SEC brings charges over 'free lunches'

By MARCY GORDON

posted: 34 DAYS 9 HOURS AGO

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WASHINGTON -Federal regulators on Thursday accused a real estate funds promoter and former brokerage executive with bilking mostly elderly investors of about $12 million by using "free lunch" seminars to lure them to invest.

The Securities and Exchange Commission's allegations, brought in a civil lawsuit filed in federal court in Brooklyn, New York, were announced as SEC Chairman Mary Schapiro said fraud against seniors is a key focus of the agency's enforcement efforts.

The SEC has brought nearly 70 actions against schemes targeting seniors in the past three years, Schapiro said in a speech to a conference on fraud organized by the AARP and the National Consumers League. "Many of these cases involve supposedly profitable and secure investment programs that are really nothing more than Ponzi schemes," she said.

In the suit filed Thursday, the SEC alleged that the promoter, Charles C. Slowey Jr., claimed investors would get a return of more than 50 percent on the sale of some properties. The agency also said Slowey improperly took more than $1 million of investors' funds by charging excessive management fees and getting an interest-free loan to buy his own home.

Slowey, who is representing himself in the case, said he was "in the process of executing a settlement with the SEC."

"My company failed in 2007," Slowey said in a telephone interview. He declined further comment.

The SEC also named Endeavor Partners LLC and Endeavor Capital Management Group LLC, which it said are controlled by Slowey and managed the four real estate investment funds; Smithtown, New York-based brokerage firm Advanced Planning Securities Inc. and three brokers there said to have sold the funds; and Oldham Harris Inc., a retirement advisory firm based in Kenosha, Wisconsin.

About 90 elderly investors lost money in the scheme, according to the SEC. It said Oldham Harris lured investors with invitations to free lunch or dinner "seminars" at restaurants. Slowey often joined to make sales pitches for the Endeavor real estate funds, the SEC said.

Many of the investors were elderly and with limited incomes, and few had ever invested in such privately placed securities.

"We allege that these securities professionals handed out free lunches to senior investors to win their trust and sell them risky, unregistered securities that eventually lost most of their value," Schapiro said in a statement.

The SEC and other regulators have in recent years investigated free lunch seminars, which abound in areas of the country with large populations of retirees, portrayed by promoters as educational sessions. The investigations have uncovered high-pressure sales pitches for unsuitable investments, misleading claims and fraud. Practices include the use of scare tactics to get seniors to question their current investments, claims of fantastic returns with no risk, and "ringers" in the audience who stand up and offer testimonials of how much they had earned, regulators say. They have warned seniors to be wary.

Also Thursday, the SEC announced the start of its first Web site devoted to investor education, providing detailed information and tips on investing wisely and avoiding scams. The address is http://www.investor.gov.

2009-10-22 16:47:11