Security Exchange Commission v Michael Kelly, etc

[Ernie]

SEC Files Suits in Alleged Timeshare Scheme to Swindle Retirees

By David Scheer

Bloomberg News

Thursday, September 6, 2007; Page D03

The Securities and Exchange Commission, cracking down on scams targeting retirees, sued 26 people and companies for their roles in a $428 million fraud involving Mexican timeshare rentals, the agency said.

The ring duped thousands of people by promising stable income from timeshares in Cancun, the SEC said in the suit filed at federal court in Chicago yesterday. Operators instead used money from new clients to make purported rental payments to earlier investors, leaving victims with more than $310 million in losses when the system collapsed, the SEC said.

The suit "shows that the SEC will vigilantly pursue those who target older Americans, no matter what the obstacles," said Merri Jo Gillette, the SEC's regional director in Chicago. The agency "plans to aggressively seek recovery from the defendants to offset the huge losses they inflicted."

U.S. regulators are stepping up efforts to protect retirees as their share of U.S. wealth makes them "prime targets for scam artists and securities swindlers," the SEC's chairman, Christopher Cox, told a Senate committee yesterday. The effort has generated more than 40 enforcement actions in the past two years, he said.

The SEC's suit focuses on Michael E. Kelly, a former resident of Indiana, who was arrested in December and charged by federal prosecutors with engaging in a scheme to defraud. Kelly orchestrated the scam from 1999 until 2005 with help from a national sales network, the SEC said.

Operators sold investors timeshares in several hotels, which were supposed to be leased through an agent, generating fixed returns, the SEC said. When investors wanted out, the leasing agent would buy back their timeshares for the full amount.

The leasing agent, purported to be a large, independent company, was actually a small Panamanian travel agency controlled by Kelly, the SEC said. Brokers pushing the investments received $72 million in commissions, the agency said.

Kelly has pleaded not guilty in the criminal case, and a jury has not returned an indictment, said Jeffrey Steinback, his attorney in that matter.

"Mr. Kelly is very aware that there are a number of people who have voiced concerns about the losses they feel they have suffered," Steinback said. "Mr. Kelly has directed his attorneys to address the issue of restitution, and we are doing that in the context of the criminal matter."

A lawyer for Kelly in the SEC's case didn't immediately return a phone call seeking comment.

[jeffgrohs]

http://www.sec.gov/news/press/2007/2007-172.htm

http://www.sec.gov/litigation/complaints/2007/comp20267.pdf

from the stude newsgroup...

[Ernie]

Avanti Motor Corp, Michael E. Kelly, Michael P. Kelly, and Donald L. Kelly also named in SEC charges:

http://www.bizop.ca/blog2/ponzi-schemes/mi...500_millio.html

Edited September 7, 2007 by Ernie

[SBCA96]

Wow .. well they certainly tainted the name "Avanti".

Tom

[jbfleder]

They meaning Michael Kelly and his family? The SEC complaint states that they illegally dumped more than $7.3 million of investor money into Avanti.

[Ernie]

'Prime targets' try to get money returned

SEC SUIT | Chicagoans among those alleging scam

September 6, 2007

BY MARY WISNIEWSKI mwisniewski@suntimes.com

Joyce Wood said that when she thinks back on how she lost $200,000 to an investment fraud scheme, "I want to kick myself down the block."

"I admit to being dumb, which most people don't," said Wood, 77, of La Grange Park. "We were prime targets."

Wood and her husband, Charles, 79, are among the thousands of seniors and other investors around the country who lost more than $300 million to an investment ponzi scheme allegedly run by Michael E. Kelly, a former Indiana resident and a hotel owner in Mexico.

At least three other alleged Kelly victims are from the Chicago area.

The Securities and Exchange Commission filed suit in Chicago federal court Wednesday against 26 defendants, including Kelly, his two sons, several brokers and related companies. Kelly, 57, a hotel owner in Mexico, is already in prison on a related criminal complaint after his arrest in December.

