re. affinity scams and HYIP scams, the SEC sued some people for yesterday running some particularly large scams. They even bought a horse with the proceeds. Sound familiar?
SEC Charges TLC America, Individuals
Operated Fraudulent Investment Scheme
By JOHN R. EMSHWILLER
Staff Reporter of THE WALL STREET JOURNAL
LOS ANGELES -- The Securities and Exchange Commission charged several individuals and firms with operating a fraudulent scheme that took in over $156 million from 2,600 investors nationwide, many of them elderly.
In a suit filed in federal court here, the SEC asserted that while some of the defendants told investors their money would be used to purchase real estate, much of the money went to other purposes. The alleged uses included buying racehorses and giving $1 million to repair the football stadium at the high school of one of the defendant's sons.
Among the defendants in the case are TLC America Inc. of Brea, Calif., and several related firms. The individual defendants include Ernest F. Cossey, TLC's president.
Mr. Cossey's attorney, Dean Steward, said his client denies wrongdoing and will "vigorously fight the lawsuit." James Sanders, an attorney for TLC America, said he hadn't yet seen the SEC complaint and couldn't comment on it.
"The TLC case is the latest in an ongoing effort by the SEC to attack frauds that use the Internet or target the elderly," said Lisa Gok, an assistant regional director in the agency's Los Angeles office.
Ms. Gok said the case also involves another area of SEC enforcement interest, so-called affinity fraud where people who share common activities, beliefs or ethnicity are targeted as victims. In this case, the SEC complaint alleged that one of the defendants, Thomas G. Cloud, engaged in affinity fraud by helping push the investment scheme "through a Christian-themed Internet Web site."
On his Web site, Mr. Cloud, an Atlanta-based investment counselor, said he "believes in combining his knowledge of scripture with his knowledge of investing."
An attorney for Mr. Cloud said he hadn't yet seen the SEC complaint and couldn't comment on it.
The SEC complaint said that the TLC entities have been offering real-estate investments to the public since at least 1996. While the entities claimed to be earning returns of 12% to 14%, they had actually been losing money over the past two years, the SEC alleged.
Of the $156 million raised, only about $62 million went into real-estate investments, the SEC said. Some of the remaining funds were used in a "Ponzi scheme" in which some investors were paid with other investors' money instead of from actual investment returns, the complaint alleged.
The SEC said money also went into a "prime bank scheme," which promised extremely high returns from a leveraged investment program. At least $500,000 went to offshore bank accounts and over $4 million went to thoroughbred-horse auction farms, the SEC said. One of the horses purchased was named "Union Project," according to the SEC complaint.
The SEC has obtained a temporary restraining order and asset freeze in the case.
Here's the website for Tom Cloud, one of the defendants: cloudassoc.com |
