ACC Stops $4.9 Million Investment Scam

The following is the text of a February 3, 2015, Arizona Corporation Commission press release:

The Arizona Corporation Commission today ordered Tucson residents Michael and Betsy Feinberg and their affiliated company, Catharon Software Corporation, to pay $4,926,559 in restitution and a $250,000 administrative penalty for defrauding investors with an unregistered investment program. The Commission found that the Feinbergs, formerly of Sedona, represented that they had created and owned a patented computer language technology named “V∆Delta”that would enable Catharon to compete with Microsoft and other computer language systems manufacturers.

While not registered to offer or sell securities in Arizona, the Feinbergs induced investors to purchase Catharon stock by repeatedly representing that Catharon would launch its technology within months of the investors’ investment, Catharon would generate $2 billion in revenue within three years and investors would receive returns of between 400 and 1,572percent.  The Commission found, however, that the Feinberg never launchedCatharon’s technology.

The Commission found, and the Feinbergs admitted, they did not have any reasonable factual basis for the projected launch dates, the projected $2 billion revenue figure and investment returns, or their representations that Catharon would compete with Microsoft and similar companies. Further, the Commission found that the Feinbergs failed to disclose their use of investor monies to pay for personal living expenses, including a bird-watching trip to Mexico, as well as the transfer of more than $891,000 to their personal bank account. In settling this matter, the Feinberg admitted to the Commission’s findings for the purposes of its administrative proceeding and any other proceeding in which the Commission is a party and consented to theentryof the consent order.

For more details about this case, view the full text of the Commission’s order S-20905A-14-0061. The Commission’s final order against the named respondents will be posted online as soon as it is signed by all of the Commissioners.

2019-07-04T10:28:52-07:00February 3rd, 2015|AZ Corporation Commission|0 Comments

Beware Certificate of Good Standing Rip Off

Today we received in the mail about 30 envelopes from Arizona Business Filing Services.  The envelopes contained an official looking document entitled “2014 Certificate of Good Standing Request Form.” The document suggests that the brand new Arizona LLC should pay ABFS $59.99 to obtain a Certificate of Good Standing for the new LLC.  As soon as I saw the document I knew it was a scam.  Here are some tell tale signs that the letter should be ignored:

  • It starts with IMPORTANT!
  • It states “Your Articles of Formation have been filed with the Secretary of State of Arizona.”  Arizona LLC’s don’t file Articles of Formation with the Secretary of State.  Arizona LLCs file Articles of Organization with the Arizona Corporation Commission.
  • The cost for the Certificate of Good Standing is $59.99, but anybody can obtain a COGS from the Arizona Corporation Commission for $10.

FYI:  We never get a Certificate of Good Standing for LLCs we form.  Your LLC does not need a COGS unless some party like a bank or title insurance company asks for it.  When somebody does demand a COGS the requestor wants a current document, not one obtained two years before the request for the COGS.

The following is the text of a June 9, 2014, press release from the Arizona Corporation Commission concerning the Arizona Business Filing Services COGS letter:

Corporation Commission Warns Business Owners of
False Service Claiming to Offer “Official” Documents

PHOENIX — The Arizona Corporation Commission is warning business owners that an individual or group calling itself “Arizona Business Filing Services” is sending out an official – looking document offering to provide an “Arizona Certificate of Good Standing” for a fee of $59.99. This entity is not affiliated with the Corporation Commission, and business owners do not need to go through any third party to obtain their Certificate. Further, the Commission cannot guarantee the authenticity of such a document.

Valid Certificates of Good Standing can only be obtained directly from the Corporation Commission. The entity status can be viewed online, or a hard – copy certificate of good standing can be obtained by corporations and limited liability companies immediately online for a fee of $45, or by mail, for a fee of $10 (regular processing time).

The Commission has referred this false advertisement to the Attorney General’s office for investigation. I f you have received it, please contact the Arizona Attorney General’s Office in Phoenix at (602) 542-5763, in Tucson at (520) 628-6504, or outside the Phoenix and Tucson metro areas at 1 (800) 352-8431. To file a complaint online, please visit the Attorney General’s web site at www.azag.gov. To file a complaint in person, the Attorney General’s Office has 37 satellite offices throughout Arizona with volunteers available to help. Locations and hours are posted on the Attorney General’s web site .

Do I Need a Certificate of Good Standing for My LLC?

Question:  Do I need to purchase a Certificate of Good Standing for my Arizona limited liability company from the Arizona Corporation Commission?

Answer:  Not unless a third party requires it.  The purpose of the Certificate of Good Standing is to prove to people or companies that your Arizona LLC was formed and is in good standing with the Arizona Corporation Commission.  You do not need the Certificate of Good Standing unless a third party requests it.  If you do get a request for a Certificate of Good Standing the requester will want a current Certificate of Good Standing, not one created months or years before the date of the request.

The most common reason you might need a Certificate of Good Standing is your LLC wants to borrows money from a financial institution.  Lenders frequently ask for a Certificate of Good Standing because they want to confirm that the LLC exists and is in good standing with the Arizona Corporation Commission when the lender loans the money.

