEC’s follow-up charges are against the founder and former president of the company, James C. Howard III, as well as the company’s vice president Louis N. Gallo III and outside counsel Michael R. Casey, who later became the president.
"This trio teamed up to employ all the hallmarks of an investment scheme," said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. "Howard met with prospective investors at a luxury hotel to emanate a false sense of wealth and security, Gallo oversaw an in-house boiler room that drummed up investor interest, and Casey was the company’s purported legal counsel who acted anything but lawyerly."
In a parallel action, the U.S. Attorney’s Office for the Southern District of Florida today announced criminal charges against Howard, Gallo, and Casey.
According to the SEC’s complaint filed in federal court in Miami, Commodities Online offered investors the chance to participate in its purportedly profitable brokering of physical commodities via pre-sold contracts – for example, the purchase and sale of large amounts of seafood or iron ore. Investors were sold participation units in unregistered private placement offerings, each supposedly tied to a commodities transaction in which Commodities Online had already secured a buyer and a seller of the commodity. These participation units would purportedly generate predetermined profits for investors.
The SEC alleges that in reality, Commodities Online performed only a limited percentage of the commodities transactions that were promised to investors. The majority of "profits" allocated or distributed to investors were not profits from completed commodities transactions, but instead taken from the funds of other investors. Meanwhile, Howard and Gallo were dissipating millions of dollars in investor funds to largely sham companies. Through these companies, Howard and Gallo stole investor funds for their own use. For example, Howard met with prospective investors at a luxury hotel in Fort Lauderdale and offered Commodities Online membership interests. He told investors that the funds raised from the offering would be used for the company’s start-up costs such as salaries, marketing, and advertising. However, within weeks of receiving $2 million in investor funds for the purchase of the membership units, Howard siphoned $1.45 million to another entity he controlled. Furthermore, Howard failed to disclose to prospective investors that he’s a convicted felon.
According to the SEC’s complaint, Howard stepped down as the company’s president in 2010 after he was arrested for an unrelated investment fraud. He was replaced by Casey, who misled investors about Howard’s continuing control over Commodities Online while also misrepresenting the profitability, structure, and existence of the purported commodities contracts to investors. Casey also failed to tell at least one investor that the funds raised from the purchase of membership interests had previously been misappropriated by Howard.
The SEC alleges that Gallo ran an in-house "boiler room" of telephone sales agents and a network of approximately 20 regional and international sales offices. He failed to disclose to investors that he previously pled guilty to federal bank fraud and other felonies and was serving a term of supervised release while employed at Commodities Online. Gallo also misled investors about Howard’s role at Commodities Online.
The SEC’s complaint charges Howard, Gallo and Casey 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. They’re also charged with aiding and abetting violations by Commodities Online and Commodities Online Management of Section 10(b) of the Exchange Act and Rule 10b-5. Howard is further charged with a violation of Section 20(a) of the Exchange Act as a control person of Commodities Online, and the complaint alleges he is therefore jointly and severally liable for Commodities Online’s violations of Section 10(b) of the Exchange Act and Rules 10b-5. The SEC is seeking disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, and permanent injunctions against Howard, Gallo, and Casey. The SEC’s complaint also names several relief defendants for the purposes of recovering investor money steered to those entities in the scheme: Sutton Capital LLC, J&W Trading LLC, American Financial Solutions LLC, and Minjo Corporation.
The SEC’s investigation was conducted by Senior Investigations Counsel Robert H. Murphy, Senior Counsel Melissa J. Mitchell, and Staff Accountant Timothy J. Galdencio under the supervision of Assistant Regional Director Eric R. Busto in the Miami Regional Office. James M. Carlson will lead the SEC’s litigation efforts.
Washington, D.C., Sept. 5, 2012 – The Securities and Exchange Commission today charged an attorney and two others living in South Florida for their roles in a $27.5 million investment scheme that led investors to believe they were purchasing securities consisting of "pre-sold" commodities contracts with a pre-determined profit. However, the supposed profits actually distributed to investors were largely taken from other investors’ funds.
