I thought you guys would enjoy the items below that were forwarded to me today. BE CAREFUL! Raising money the wrong way can cost you dearly!
ARIZONA CORPORATION COMMISSION
FOR IMMEDIATE RELEASE: February 17, 2011 CONTACT: Rebecca Wilder (602) 542-0844
Commission Orders Restitution for Over 100 Investors Defrauded by
Unregistered Investment Programs, Most Involving Real Estate
PHOENIX, AZâ€” The Arizona Corporation Commission today sanctioned multiple individuals and their
affiliated companies whose unregistered investment programsâ€”most of which involved real estateâ€”
siphoned over $6.67 million from at least 105 investors. Also, the Commission sanctioned three other
individuals and their companiesâ€”a Sedona couple whose phony mineral and energy exploration
investment cheated investors out of over $2.2 million and a Chandler man whose fraudulent entertainment
investment scammed $525,000 from investors. In total, the Commission ordered over $9.38 million in
restitution and $405,000 in administrative penalties.
In the first case, the Commission ordered James Piccolo of Scottsdale, Craig Cottrell of Tempe
and Michael Roberts of Scottsdale and their affiliated companies to pay $5,577,226 in restitution and a
total of $300,000 in administrative penalties for defrauding 105 investors with unregistered deed of trust
investments. The Commission found that the men promoted the unregistered deed of trust investments at
real estate education seminars where they convinced students to become investors, promising them
double-digit returns. The Commission found that Piccolo, Cottrell and Roberts misrepresented that a
second deed of trust or lien on vacant lots would be secured for the investors and that the investment had a
corporate guarantee behind it. Additionally, the Commission found that the respondents failed to record
any liens for the benefit of the investors.
The Commission found that Piccolo and Five Star Capital Markets, LLC solicited potential
investors to buy the unregistered deed of trust investment while not being registered to offer or sell
securities in Arizona. The Commission found that, during part of the time he was a registered securities
salesman, Cottrell fraudulently offered and sold the unregistered deed of trust investments without the
authorization of his securities dealer. As a result, the Commission revoked his securities salesman
registration. The Commission found that Roberts and his home development company, Charlevoix
Homes, LLC, received investor funds solicited by Five Star Capital Markets, LLC, Piccolo and Cottrell,
but Roberts and his company were not registered to offer or sell securities in Arizona. In settling this
case, Piccolo, Cottrell and Roberts neither admitted nor denied the Commissionâ€™s findings, but agreed to
the entry of the consent orders.
In a separate case, the Commission issued a default order against Wayne Scott Clague of Phoenix,
requiring him to pay $1,076,000 in restitution and a $50,000 penalty for defrauding six investors in an
unregistered real estate investment program. The Commission found that, while not registered to offer or
sell securities in Arizona, Clague offered and sold unregistered investment contracts, telling investors that
their money would fund the completion of two residential developments in Hawaii and Washington, D.C.
The Commission found that, as a managing member of Norstreet Portfolio, LLC, Clague told investors
their funds would be secured by the real estate when, in fact, Norstreet lacked free-and-clear title to the
properties and was unable to execute a deed of trust in the name of the investors. Also, the Commission
found that Clague failed to inform investors about Norstreet's failure to acquire the necessary approvals as
promised in order to resale the Hawaii property and that some of the investor funds would be used for
outstanding, mortgage interest payments owed on the real estate properties.
In the next case, the Commission ordered a Sedona couple, Theodore Hogan and Christina
Damitio, and their affiliated company, to pay $2,208,310 in restitution and a $45,000 penalty for
defrauding investors in a mineral and energy development scam. The Commission found that, while not
registered as a securities dealer or salesmen in Arizona, Hogan and Damitio pooled the money of at least
32 investors and promised them an investment return from the development of oil and natural gas wells
on a Native American reservation in Montana. The Commission found that Hogan, who is also known as
â€œTed Kills in the Fog,â€ claimed to have an agreement with the Crow Nation to explore for minerals and
energy, including a commission of up to $360 million for Hoganâ€™s efforts. Moreover, Hogan assured
investors that their money was safe because the multimillion-dollar investment was bonded and
guaranteed by the federal government, but the Commission found Hoganâ€™s claims to be false.