Don’t waste your money on getting a Certificate of Good Standing unless somebody asks for it and complying with the request is important to your LLC.

If you need a Certificate of Good Standing for an Arizona LLC or corporation for your company or somebody else’s company watch my demonstration video and I will show you how to purchase the Certificate of Good Standing for $45 and download it immediately.

Should I Pay the $50 or $85 Arizona LLC Filing Fee?

Question:  I know the fee to file Articles of Organization to create a new Arizona limited liability company is $50 or $85.  Why would I pay the $85 filing fee?

Answer:  The main reason to pay the $85 expedited filing fee is because the Arizona Corporation Commission will review the new LLCs Articles of Organization and approve it (hopefully approve rather than reject) within 5 – 8 business days rather than the 30 – 35 business days that applies to the standard $50 filing fee.  You should pay the $85 fee if any of the following apply to your LLC:

  • You need to open a bank account and your bank requires a copy of the LLC’s approved Articles of Organization and you can’t wait 30 – 35 business days.
  • You want the LLC to be able to take title to real estate and you can’t wait 30 – 35 business days.  Escrow companies will not close a real estate purchase escrow if title insurance is to be issued to the new LLC until the ACC approves the Articles of Organization.
  • The LLC is to sign an important contract and the other party won’t sign the contract until the ACC approves the Articles of Organization.

To see the exact number of days for the ACC to review regular filings and expedited filings go to its document processing times webpage.

ACC Sanctions Phoenix Man for Securities Law Violations

The following is the text of a March 11, 2014, press release from the Arizona Corporation Commission:

The Arizona Corporation Commission today sanctioned a Phoenix business man and his affiliated companies for his securities violations in connection with two investment programs , one involving a failed home building venture and the other involving a marketing training website.

The Commission ordered Todd R. Nuttall of Phoenix and his affiliated companies, Todd Robert Homes, Inc., Magdalena Homes , LLC and Rotall Marketing Group, LLC to pay $225,100 in restitution and a $20,000 administrative penalty for committing securities fraud in connection with a failed home building venture and for issuing unregistered securities to finance start – up costs of a marketing training website.

Regarding the home building venture, the Commission found that, while not registered to offer or sell securities in Arizona, Nuttall and his affiliated companies, Todd Robert Homes and Magdalena Homes fraudulently sold unregistered promissory notes to eight investors through a series of workshops held in Arizona and California. The Commission found that Nuttall and his companies issued promissory notes bearing interest of 20 percent over two years . The Commission found that Nuttall and his companies represented a second general partner of Magdalena Homes as an experienced property developer of several multimillion – dollar real estate projects when, in fact, the sole general partner had never created a residential development on his own.

Regarding the marketing training website, the Commission found that, while doing business as Direct Rev Millionaire, Nuttall and Rotall Marketing Group, LLC sold unregistered promissory notes to 11 Arizona investors and other out – of – state investors . The Commission found that Nuttall and his companies promised investors annual returns ranging from 20 to 900 percent.

In settling this matter, Nuttall neither admitted nor denied the Commission’s findings , but agreed to the entry of the consent order. For more details about this case, view the full text of the Commission’s order S-20901A-13-0432. The Commission’s final order against the named respondents will be posted online as soon as it is signed by all of the Commissioners.

Do Arizona LLCs File Annual Reports with the State?

Question:  Does Arizona LLC law require that an Arizona limited liability company file an annual report with the Arizona Corporation Commission?

Answer:  No.  One of the benefits of an Arizona LLC is that it does not have to file an annual report with the Arizona Corporation Commission or pay an annual fee to exist.  Most if not all other states require LLCs to file and annual report and pay a fee.  California is the worst.  It requires LLC’s to not only file an annual report, but pay an annual gross receipts tax of a minimum of $800.

Unfortunately Arizona corporate law requires Arizona corporations to file an annual report and pay a $45 fee (for profit corporations) or a $10 fee (nonprofit corporations).  Every year approximately ten percent of Arizona’s existing for corporations fail to file their annual report and are terminated by the Arizona Corporation Commission.  This is one of the reasons the Arizona LLC is a better choice of entity than an Arizona corporation.

Corporate Annual Report Reminders:  Although the ACC no longer mails annual report forms to corporations it does provide an annual email reminder, but you must subscribe on the ACC’s website to get the reminder.  If you have an Arizona corporation and you want to get a reminder every year from the ACC that the corporation’s annual report is due go to your entity’s record and then click on the “Subscribe to Annual Report Email Reminder” button and follow instructions.

2018-05-31T16:54:14-07:00March 2nd, 2014|AZ Corporation Commission, FAQs|0 Comments

When Do I Change the Address of My LLC with the Arizona Corporation Commission?

Question:  After I filed the Articles of Organization for my Arizona LLC my LLC moved its place of business.  Should I notify the Arizona Corporation Commission about the address change?

