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OHIO SECURITIES REGULATORS WARN OF BANKING-RELATED INVESTMENT SCHEMES

 

Ohio securities regulators are warning Ohioans to beware of “prime bank” and other banking-related investment schemes, frequently advertised on the internet.  This warning is being issued in connection with Ohio’s observance of Saving and Investing Education Month. 

 

These schemes often claim that investor money will be used to purchase and trade “prime bank” financial instruments on overseas markets.  They promise high returns – sometimes more than 100% per year – with little risk.  Unfortunately, the financial instruments and the markets on which they supposedly trade do not exist. 

 

The sellers frequently solicit investors by saying that they have special access to programs reserved for Wall Street financiers or those in London, Geneva or other financial centers. 

 

“If sometime tries to promise you a 100% annual return on any investment, don’t even think of giving them a penny!  Immediately call the Ohio Division of Securities’ Investor Protection Hotline at 800-788-1194,” said Ohio Securities Commissioner Debbie Dye Joyce.  “Ohioans need to be vigilant against this type of fraud.”

 

The Ohio Department of Commerce’s Division of Securities has taken enforcement action against several individuals and organizations who have preyed upon Ohio investors.

 

Three officials of The Infinity Group Company were convicted in U.S. District Court in Youngstown on March 15.  The company was once located in Fairport Harbor, Ohio and later moved to Claridon Township, Geauga County.  Geoffrey P. Benson and his wife Susan L. Benson of Waite Hill, Ohio and Geoffrey J. O’Connor of Painesville, Ohio were found guilty of 26 counts of mail and wire fraud, conspiracy to commit wire fraud, conspiracy to impede and impair the Internal Revenue Service, and tax evasion.  They are scheduled to be sentenced on June 12. 

 

The Infinity Group claimed that they could generate high returns by pooling investor funds and then investing them in prime bank instruments.  Approximately 80 of the investors were Ohio residents.  When the Infinity Group failed to comply with a court order for records, the Division, with the assistance of Lake and Geauga County prosecutors and law enforcement, executed search warrants on three Infinity Group addresses.  The Division first learned of the Infinity Group through its Internet Monitoring Program.  Under this program, the Division searches the internet for offerings available to Ohioans to ensure compliance with Ohio’s securities laws. 

 

On Friday, the Division issued a notice order against Great Start Limited of Dayton, Richard P. Dresner of Worthington, Andrew F. Davis of Kettering, and Hubert W. Patterson of Columbus.  The Division alleges that they had sold $210,000 in investment contracts to six Ohio investors.  Great Start claimed that investors would share in profits earned from investments in high yield, private placements or bank financial instruments.  Patterson represented that the investors would receive a return of the initial contract within 60 days along with 100% interest per month for the next 10 months.  Patterson also claimed that the contracts were based on a United Nations concept to quickly loan sums of money to third world countries that had suffered large disasters.  The Division alleges that the securities were unregistered and that Patterson sold securities without an Ohio license and that he knowingly made false representations. 

 

“This investment contains classic pitches used to lure investors:  an amazing return on the investment and a humanitarian cause,” Dye Joyce said.

 

Less than two weeks ago, the Division issued a notice order on March 28 against Tri-West Investment Club, which lists business addresses in San Diego, Nassau, Bahamas, and Belize City, Belize.  The Division alleges that Tri-West solicits investments in a “bank debenture trading program.”  The company seeks investments of at least $1,000 and advertises on its web site that investors will receive 10% per month at no risk.  The Division is alleging that the company is selling unregistered securities and knowingly engaging in fraud through failure to disclose material facts.

 

James S. Powell of Cincinnati accepted a plea agreement in Hamilton County Common Pleas Court in January, 2000 for selling unregistered securities.  His 3 1/2 year sentence was suspended and he was ordered to pay $315,000 in restitution and placed on probation for five years.  He can be imprisoned if he does not meet his repayment schedule.  Powell fraudulently offered and sold $630,000 in unregistered securities to Ohio investors in a bogus short-term, high-yield international trading program that purported to utilize world wide financial institutions.  Prior to the criminal action, the Division of Securities issued a cease and desist order in 1998 against Powell, Powell Financial Group, and Powell Financial Group Limited Partnership.  Powell had represented to investors in writing that they would receive 30% per month “at no risk.” 

 

In a related issue, the Division issued a cease and desist order in 1999 against Lennox Investment Group, Ltd., James F. Wardell of Bedford, Texas and Randall W. Law, and Monica M. Illes and Standard Capital Group, all of Cincinnati.   They sold securities in an alleged short-term, high-yield international trading program that purported to utilize international financial institutions.  Approximately $11.1 million was lost nationwide by investors in this prime bank scheme. 

 

 “I would like to remind Ohioans that every investment involves risk.  There is no such thing as a guaranteed return on an investment,” Commissioner Dye Joyce said. 

 

She encourages Ohioans to visit the Division’s web site to review a page titled “On-line Securities Offerings That Ohio Residents Should Avoid.”  It lists eight companies, including The Infinity Group Company, who were offering securities to Ohioans over the internet without complying with Ohio securities laws.  The web address for this warning is www.securities.state.oh.us/PressRelease/Avoid.html

 

In addition, the Division has a new publication titled “10 Tips for Online Investors.”  It explains how an online securities transaction is conducted and how investors can protect themselves in the process.  The web address for these tips is www.securities.state.oh.us/Information/10_Tips_Final.pdf or it can be requested by calling 800-788-1194. 

 

Note to editors:  The Ohio Department of Commerce is issuing news releases every Monday during April to address specific saving and investing topics.  If this schedule does not meet your needs, please contact us. 

 

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