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Sheriff's loan dealer sued by SEC
Scam alleged: Miami businessman has failed to honor repayment agreements before
By STEVE VISSER, DAVID McNAUGHTON
The Atlanta Journal-Constitution
Published on: 04/24/04
The Miami businessman Fulton County Sheriff Jackie Barrett hoped would help her recoup a failed $2 million investment hasn't repaid the millions he allegedly bilked from investors in the 1990s, the Securities and Exchange Commission charged in a court filing in Atlanta.
The SEC is asking a federal court to hold Andre Brady in contempt for failing to live up to the repayment agreement. In its filing Wednesday, the federal agency took note of Brady's claim on his Web site that he is "a very successful multimillionaire entrepreneur."
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Brady in 1995 agreed to return $13.5 million as part of a settlement in which he neither admitted nor denied the SEC's charge that he operated a pyramid scheme. The amount of the settlement was reduced to $4 million in 1998.
In a recent interview with The Atlanta Journal-Constitution, Brady said he returned "over $10 million." However, court documents filed Wednesday show he has repaid less than $10,000.
In what was described as a desperate move, Barrett on March 12 signed a deal with Brady to leverage about $5 million in public money she controlled to recover $2 million she had lost in an investment with a Florida financial company.
Even though Barrett was entrusting millions to Brady, there is no evidence that the sheriff made any attempt to check his background.
Caudell Jones, the sheriff's chief deputy and a participant in the financial deals, said Barrett knew little about Brady. "I don't think she was aware of Brady's background," Jones said Friday.
Brady was introduced to Barrett by Byron Rainner, the former MetLife broker who directed Barrett's $7.2 million questionable investments, Jones said.
Barrett signed the contract with Brady less than two weeks before her initial questionable investments were made public by a county auditor on March 22.
On the same day she signed the contract to invest $5 million with Brady, the sheriff wrote MetLife demanding a refund of $5.2 million she invested with the firm in 2003, records show. She apparently intended to use the Metlife refund as collateral for a $5 million credit from a Toronto bank, according to loan documents obtained by the Journal-Constitution.
Barrett had invested about $2 million with Provident Capital Investment Inc., which informed her in March that the money had been loaned to other companies and could not be returned.
Brady agreed to place the borrowed money that was to come from Toronto in investments that he promised would produce more than enough income to make up for the $2 million loss in a year. The agreement also would have allowed for Barrett to deposit $2 million from the loan into a bank to cover the missing money.
Brady could not be reached for comment Friday. Barrett's attorney denied any wrongdoing by the sheriff.
At the time she was dealing with Brady, Barrett was desperate to come up with the $2 million before a March 31 deadline set by the county auditor, chief deputy Jones said. "At this point, it was 'Let's see what he can do,' " Jones recalled.
J. Steven Parker, a former state securities regulator, reviewed the documents prepared by Brady for Barrett and said they looked suspicious. "It's pretty obviously a scam," Parker said. "There are a lot of red flags."
The warning signs include the agreement's description of the investment as an "irrevocable letter of undertaking."
"That kind of instrument doesn't exist in the real world," Parker said.
Parker also questioned the return promised on the investment: 1 percent a month. "It's economically impossible to have an investment vehicle with no risk and that rate of return," he said.
Mike Puglise, one of Barrett's lawyers, said he was convinced that Brady and Rainner saw the deal as one last chance to get hold of the $5.2 million that had gone to MetLife.
Puglise said it was clear the sheriff wasn't thinking clearly, in her desperation to recover the $2 million loss before it became public.
"I think panic outweighed logic at that point," the attorney said. "She was trying to find a way to escape the wrath that was going to befall her."
Rainner has been subpoenaed to testify before a federal grand jury in Atlanta that is investigating the case, said Curtis Carlson, one of Rainner's lawyers. Carlson disputed the finding of a Fulton County auditor that the investments with MetLife and Provident were not legal.
Brady's deal with Barrett was through the Royal Institute of Finance, which is owned by Brady.
His problems with the SEC are related to another company, Wealth International Network.
The SEC sued Brady in 1995, accusing him and three associated companies of operating a pyramid scheme in which early investors are repaid with money from new investors.
The agency said Brady and the firms promised returns of 8 percent to 20 percent a month, with little risk. The case was settled when Brady and the firms agreed to pay $13.5 million in reimbursements, later reduced to $4 million.
Brady was supposed to send the U.S. District Court in Atlanta his total income, less $800 a week for living expenses, according to the SEC's filings.
Since the revised order in 1998, only $9,926.83 — including interest on two deposits Brady made — has been repaid, the SEC said.
U.S. District Judge Charles Moye Jr. set a hearing May 12 for Brady to show why he should not be held in contempt, said SEC counsel William Hicks. The judge could sentence him to jail until he pays, if he's found in contempt of the previous order. |