Answer:  Yes.  Arizona LLC law requires that whenever an Arizona LLC changes it address the LLC must notify the ACC of its new address within thirty days of the change.

To change the address of your LLC with the ACC complete the Arizona Corporation Commission’s Statement of Change of Known Place of Business Address or Statutory Agent.  Print the change of address form and send to the Arizona Corporation Commission at Arizona Corporation Commission – Corporate Filings Section, 1300 W. Washington St., Phoenix, Arizona 85007, with a check for $5 or $40 if you want expedited review by the ACC.

2019-07-04T10:41:46-07:00February 24th, 2014|AZ Corporation Commission, FAQs, How Do I|0 Comments

Arizona Corporation Commission Takes Action Against Man Who Sold Fake Shares of Company Stock

The following is the text of a news release dated January 14, 2014, by the Arizona Corporation Commission:

The Arizona Corporation Commission today sanctioned a former securities salesman who committed securities fraud by offering and selling fake stock shares to investor s. In a separate case, the Commission denied an investment adviser representative license to a former securities salesman who provided incomplete, inaccurate and misleading information on his application.

James F. Liebes

The Commission ordered former securities salesman-dealer James F. Liebes of Paradise Valley and his affiliated company, Lanesborough Financial Group, LLC, to pay $684,725 in restitution and a $75,000 administrative penalty for committing securities fraud. The Commission found that Liebes and Lanesborough Financial Group’s representation of owning restricted shares in a publicly traded company and options to purchase shares was false as the company had no records indicating Liebes owned the common stock that he had agreed to sell. The Commission found that Liebes and Lanesborough Financial Group were not registered to offer or sell securities in Arizona when they entered into agreements to sell investor s the company shares. Further, the Commission found that Liebes and Lanesborough Financial Group failed to disclose to investors that the Commission’s Securities Division had already filed a case against them for offering and selling securities without being registered. For more details about this case, view the full text of the Commission’s order S-20876A-13-0407 .

Jon Joseph Bauman

In a separate matter, the Commission denied an investment adviser representative license for Phoenix resident and former securities salesman, Jon Joseph Bauman. The Commission denied the license since Bauman’s application contained incomplete, inaccurate and misleading information. Additionally, the Commission found that Bauman had been barred from association with any member in any capacity of the Financial Industry Regulatory Authority (FINRA) for failing to provide information requested by FINRA. For more details about this case, view the full text of the Commission’s order S-20895A-13-0377 . The Commission’s final order against the named respondents will be posted online as soon as it is signed by all of the Commissioners.

 

Arizona Corporation Commission Orders Crackdown on Securities Sales by Infomercial Company

The following is the text of a news release dated September 10, 2013, by the Arizona Corporation Commission:

The Arizona Corporation Commission ordered Stephen Christopher Donovan of Phoenix and his infomercial company, TV Products, LLC, to pay $153,000 in restitution and a $20,000 administrative penalty for committing securities fraud in connection with sales of securities in the company. The Commission found that while not registered to offer or sell securities in Arizona, Donovan, TV Products, LLC and another company employee conducted a nationwide cold – calling campaign to solicit prospective individuals for investment funds. The Commission found that through a private placement memorandum, Donovan and his comp any made material omissions and misrepresentations to 13 individuals located across the U.S. who purchased membership interests in TV Products, LLC.

Specifically, the Commission found that Donovan and TV Products, LLC misled potential investors by promising that the offering had not been disapproved by any state securities commission and was not in violation of any order of any such governmental entity or state statute, rule or regulation, when, in fact, legal action was taken against them by the state of Pennsylvania’s securities regulator.

To date, Donovan and his company have not made any distributions, refunded investment principal or otherwise transferred any money to investors. In settling this matter, Donovan and his affiliated company neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order. The Commission’s final order against the named respondents will be posted online as soon as it is signed by all of the Commissioners.

Arizona Corporation Commission Takes Action Against Gold Processing Venture

The following is the text of a news release dated August 13, 2013, by the Arizona Corporation Commission:

“The Arizona Corporation Commission today sanctioned the promoters of a private placement investment in a gold processing operation that defrauded investors out of more than $1.14 million. The Commission cautions investors about promoters who offer and sell risky private placement offerings that are not always suitable for the typical investor.

The Commission ordered Charles L. Robertson of Texas and his two affiliated companies —Arizona Gold Processing, LLC and AZGO, LLC—to pay $1,142,275 in restitution and a $100,000 administrative penalty for committing securities fraud in connection with their private placement offering. The Commission found that,through a private placement memorandum, Robertson and his two affiliated companies made material omissions and multiple misrepresentations to 63 investors who purchased membership interests in Arizona Gold Processing and AZGO.

The Commission found that Robertson, who was one of the principals of Arizona Gold Processing and one of the managing members of AZGO, either contacted or directed others to contact potential investors through nationwide telephone calls and emails. The Commission found that Robertson claimed his companies’ high-tech processing equipment could extract gold and silver ore at microscopic levels beyond what other equipment could extract. The Commission found, however, that there would be no increase in the amount of precious metals extracted with the equipment touted by Robertson and his companies, assuming the assays were performed by reputable labs.  Further, the Commission found that Robertson and his companies failed to inform potential investors about the temporary cease and desist order issued by the Commission’s Securities Division requiring the respondents to stop committing securities fraud in connection with their private placement offering.