The SEC charges that Kelly and those working with him duped investors into using their retirement savings to buy "Universal Leases" on Mexican properties between 1999 and 2005. The defendants allegedly raised at least $428 million through the scheme, with more than $136 million coming from IRAs.

The investments were structured as time shares in several hotels in Cancun, Mexico, together with a pre-arranged rental agreement that promised investors a high, fixed rate of return. For most of the scheme, payments to investors came from money raised by new investors, and the leasing agent was a Panamanian travel agency controlled by Kelly, the suit said.

Investor funds were used to pay commissions as high as 27 percent to selling brokers, the suit said.

Attorneys for Kelly did not return phone calls for comment.

One of the brokers for Kelly, Mark Ruttenberg, 60, of Downstate Bloomington, along with Ruttenberg's company, were paid $6.4 million in commissions in the alleged scheme, the suit said.

"If there was a fraud, Mark Ruttenberg was not a part of it," said James Kopecky, Ruttenberg's Chicago attorney.

Wood said she was hooked into the scheme through someone who claimed to be their insurance agent but actually worked for Kelly. The Woods signed over the proceeds of an IRA and a reverse mortgage on their paid-for home.

They had hoped the investment, which was supposed to pay $1,165 a month, would supplement their overstretched Social Security income. They didn't know it involved time shares in Cancun.

"If it sounds too good to be true, damned if it isn't," Wood said. "If I have to go to my grave fighting for this money, I will."

The SEC suit demands that the defendants return the fraud proceeds to investors.

[Ernie]

Another recap on Michael Eugene Kelly including a picture:

http://en.wikipedia.org/wiki/Michael_Eugene_Kelly

[Ernie]

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21620 / August 6 , 2010

SEC v. Michael E. Kelly, et al., Case No. 1:07-CV-4979 in the United States District Court for the Northern District of Illinois

Court Enters Final Judgment Against San Marcos, Texas Resident Richard E. Riner and his Company Southwest Income Marketing, Inc.

The Securities and Exchange Commission announced today that on August 5, 2010, Judge Elaine Bucklo of the United States District Court for the Northern District of Illinois entered a final judgment against Richard E. Riner, of San Marcos, Texas, and Southwest Income Marketing, Inc. (SIMI), Riner's business. The final judgment: (1) enjoined Riner and SIMI from violating Sections 5(a), 5© and 17(a) of the Securities Act of 1933, Sections 10( and 15(a) of the Securities Exchange Act of 1934, Rules 10b-5 and 10b-10 promulgated thereunder, and enjoined Riner from aiding and abetting violations of Rule 10b-10 of the Exchange Act; (2) ordered Riner and SIMI to pay disgorgement in the amount of $2,784,293.38, plus prejudgment interest of $1,155,871.72 for a total of $3,940,165.10; and (3) ordered Riner to pay a civil penalty in the amount of $120,000.

[Ernie]

ANOTHER 3 MILLION DOLLAR FINE!

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21793 / December 23, 2010

SEC v. Michael E. Kelly, et al., Case No. 1:07-CV-4979 in the United States District Court for the Northern District of Illinois

Court Enters Final Judgment against Bulverde, Texas Resident George “Lin” Phelps

The Securities and Exchange Commission announced today that on December 21, 2010, Judge Elaine Bucklo of the United States District Court for the Northern District of Illinois entered a final judgment against Bulverde, Texas resident George L. Phelps (Phelps), also known as “Lin” Phelps and also doing business under the name “Safe Estate Plans.” The final judgment: (1) enjoined Phelps from violating Sections 5(a), 5© and 17(a) of the Securities Act of 1933, Sections 10( and 15(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 10b-10 promulgated thereunder; (2) ordered Phelps to pay disgorgement in the amount of $2,002,766.66, plus prejudgment interest of $919,732.93, for a total of $2,922,499.59; and (3) ordered Phelps to pay a civil penalty in the amount of $120,000.

