Beautiful Losers: Summer Snow Jobs Frost SEC

by Paul Springer

It’s going to be a long, hot summer – for both the Securities and Exchange Commission and the imaginative fraudsters it seeks to keep in check.

Three recent enforcements involve investment pitches based on beautiful lies – so beautiful in fact that they might call for additional penalties based on karmic damage and bleak irony.

Association for Betterment through Education and Love (ABEL) reeks of sunshine and rainbows. But the commission alleged that the group fraudulently solicited money for certificates of deposit that offer above-market returns and channel funds to charities.

The whole thing had with elements of Ponzi-like cash flow, where funds from new investors were used to pay earlier ones. The SEC said it obtained a restraining order to shut down the business and freeze assets. So ABEL turned out a lot more like Cain.

Shakespeare coined the phrase, “A rose is a rose by any other name.” Likewise, a scam is a scam by any other name – and it sure doesn’t smell like a rose.

Dreams of glorious beer were at the heart of scam that involved soliciting investor funds for the acquisition of Pabst Brewing Co. The two principals of claimed they were on their way to collecting $300 million to purchase the fabled brewery operation.

The pair claimed investors had pledged $200 million according to the SEC, which said the men never actually collected a dime. They did consent to a cease-and-desist order for selling unregistered securities.

Pleasing as the thought of a vacation to distant lands may be, many a would-be traveler has been reduced to profanity and disgust by annoyingly persistent timeshare sales pitches.

Some of those pitches are a lot more than annoying, and the commission alleged one group managed to raise $428 million through a scheme based on universal leases structured as time shares. Investors were lead to believe they would somehow make money on their timeshares, a possibility belied by the hordes of people constantly trying to get rid of timeshares that turned out to be a huge pain.

The pitch claimed the investment would generate risk-free income, the commission said, but investors were not told that commissions consisted of as much 27% of the amount invested. Total commissions racked up to $72 million.

The SEC just got a $2.4 million judgment against one of the parties. Some of the others are, well, still out of town.

Previous investors were paid with cash from new ones, and the commission said $136 million of the proceeds came from individual retirement accounts. Sadly, most of that money is now on permanent vacation.

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