In settling this matter, Robertson and his affiliated companies neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order. The Commission’s final order against the named respondents will be posted online as soon as it is signed by all of the Commissioners. To access the full text of the Commission’s order S-20846A-12-0135, please check the website in a few days: http://www.azcc.gov/divisions/securities/enforcement/enforce.”

Is Publication in a Newspaper Optional for a New Arizona LLC?

Question:  How important is it to publish a Notice of Publication for your Arizona LLC after it is formed?

Answer:  If newspaper publication is required the failure to publish timely could cause a court to deny the existence of the LLC, which could cause the members to become liable for its debts and liabilities.

Arizona LLC law requires that a notice of publication for the new Arizona LLC to be published in an Arizona Corporation Commission approved newspaper within 60 days after the ACC approves the filing if the company’s statutory agent is not located in Maricopa or Pima County.  Arizona Revised Statutes Section 29-3201.G states:

“Within sixty days after the Commission files the Articles of  Organization, either of the following must occur:

1. a notice of the filing of the Articles shall be published in a newspaper of general circulation in the county of the statutory agent’s street address for three consecutive publications containing the information required in subsection B of this Section. an affidavit evidencing the publication may be filed with the Commission.

2. the Commission shall input the information regarding the approval into the database as prescribed by Section 10-130 if the statutory agent’s street address is in a county with a population of more than eight hundred thousand persons.”

Because Section 29-3201.G.1 uses the word “shall” I interpret Arizona LLC law to say that publication within the required period is a requirement to the valid formation of the Arizona LLC whose statutory agent is not located in Maricopa or Pima county.  An LLC that fails to publish within the required period opens itself up to a challenge by a creditor in court that the LLC was not formed as required by Arizona LLC law and therefor does not exist.  If the court agreed with that argument then all of the members of the LLC would potentially be liable for the LLC’s debts and obligations.

Bottom Line:  Publication is not an option when the company’s statutory agent is not located in Maricopa or Pima county.  Every new Arizona LLC that does not have a statutory agent located in Maricopa or Pima county should always publish in an approved newspaper in the appropriate county within 60 days of the Arizona Corporation Commission approving the submitted Articles of Organization AND it should deliver an affidavit of publication to the ACC so it can put proof of publication online for the world to see.

 

Don’t File a False Document with the Arizona Corporation Commission

A client called and said his banker refused to open a bank account because the Articles of Organization filed with the Arizona Corporation Commission does not list the name of a person who owns 10% of the LLC.  The banker insisted that my client file an amendment to the Articles of Organization that names the 10% owner as a member.  Here is the text of an email message I sent to my client about the bank’s unreasonable and ignorant request:

I understand that your bank wants you to commit a felony and file a false document with the Arizona Corporation Commission that misrepresents the ownership of your LLC. Specifically your bank wants the Articles of Organization of <name omitted>, LLC, to show that Homer and Marge Simpson are members of the LLC despite the fact they together own only 10% of the company.

Arizona Revised Statutes Section 29-3502.D states: ‘A person that signs a record, or causes another to sign it on the person’s behalf, knowing that the record contains inaccurate information at the time it is signed, is liable to the limited liability company and to each member of the company for damages resulting from the inaccurate information.

ARS Section 13-2702 states: “A person commits perjury by making either: 1. A false sworn statement in regard to a material issue, believing it to be false. 2. A false unsworn declaration, certificate, verification or statement in regard to a material issue that the person subscribes as true under penalty of perjury, believing it to be false.  Perjury is a class 4 felony.

Your LLC is manager managed therefore Arizona LLC law prohibits naming anybody as a member of the LLC unless the member owns 20% or more of the LLC. I understand that your banker wants you to file a false document with the Arizona Corporation Commission that names Homer and Marge Simpson as members of the LLC. You should not do that because it is a felony to file a document with the Arizona Corporation Commission that you know contains a misrepresentation of the facts.

Because of this law knowledgeable bankers and others always ask to see the Operating Agreement of a manager managed Arizona LLC because an Operating Agreement signed by all of the members is the only way to verify all of the owners of a manager managed Arizona LLC and their percentage ownership of the LLC.

Bottom Line:  Do not file documents with the Arizona Corporation Commission that contain false statements.

Arizona Corporation Commission Takes Action Against Sellers of Unregistered Securities

Commission Fines Fountain Hills Company for Unregistered Investment Sales, Sanctions Others for Securities Fraud and Revokes Registration of Fountain Hills Broker

The Arizona Corporation Commission today fined a Fountain Hills limited liability company for its unregistered investment sales in connection with a residential real estate development. Also, the Commissioners sanctioned multiple individuals and their affiliate d companies for committing securities fraud and revoked a Fountain Hills stockbroker’s registration for making unsuitable investments with a couple’s retirement funds.