The SEC’s complaint in this matter charges that Michael E. Kelly and 25 other defendants, including Phelps, participated in a massive fraud on U.S. investors that involved the offer and sale of securities in the form of Universal Leases. Universal Lease investments were structured as timeshares in several hotels in Cancun, Mexico, coupled with a pre-arranged rental agreement that promised investors a high, fixed rate of return. The SEC’s complaint alleges that from 1999 until 2005, Kelly and others, including Phelps, raised at least $428 million through the Universal Lease scheme from investors throughout the United States, with more than $136 million of the funds invested coming from IRA accounts. The SEC further alleges that a nationwide network of unregistered salespeople who sold the Universal Leases, including Phelps, collected undisclosed commissions totaling more than $72 million. The SEC also alleges that Kelly and others ran the scheme from Cancun, Mexico, through a number of foreign entities in Mexico and Panama. According to the SEC's complaint, Kelly and others told investors that Universal Leases would generate guaranteed income through the leasing of investor timeshares by a large, independent leasing agent. In fact, the complaint alleges, the leasing agent was a small Panamanian travel agency controlled by Kelly, and for most of the scheme, its payments to investors came from accounts funded by money raised from new investors. Further, the complaint alleges that Kelly and the other defendants, including Phelps, failed to disclose key facts about the Universal Lease investment, including the risks of the investment and that Kelly was paying commissions as high as 27% to the selling brokers. The SEC’s action against the remaining defendants is pending.

For further information, see Litigation Release Nos. 20267 (Sept. 5, 2007), 20573 (May 14, 2008) , 20578 (May 15, 2008), 20579 (May 15, 2008), 20664 (July 31, 2008), 20679 (August 12, 2008), 20708 (Sept. 9, 2008); 20709 (Sept. 9, 2008), 20799 (November 6, 2008), 21003 (April 15, 2009) and 21481 (April 8, 2010); 21583 (June 29, 2010); 21620 (August 6, 2010); [sEC v. Michael E. Kelly, et al., Civil Action No. 07-cv-4979 (N.D. Ill.]

http://www.sec.gov/litigation/litrel...10/lr21793.htm

[Ernie]

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21994 / June 8, 2011

SEC v. Michael E. Kelly, et al., Case No. 1:07-CV-4979 in the United States District Court for the Northern District of Illinois

Court Enters Final Judgment against Coppell, Texas Resident Mark G. Meyer and his Company Mark Meyer & Associates, Inc.

The Securities and Exchange Commission announced today that on June 7, 2011, Judge Elaine Bucklo of the United States District Court for the Northern District of Illinois entered a final judgment against Mark G. Meyer, of Coppell, Texas, and Mark Meyer & Associates, Inc. (MMAI), Meyer's business. The final judgment: (1) enjoined Meyer and MMAI from violating Sections 5(a), 5© and 17(a) of the Securities Act of 1933, Sections 10( and 15(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 10b-10 promulgated thereunder, and enjoined Meyer from aiding and abetting violations of Rule 10b-10 of the Exchange Act; (2) ordered Meyer and MMAI to pay disgorgement in the amount of $1,162,729.13 plus prejudgment interest of $565,204.12, for a total of $1,727,933.25; and (3) ordered Meyer to pay a civil penalty in the amount of $120,000, and MMAI to pay a civil penalty in the amount of $600,000.