The SEC halted the scheme last year when it obtained an asset freeze and a court-appointed receiver over the companies involved: Commodities Online LLC and Commodities Online Management LLC. The SEC’s follow-up charges are against the founder and former president of the company, James C. Howard III, as well as the company’s vice president Louis N. Gallo III and outside counsel Michael R. Casey, who later became the president.
"This trio teamed up to employ all the hallmarks of an investment scheme," said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. "Howard met with prospective investors at a luxury hotel to emanate a false sense of wealth and security, Gallo oversaw an in-house boiler room that drummed up investor interest, and Casey was the company’s purported legal counsel who acted anything but lawyerly."
In a parallel action, the U.S. Attorney’s Office for the Southern District of Florida today announced criminal charges against Howard, Gallo, and Casey.
According to the SEC’s complaint filed in federal court in Miami, Commodities Online offered investors the chance to participate in its purportedly profitable brokering of physical commodities via pre-sold contracts – for example, the purchase and sale of large amounts of seafood or iron ore. Investors were sold participation units in unregistered private placement offerings, each supposedly tied to a commodities transaction in which Commodities Online had already secured a buyer and a seller of the commodity. These participation units would purportedly generate predetermined profits for investors.
The SEC alleges that in reality, Commodities Online performed only a limited percentage of the commodities transactions that were promised to investors. The majority of "profits" allocated or distributed to investors were not profits from completed commodities transactions, but instead taken from the funds of other investors. Meanwhile, Howard and Gallo were dissipating millions of dollars in investor funds to largely sham companies. Through these companies, Howard and Gallo stole investor funds for their own use. For example, Howard met with prospective investors at a luxury hotel in Fort Lauderdale and offered Commodities Online membership interests. He told investors that the funds raised from the offering would be used for the company’s start-up costs such as salaries, marketing, and advertising. However, within weeks of receiving $2 million in investor funds for the purchase of the membership units, Howard siphoned $1.45 million to another entity he controlled. Furthermore, Howard failed to disclose to prospective investors that he’s a convicted felon.
According to the SEC’s complaint, Howard stepped down as the company’s president in 2010 after he was arrested for an unrelated investment fraud. He was replaced by Casey, who misled investors about Howard’s continuing control over Commodities Online while also misrepresenting the profitability, structure, and existence of the purported commodities contracts to investors. Casey also failed to tell at least one investor that the funds raised from the purchase of membership interests had previously been misappropriated by Howard.
The SEC alleges that Gallo ran an in-house "boiler room" of telephone sales agents and a network of approximately 20 regional and international sales offices. He failed to disclose to investors that he previously pled guilty to federal bank fraud and other felonies and was serving a term of supervised release while employed at Commodities Online. Gallo also misled investors about Howard’s role at Commodities Online.
The SEC’s complaint charges Howard, Gallo and Casey 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. They’re also charged with aiding and abetting violations by Commodities Online and Commodities Online Management of Section 10(b) of the Exchange Act and Rule 10b-5. Howard is further charged with a violation of Section 20(a) of the Exchange Act as a control person of Commodities Online, and the complaint alleges he is therefore jointly and severally liable for Commodities Online’s violations of Section 10(b) of the Exchange Act and Rules 10b-5. The SEC is seeking disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, and permanent injunctions against Howard, Gallo, and Casey. The SEC’s complaint also names several relief defendants for the purposes of recovering investor money steered to those entities in the scheme: Sutton Capital LLC, J&W Trading LLC, American Financial Solutions LLC, and Minjo Corporation.
The SEC’s investigation was conducted by Senior Investigations Counsel Robert H. Murphy, Senior Counsel Melissa J. Mitchell, and Staff Accountant Timothy J. Galdencio under the supervision of Assistant Regional Director Eric R. Busto in the Miami Regional Office. James M. Carlson will lead the SEC’s litigation efforts.
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