Feds Press Sham-Investment Charges
The Securities and Exchange Commission and U.S. Attorney's Office said they uncovered 10 such schemes, in which 20 percent to as much as half of the money obtained from investors went to pay telemarketers, while much of the rest went to unregistered brokers as sales commissions.
According to the SEC, the schemes included:
· Three motion picture ventures, which raised about $13.1 million from investors for securities in movie development firms. Half the proceeds went to telemarketers, and the rest went to unregistered brokers;
· Three medical technology ventures, which raised more than $13 million for investment in firms that develop medical devices and software. But 20 percent to 30 percent went to pay broker sales commissions despite claims that only 12 percent of the money would be used for commissions.
· Three telecommunications ventures, which raised $2.9 million for businesses to establish long-distance telephone services over the Internet. However, $1.2 million went to unregistered brokers.
· An in-line hockey rink venture, which raised $650,000 from 52 investors for stock in a company that purported to be engaged in building roller hockey rinks. Thirty percent of the proceeds went to telemarketers.
The schemes occurred between 1996 and 2001, the SEC said. Federal authorities began their investigation in 2001.
The SEC has filed civil charges against 50 individuals and 31 corporate entities. The commission seeks court injunctions to halt the schemes in addition to reimbursement of the money raised in the ventures, as well as civil penalties.
The U.S. Attorney's Office has filed criminal charges against 53 individuals, seven of whom have already pleaded guilty. These charges carry maximum penalties of 10 years in prison, $1 million fines and payment of restitution to investors.