Promise Land Properties, LLC. The Commission issued a default order against Promise Land Properties, LLC, requiring the payment of $958,000 in restitution and a $25,000 administrative penalty for offering and selling unregistered securities in connection with a residential real estate development. The Commission found that Promise Land Properties—a manager-controlled, Arizona limited liability company based in Fountain Hills—w as not registered to offer or sell securities in Arizona when it offered and sold LLC membership interests to six investors in order to fund the acquisition and development of 1,280 acres near Tombstone, Arizona. The Commission found that the Promise Land Properties’ manager met potential investors through a network of acquaintances, including individuals from Arizona, Nebraska and Minnesota. Additionally, the Commission found that an institutional lender eventually foreclosed on the Tombstone real estate development project.

Patrick B. Hammons, et al. In a separate case, the Commission ordered Patrick B. Hammons of Mesa and his affiliated companies to pay $174,000 in restitution and a $20,000 administrative penalty for committing securities fraud and transacting business as an investment adviser without a license. The Commission found that Hammons and the company he managed, Pacific Ventures & Trading, LLC, fraudulently offered and sold unregistered LLC membership interests to investors. The Commission found that Hammons failed to use investor funds as promised and to disclose aspects of the payments made by Pacific Ventures & Trading to another company Hammons managed, TF6 Advisors, LLC. The Commission found that Hammons and TF6 Advisors violated the Arizona Investment Management Act by providing investment advice for a fee without being licensed. Additionally, the Commission found that Hammons and TF6 Advisors committed fraud in connection with their investment advisory services by failing to do the following: use investor money as promised, follow required auditing procedures while having control over client funds, act in the best interests of their client, accurately disclose the compensation structure of TF6 Advisors, and by misrepresenting the market value of the assets of TF6 Advisors. In settling this matter, Hammons and his companies neither confirmed nor denied the Commission’s findings, but agreed to the entry of the consent order.

Morrie S. Friedman, et al. In another matter, the Commission ordered Morrie S. Friedman of Scottsdale to pay $79,625 in restitution and a $5,000 administrative penalty for fraudulently offering and selling unregistered stock shares to investors. The Commission found that, while not registered to offer or sell securities in Arizona, Friedman offered and sold unregistered stock in connection with two companies, Beyond Juice, Inc. and VIP* ComLink, Inc. The Commission found that Friedman told the Beyond Juice investors that the company stock would soon be going public, resulting in an increase in stock value, but had no factual basis for the prediction. To date, Beyond Juice has yet to become a publicly traded company. Also, the Commission found that Friedman failed to provide stock certificates to a VIP* ComLink investor and to disclose the prior legal actions taken against him in regards to Beyond Juice. In settling this matter, Friedman neither confirmed nor denied the Commission’s findings, but agreed to the entry of the consent order.

Donna Kay Beers Finally, the Commission revoked the securities registration of Fountain Hills resident Donna Kay Beers for her dishonest and unethical conduct, requiring the payment of $86,815 in restitution and a $15,000 administrative penalty. The Commission found that Beers, who was also a former investment adviser representative, recommended unsuitable investments for a senior couple who was searching for a safe and prudent way to invest their retirement funds. The Commission found that Beers recommended the couple sell their well-known stock holdings such as Wal-Mart and Costco and invest the proceeds plus additional cash into multiple private placement investments and direct participation programs, which were risky and illiquid. The Commission found that one of the investments, Fountain Hills Town Square, LLC, involve d a 12.67 acre real estate development in which Beers had an undisclosed financial interest. The Commission found that, despite knowing the real estate project had difficulty obtaining financing, Beers touted the investment as good and safe and pressured her clients to invest. In settling this matter, Beers neither confirmed nor denied the Commission’s findings, but agreed to the entry of the consent order.

More caution for investors: Even when selling a legitimate product, some promoters do not recognize the investment program they have created is a security. Determining whether an alternative investment program is a security is not always easy to determine and depends upon the unique facts and circumstances of the transaction and not on what a promoter calls the investment product. Even when investing with someone they know, investors should verify the registration of sellers and investment opportunities and investigate disciplinary histories by contacting the Arizona Corporation Commission’s Securities Division at 602-542-4242 or toll free in Arizona at 1-866-VERIFY-9. The Division’s investor education website also has helpful information at www.azinvestor.gov .

Arizona Corporation Commission Enforcement Actions

The Arizona Corporation Commissioners voted to require three individuals and their affiliated companies to stop offering and selling unregistered securities and to pay penalties. The Commission entered into two consent orders, one involving a Mesa man who sold unregistered stock and promissory notes issued by his start-up, air ambulance service company, the other involving a Peoria man who fraudulently sold membership interests in an oil and gas venture. The third order involved a Gilbert man who defrauded investors with an options and foreign currency trading investment scam.