The SEC's complaint in this matter charges that Michael E. Kelly and 25 other defendants, including Meyer and MMAI, participated in a massive fraud on U.S. investors that involved the offer and sale of securities in the form of Universal Leases. Universal Lease investments were structured as timeshares in several hotels in Cancun, Mexico, coupled with a pre-arranged rental agreement that promised investors a high, fixed rate of return. The SEC's complaint alleges that from 1999 until 2005, Kelly and others, including Meyer and MMAI, raised at least $428 million through the Universal Lease scheme from investors throughout the United States, with more than $136 million of the funds invested coming from IRA accounts. The SEC further alleges that a nationwide network of unregistered salespeople who sold the Universal Leases, including Meyer and MMAI, collected undisclosed commissions totaling more than $72 million. The SEC also alleges that Kelly and others ran the scheme from Cancun, Mexico, through a number of foreign entities in Mexico and Panama. According to the SEC's complaint, Kelly and others told investors that Universal Leases would generate guaranteed income through the leasing of investor timeshares by a large, independent leasing agent. In fact, the complaint alleges, the leasing agent was a small Panamanian travel agency controlled by Kelly, and for most of the scheme, its payments to investors came from accounts funded by money raised from new investors. Further, the complaint alleges that Kelly and the other defendants, including Meyer and MMAI, failed to disclose key facts about the Universal Lease investment, including the risks of the investment and that Kelly was paying commissions as high as 27% to the selling brokers. The SEC's action against the remaining defendants is pending.

http://www.sec.gov/litigation/litreleases/2011/lr21994.htm

[J Boyle]

Any end in sight?

When it's over, perhaps we'll find out what going to happen with the factory and some of the older Avantis in it (there was a company museum...or so I've read).

[Ernie]

And it continues -- June 22, 2011:

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22016 / June 28, 2011

SEC v. Michael E. Kelly, et al., Case No. 1:07-CV-4979 in the United States District Court for the Northern District of Illinois

Court Enters Final Judgment Against Georgia Resident William K. Boston, Jr., Texas Resident Warren T. Chambers And Their Business, Century Estate Planning, Inc.

The Securities and Exchange Commission announced today that on June 22, 2011, Judge Elaine Bucklo of the United States District Court for the Northern District of Illinois entered a final judgment against William K. Boston, Jr., of Canton, Georgia, Warren T. Chambers, of Leander, Texas, and Century Estate Planning, Inc. (Century Estate), their business. The final judgment: (1) enjoined Boston, Chambers and Century Estate from violating Sections 5(a), 5© and 17(a) of the Securities Act of 1933, Sections 10( and 15(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 10b-10 promulgated thereunder, and enjoined Boston and Chambers from aiding and abetting violations of Rule 10b-10 of the Exchange Act; (2) ordered Boston, Chambers and Century Estate to pay disgorgement in the amount of $1,347,601.44 plus prejudgment interest of $617,269.01, for a total of $1,964,870.45; and (3) ordered Boston and Chambers to each pay a civil penalty of $120,000,and Century Estate to pay a civil penalty in the amount of $600,000.

The SEC’s complaint in this matter charges that Michael E. Kelly and 25 other defendants, including Boston, Chambers and Century Estate, participated in a massive fraud on U.S. investors that involved the offer and sale of securities in the form of Universal Leases. Universal Lease investments were structured as timeshares in several hotels in Cancun, Mexico, coupled with a pre-arranged rental agreement that promised investors a high, fixed rate of return. The SEC’s complaint alleges that from 1999 until 2005, Kelly and others, including Boston, Chambers and Century Estate, raised at least $428 million through the Universal Lease scheme from investors throughout the United States, with more than $136 million of the funds invested coming from IRA accounts. The SEC further alleges that a nationwide network of unregistered salespeople who sold the Universal Leases, including Boston, Chambers and Century Estate, collected undisclosed commissions totaling more than $72 million. The SEC also alleges that Kelly and others ran the scheme from Cancun, Mexico, through a number of foreign entities in Mexico and Panama. According to the SEC's complaint, Kelly and others told investors that Universal Leases would generate guaranteed income through the leasing of investor timeshares by a large, independent leasing agent. In fact, the complaint alleges, the leasing agent was a small Panamanian travel agency controlled by Kelly, and for most of the scheme, its payments to investors came from accounts funded by money raised from new investors. Further, the complaint alleges that Kelly and the other defendants, including Boston, Chambers and Century Estate, failed to disclose key facts about the Universal Lease investment, including the risks of the investment and that Kelly was paying commissions as high as 27% to the selling brokers. The SEC’s action against the remaining defendants is pending.