Finally, the Commission ordered Mario K. Reed of Chandler and his affiliated company,
Phoenician Entertainment, LLC, to pay $524,000 in restitution and a $10,000 penalty for committing
securities fraud. The Commission found that Reed used his companyâ€™s bank account for the purpose of
handling banking transactions for Reedâ€™s cousin, Miko D. Wady, who is being criminally prosecuted for
operating a Ponzi scheme involving fraudulent concert funding. The Commission found that Reed failed
to disclose to investors that Phoenician Entertainment was not a talent agency that represented musical
groups. The Commission found that of the total investor funds received by Reedâ€™s company, nearly
$250,000 went directly to Wady or bank accounts controlled by Wady, while the remaining funds went to
other entities directed by Wady. Besides Reed, the Commission has sanctioned multiple other individuals
and their companies that facilitated Wadyâ€™s investment scheme. In settling this matter, Reed neither
admitted nor denied the Commissionâ€™s findings, but agreed to the entry of the consent order.
More caution for investors:
Even when investing with someone they know, investors should verify the registration of sellers
and investment opportunities and investigate disciplinary histories by contacting the Arizona Corporation
Commissionâ€™s Securities Division at 602-542-4242 or toll free in Arizona at 1-866-VERIFY-9. The
Divisionâ€™s investor education web site also has helpful
information at www.azinvestor.gov.
More info here:
here's the edocket: http://images.edocket.azcc.gov/docketpdf/0000123769.pdf
Apparently most of this went down in 2005. From the docket:
13. FIVE STAR represented to investors that the Charlevoix Notes were to be secured
:ither by a â€˜â€˜2nd Deed of Trust held on behalf of all investors by Five Star Capital Marketsâ€ or by a
â€˜lien on lots.â€ No second deed of trust or lien for the benefit of the investors, either individually or
for the benefit of FIVE STAR, was ever recorded.
14. The Charlevoix Notes offering documents provided to investors stated that the
nvestments were guaranteed by a â€œCharlevoix Home Corporate guarantee.â€ However, there was
i o Charlevoix guarantee.
15. From October 2005 through November 2006, Charlevoix Notes were sold to 105
investors who invested $5,616,226.59.
16. From October 2005 through November 2006, FIVE STAR and PICCOLO were not
registered as securities dealers or salesmen with the Commission.
17. The Charlevoix Notes were not registered with the Commission.
18. FIVE STAR misrepresented to offerees and investors that the investments in
Charlevoix Notes were guaranteed by a â€œcorporate guaranteeâ€ in CHARLEVOIX when, in fact,
there was no guarantee.
Like they say karma is a biznich.
Couldn't happen to a nicer guy and company.
Wow - That's pretty strong. All the more reason anybody raising capital for any reason needs to check securities regulations with a lawyer experienced in securities regulation in the state their operating in.
If raising capital from investos in 2 or more states, an attorney knowlegable about Federal securities law ahould be retained.
Your chosen attorney may find that your "offering" qualifies for an exemption from registation under one or more acts or rules. Even if it does, there probably will be a ban on any general solicitation and advertising. From the rulings of the Arizona Corporation Commision above, holding an educational seminar with the intent to sell securities is a vikolation of the ban on general solicitation and advertising for non registered securities.
In a similar vein, another important piece of information gathered from the above rulings are that just because a security or transaction is exempt from registration does not mean the the party selling the investment is exempt from registration. In talking with my attorney about planned future offerings, he suggested that the regulatory climate is such that anyone raising capital for my ventures, including myself, obtain a securities license.
BTW, the Texas securities laws and regulations seem to offer contradictory information as to whether a note secured by real estate is a security or not; whether such transaction is an exempt transaction, and whether the party brokering the note needs a securities license. And remember, each state you operate in has differing regulations that must be complied with!
It's hard to believe people invest these sums of money to these types of individuals.
In my neck of the woods everyone scrutinizes every cent of a possible purchase or investment so I can't relate.
Glad they can no longer misrepresent and take advantage of others.
Yeah....I have seen the "education" angle used extensively to solicit investors. Another company in Dallas used this a few years back, but I don't think they ever got caught. I know of another "university" using this approach in Austin too.
Wow - That's pretty strong. All the more reason anybody raising capital for any reason needs to check securities regulations with a lawyer experienced in securities regulation in the state their operating in.True. Keep in mind that these crooks, Jim P in particular, raised funds by soliciting strangers in a false pretense, then made illegal promisses and also never recorded deeds of trust. Bing - busted!!!! Love to see this went down against him and his partners in crime. NV was such a scam!
I am glad these crooks got busted...this was not a simple ignorance of the law situation, this was a case of swindling people out of their money. This proves two things:
1) Do not try to rip people off, it will eventually come back to you
2) Be careful w/ securities laws (same goes for tax laws, landlord laws, etc.)
Wow! I was presented with this system but didn't buy in! Too many claimed gurus!
Originally posted by Will Barnard:
.... NV was such a scam!
Did you mean to say "NR/NRU" there where you wrote "NV"?
Our fund is about to take in $625k in new investments. We are doing things perfectly legitimately without having to fast talk people. I guess everyone wants to take shortcuts though.