Thomas F. Kelley and International Air Medical Services, Inc. The Commission ordered Thomas F. Kelley of Mesa and his Scottsdale start-up company to pay $1,406,300 in restitution and a $50,000 administrative penalty for offering and selling an unregistered investment program involving a long-range, jet-air ambulance business. The Commission found that, while not registered to offer or sell securities, respondents Kelley and International Air Medical Services, Inc. (International Air) offered and sold stock and promissory notes to at least 14 investors. The Commission found that the majority of investors who were issued promissory notes have not been paid as required under the terms of their notes, and some investors who purchased stock were not issued stock certificates or the issuance of the stock certificates was significantly delayed. Additionally, the Commission found that the respondents failed to provide stockholders the voting rights to which they were entitled under International Air’s bylaws. Further, the Commission found that Kelley, as well as one other International Air officer, used investor funds for their own personal expenses, despite the fact that the board of directors had not approved compensation or salaries for International Air’s officers. In settling this matter, Kelley and International Air neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order.

Christopher D. Dedmon and SDC Montana Consulting, LLC. The Commission sanctioned Peoria resident Christopher D. Dedmon and his affiliated company, SDC Montana Consulting, LLC, with a $25,000 administrative penalty for fraudulently offering and selling membership interests in an oil and gas venture. The Commission found that, while not registered to offer or sell securities, Dedmon and SDC raised $547,500 from 13 investors, most of whom lived in Arizona. The Commission found that Dedmon and his company failed to disclose to investors a 2005 Commission consent order that prohibited Dedmon and SDC from selling securities or exercising control over an entity that sells securities. To date, each membership interest investor has received distributions from SDC that exceed the investor’s original investment. In settling this matter, Dedmon neither admitted nor denied the Commission’ s findings, but agreed to the entry of the consent order and has paid the administrative penalty in full to the state of Arizona.

Tyrone L. Brooks and 3T Options, LLC.  The Commission issued a default order against a Gilbert man and his affiliated company who defrauded investors with an options and foreign currency trading investment scam. The Commission ordered Tyrone L. Brooks and 3T Options, LLC to pay $95,013 in restitution and a $25,000 administrative penalty. The Commission found that, while not licensed to provide investment advice, Brooks and his company pooled together the funds of at least eight investors from Arizona, California and Nevada, promising certain clients a guaranteed monthly return of at least six percent. The Commission found that Brooks used only a small percentage of his client’s funds to conduct options and foreign currency trading, depositing most of the money into his personal bank account. Moreover, the Commission found that Brooks issued account statements to investors that reflected fictitious value

 

Arizona Corporation Commision Enforcement Actions

The Arizona Corporation Commission sanctioned multiple individuals and their affiliated companies whose unregistered investment programs caused investors to lose over $7.8 million. The Commission also revoked the securities registration of a Lake Havasu securities salesman who borrowed money from his brokerage clients, ordering him to pay restitution and penalties for his dishonest and unethical conduct. In total, the Commission ordered over $7.8 in restitution and $291,500 in administrative penalties.

John M. McNeil, Peter Pocklington, and Crystal Pistol Resources, LLC, et al. The Commission ordered former Scottsdale resident John M. McNeil, California resident Peter Pocklington and their affiliated companies to pay $5,149,316 in restitution and a $100,000 administrative penalty for committing securities fraud in connection with a gold mining venture. The Commission found that, while not registered as securities salesmen or dealers in Arizona, respondents McNeil, Pocklington and their affiliated companies—Crystal Pistol Resources, LLC, Crystal Pistol Management, LLC, and Liberty Bell Resources I, LLC—told at least 120 investors that they had obtained mineral rights to a placer mine outside of Quartzite, Arizona, and would begin mining and processing gold on the site within a short period of time. The Commission found that the respondents obtained at least some investors by making unsolicited telephone calls to them and that some investors were taken to the mine site, which was located on U.S. Bureau of Land Management land. Additionally, the Commission found that Crystal Pistol prepared newsletters in which it claimed to be offering one of the most lucrative dividend plans in the mining business and that hedge funds and banks were interested in the project. The Commission found, however, that the estimates of gold resources on the respondents’ website were not supportable with the methods currently available in the industry. In settling this matter, the respondents neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order.

Casimer Polanchek.In a separate case, the Commission issued a default order against Casimer Polanchek of Chandler, ordering him to pay $2,558,832 in restitution and a $175,000 administrative penalty for defrauding investors with a promissory note scheme. The Commission found that Polanchek was the manager of Pangaea Investment Group, LLC, which was doing business as Arizona Investment Center. The Commission found that Polanchek was not registered as a securities salesman in Arizona when he fraudulently offered and sold promissory notes issued by Tri-Core Companies, LLC and C&D Construction Services, Inc. The Commission also found that Polanchek was jointly and severally liable as the control person of Pangaea for the promissory notes Pangaea fraudulently offered and sold issued by ERC Compactors, LLC and Tri-Core Companies, LLC. The Commission found that on multiple occasions Polanchek participated as a host or presenter on an Arizona radio program called “The Investment Roadshow,” offering alternative investment opportunities and urging prospective investors to attend seminars and webinars about the alternative investments. The Commission found that, among the multiple, material omissions and misrepresentations made to investors, Polanchek or his company represented the alternative investments as being secured by property or equipment, but failed to provide any collateral or other mechanism to securitize the promissory notes.

