A sweeping crackdown on investment fraud and bloated boiler room commissions was launched Tuesday by the Securities and Exchange Commission.
The SEC filed four lawsuits, accusing 81 defendants of selling unregistered securities and paying exorbitant commissions to telemarkers. Together, the defendants raised $30 million in five years, according to the SEC.
One suit accused three companies–Heritage Film Group, Little Giant LLC and Out of the Black Partners LLC–of raising $13.1 million. The firms, which purported to develop motion pictures, retained independent sales offices (ISOs) to market their unregistered securities by phone, according to the SEC.
Investors were promised that the brokers would receive commissions of only 10% to 20%, but the actual commissions went as high as 55%, the SEC continued. The suit also lists 48 other people and entities.
Another suit was filed against Ephone Inc. and related companies, which said they were formed to provide long-distance telephone service through the Internet.
The securities were offered to investors by a “nationwide network of boiler rooms,” according to the SEC. Of $2.9 million raised from investors, about $1.2 million–42%–was paid to defendants Donald Plain, Chris Plain, Peter Bertorelli and their ISOs.
Also sued were Intracom Corp. and several other firms that claimed they were in the business of selling software and Internet solutions to medical professionals. They raised over $13 million, paying sales commissions of 25% to 30%.
Another suit was filed against America In Line Corp. and America In Line of Mount Sinai Inc., which purportedly planned to develop a roller hickey rink in Mount Sinai. These firms generated $650,000. Roughly 30% went to unlicensed brokers, although the firm promised it would pay only 8% in sales commissions.
The investors were “deceived into believing that their money would go to the development of various business enterprises when, in fact, a quarter to a half of each investor’s funds went to enrich telemarketers,” said Wayne M. Carlin, regional Director of the SEC
Network