Lynn R. Goldney. In another matter, the Commission revoked the securities registration of Lake Havasu resident Lynn R. Goldney for borrowing money from his brokerage clients, ordering him to pay $98,8 35 in restitution and a $10,000 administrative penalty. The Commission found that Goldney obtained 45 distinct loans from 26 of his customers, none of whom were family members or persons in the business of lending money to the public. Further, the Commission found that Goldney’s activity constitutes dis honest conduct or unethical practices in the securities industry. In settling this matter, Goldney agreed to the entry of the consent order and admitted to the Commission’s findings only for purposes of the administrative proceeding.

Robert R. Cottrell and RSC Adventures, LLC. A separate matter involved former Peoria resident Robert R. Cottrell and his affiliated company who agreed to pay a $6,500 administrative penalty for offering and selling unregistered limited liability memberships in an oil and gas exploration and development company. The Commission found that Cottrell and his Arizona-based company, RSC Adventures, LLC, were not registered to offer or sell securities in Arizona when they sold to five investors—most of whom lived in Arizona—unregistered membership interests in SDC Montana Consulting, LLC, an Arizona-based oil and gas exploration and development company, which also procured the sale of oil, gas and mineral rights. In settling this matter, Cottrell neither ad mitted nor denied the Commission’s findings, but agreed to the entry of the consent order.

ACC Goes After Radical Bunny Managers

The Arizona Corporation Commission entered an order that requires the prior managers of Radical Bunny, LLC and Horizon Partners, LLC to pay more than $189.8 million in restitution for committing securities fraud in connection with two unregistered deed of trust investment programs. In other cases, the Commission fined a Tucson man and his affiliated company for securities fraud and halted an unregistered real estate program totaling over $1.9 million.

Radical Bunny, LLC and Horizon Partners, LLC. The Commission ordered respondents Tom Hirsch, Harish Shah, Howard Walder and Berta “Bunny” Walder, the former managers of Radical Bunny LLC, and Horizon Partners, LLC, an affiliated entity, to pay $189.8 million in restitution and a total of $4.65 million in administrative penalties for defrauding investors. The Commission found that, while not registered as securities salesmen or dealers, Horizon Partners LLC, Hirsch, Shah, and the Walders raised funds from approximately 900 investors across the U.S. and in four foreign countries. Investors were told that their money would be used by Radical Bunny LLC to purchase fractionalized interests in promissory notes secured by real estate deeds of trust. The Commission found, however, that respondents Bunny pooled investor funds to make unsecured loans to Mortgages Ltd., a Phoenix-based originator of high-interest, short-term loans to real estate developers. Additionally, the Commission found that the respondents continued to raise investor funds despite being advised by lawyers that they had or were engaged in unregistered securities offerings in violation of Arizona securities laws. “The securities statutes were flagrantly, and repeatedly, violated in this case, and the Commission’s actions today demonstrated zero tolerance for this sort of behavior in Arizona,” said Chairman Bob Stump. “The message should be heard loudly and clearly: If you commit securities fraud, this Commission will hold you to account.” Radical Bunny, LLC previously agreed, without admitting or denying the Commission findings, to the entry of a consent order, which order was signed by the Commission on April 28, 2010 as Decision No. 71682.

David Shorey and Westcap Energy, Inc. The Commission ordered David Shorey of Tucson and Westcap Energy, Inc, to pay a $10,000 administrative penalty and to make rescission payments available to investors who want their money returned. The Commission found that Shorey, chairman and chief executive officer of Westcap, and Westcap were not registered to offer or sell securities in Arizona when they fraudulently raised at least $388,495 from 24 investors. The Commission found that Shorey and Westcap failed to disclose in to investors commissions of up to 70%, paid to those salespeople who sold Westcap stock. Parker Skylar and Associates, LLC The Commission issued a default order against Parker Skylar & Associates, LLC, requiring the payment of $1,942,000 in restitution and a $50,000 administrative penalty for its securities violations. The Commission found that, while not registered as a securities dealer, Parker Skylar fraudulently offered and sold membership interests to at least 17 investors. The Commission found that, among the multiple, material omissions and misrepresentations made to investors, Parker Skylar failed to tell investors that a lender claimed to have encumbered all of Parker Skylar ‘s property, failed to transfer all investor funds to the real estate development entity for which Parker Skylar was raising funds, and touted the acumen of Parker Skylar’s manager when, in fact, several of the manager’s creditors had sued him

Arizona Corporation Commission Shuts Down LLCs for Violating Securities Laws

The Arizona Corporation Commission shut down two unregistered investment programs—one involving gold mining and the other concerning bonds.  In total, the Commission ordered the respondents to pay $641,016 in restitution and $60,000 in administrative penalties.

Brian Langebach and Earth Explorations, LLC

The Commission issued a default order against Brian Langebach of Mesa and his affiliated company, Earth Explorations, LLC, requiring them to pay $322,000 in restitution and $50,000 in administrative penalties for fraudulently offering and selling an unregistered gold mining investment program.  The Commission found that Langebach and his affiliated company—while not registered as a securities salesman or dealer—offered and sold the unregistered gold mining investment program to 23 investors in Arizona, Ohio and Utah.  The Commission found that Langebach and his company misrepresented multiple facts, including claiming that he owned and operated a mine with one of the largest gold reserves in the U.S. and that he could extract gold from the rock material or aggregate material on a cost-effective or economically viable basis by placer mining.

Marvin Wilson and True North Business Ventures, LLC

The Commission ordered Marvin Wilson of Phoenix and his Scottsdale-based company, True North Business Ventures, LLC, to pay $319,016 in restitution and $10,000 in administrative penalties for fraudulently offering and selling an unregistered bond investment program.  The Commission found that, while not registered as a securities salesman or dealer, Wilson and True North issued unregistered bonds to six investors.  The Commission found that Wilson, who was the president and chief executive officer of True North, failed to disclose to investors that his company’s sales were rapidly declining and the business was on the verge of closing.  In settling this matter, Wilson neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order.

Corporation Commission Warns Business Owners of False Solicitation

The Arizona Corporation Commission is warning Arizona business owners that an individual or group calling themselves “Corporate Records Service” is sending out official-looking documents advertising a service of preparing filings for corporations. This solicitation, requesting payment of a $125 fee, is not a Corporation Commission document and this organization is not in any way affiliated with the Arizona Corporation Commission.  The Corporation Commission does not require business owners and their representatives to file with “Corporate Records Service,” nor does it require the $125 fee referred to in the document.

The documents look very similar to Corporation Commission filing documents and the private firm making the solicitation intentionally creates confusion by using language that is similar to that in Corporation Commission documents.  The forms carry an official-looking time deadline for filing and include the Arizona Corporation Commission file number assigned to the business.  Further, a search of the “Corporate Records Service” return address places it as a mailbox at a UPS Store in the Ahwatukee Foothills Towne Center.

If you have received this document, please contact the Arizona Attorney General’s Office in Phoenix at (602) 542-5763, in Tucson at (520) 628-6504, or outside the Phoenix and Tucson metro areas at 1 (800) 352-8431.  To file a complaint online, please visit the Attorney General’s web site at www.azag.gov.  To file a complaint in person, the Attorney General’s Office has 37 satellite offices throughout Arizona with volunteers available to help.  Locations and hours are posted on the Attorney General’s web site.

2016-11-16T08:23:45-07:00February 10th, 2013|AZ Corporation Commission|0 Comments

Arizona Corporation Commission Halts Unregistered Securities Sales

The Arizona Corporation Commission sanctioned multiple individuals and their affiliated companies for offering and selling unregistered investment programs concerning wind energy development and gold mining. The Commission ordered more than $16. 3 million in restitution and $130,000 in administrative penalties.

The Commission ordered Arizona residents Edward L. Mazur and Ronnie Williams to pay a total of $16,347,279 in restitution and $125,000 in administrative penalties for fraudulently promoting an unregistered investment program involving the development of wind energy. The Commission found that, while not registered to offer or sell securities, Mazur and Williams offered and sold to over 300 investors throughout the U.S. interests in a proposed wind energy development project. The Commission found, however, that Mazur and Williams failed to disclose that almost half of the investor funds raised would pay for sales commissions and not for the development of the wind turbine technology or energy development projects described in the private placement memoranda. In settling this matter, Mazur and Williams neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order.

In a separate case, the Commission ordered Larry Goldman of Tucson and his affiliated company, MT Explorations, LLC to pay a $5,000 administrative penalty for promoting an unregistered gold mining investment program. The Commission found that, while not registered as a securities salesman or securities dealer, Goldman and his affiliated company raised $322,0 00 from at least 25 investors who were located in Arizona, Ohio and Utah. The Commission found that Goldman subsequently forwarded investor monies to an individual who represented that he owned and operated various gold mines throughout the United States, including Congress, Arizona and Helena, Montana. In settling this matter, Goldman neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order.

Arizona LLCs No Longer Can Use a PO Box as a Place of Business

The Arizona Corporation Commission will no longer allow a new Arizona limited liability company to use a Post Office box for the LLC’s known place of business in Arizona.  Arizona Revised Statute Section 29-604.A states:

“A limited liability company shall appoint and continuously maintain in this state . . . A known place of business that may be the address of its statutory agent.”

Arizona Revised Statutes Section 29-632.A states:

“The articles of organization shall state . . . . The address of the company’s known place of business in this state, if different from the street address of the company’s statutory agent.”

Despite the fact neither statute contains any reference to, much less a prohibition against the LLC from using a P.O box as the LLC’s known place of business, the ACC will no longer accept Articles of Organization that shown that the company’s only place of business address is a PO box.

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