Securities enforcement cutbacks raise concerns about fraud

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Georgians from ages 20 to 71, ministers and ex-cons, financial advisers and attorneys have been accused of investment schemes in recent years.

Most people don't realize how easy it is to fall victim to investment fraud. They trust their money to a financial adviser, rely on the recommendation of their pastor, get drawn in by smooth talkers. In just the past two years alone, investment fraud nationwide has led to losses of more than $20 billion, and schemes are on the increase both in Georgia and nationwide. These are a few of the Georgia residents or companies accused of violating laws designed to protect investors. Georgia Secretary of State Brian Kemp (left) and his general counsel, Vincent Russo, have overseen efforts to rewrite securities rules. “I think the strides we’ve made in the course of the securities division have been relatively remarkable...” Kemp said. To find out how Georgians may be vulnerable to investment schemes, read Sunday’s Atlanta Journal-Constitution examination.

Rufus Paul Harris and two other men pumped up the stock price of their Kennesaw-based Conversion Solutions Holding Corp. with false claims and exaggerated financial statements, including a claim that the company held millions in Venezuelean bonds. Then family members sold the stock at inflated prices. Harris and co-defendants were ordered to pay $44 million in restitution. On trial for federal securities fraud counts in 2011, Harris fled and was later captured in Utah hiding in a utility closet. He was sentenced to 23 years in prison.

Gregory Bartko, an Atlanta securities attorney and registered investment adviser, took part in a scheme involving fraudulent sales of investments. It targeted members of rural Baptist churches and drew in hundreds of investors. The haul was more than $3 million. Convicted in 2010 in federal court in North Carolina on multiple fraud charges, Bartko was sentenced to 23 years in prison.

Andrew S. Mackey, a former pimp, and his common law wife Inger L. Jensen, who had a string of prostitution arrests, held themselves out as investment advisers through their A.S.M. Financial Funding Corp. They told investors that their money would be placed in confidential offshore business deals. But most of the money was used to pay make-believe profits to some early investors and to pay the couple’s personal expenses. The haul was about $12 million. After an FBI investigation, the two were convicted last July of federal wire and mail fraud charges. Jensen drew a 14-year sentence, while Mackey got 27 years. While they were ordered to pay $6.6 million in restitution, authorities say the money was spent. More than 150 people were victimized, many of them in Georgia.

On its website, Carlo Joseph Investments says that it raises $20 billion to $2 trillion with its cash partners to fund such ventures as oil business deals, commercial real estate portfolios, private jets, private banks and TV stations. "All Carlo Joseph Investments business deals and business transactions are very profitable for all cash partners that partner with Carlo Joseph Investments financially," the site says. In California newspaper ads, the company touted a 100 percent investment return. The only criminal conviction the Georgia securities division listed in 2012 resulted in a court order to pay $30,000 restitution. In 2010, Nevada and California issued cease-and-desist orders against the firm and the related Waterworks Investments for offering unregistered securities. Georgia pursued a criminal case, and in October 2012 in Fulton County, he pleaded guilty to theft by taking and violating the Georgia Uniform Securities Act. Joseph was allowed to serve his sentences on probation, and the court said probation would be suspended after restitution was paid in full to the victim.

Federal officials say Aubrey Lee Price was the mastermind of a plot to sell memberships in unregistered investment funds that purportedly would be kept in a custodial account at Goldman Sachs. After significant losses, Price and others moved the money without telling investors, including using it to buy a failing Georgia bank. To conceal his deception, Price created fictitious account statements for investors. The haul was $40 million. In 2012, the SEC sued Price and his companies. But he disappeared after sending a confession to some investors. His family later received letters saying he planned to commit suicide, but investors believe he is in hiding and the FBI has him on its most wanted list after his indictment for embezzling bank funds. After the Georgia securities division saw news accounts about the SEC allegations, in August it issued an administrative order revoking registration of Price and his Montgomery Asset Management.

In a civil action, the SEC in 2011 accused Michael L. Rothenberg, an attorney, of telling investors they could participate in a secret and supposedly risk-free trading platform involving transactions among international banks, while their funds would remain safely in his trust account. Within days of getting money, though, the agency alleges that Rothenberg began transferring money to his election campaign. At least $800,000 in investor funds were misappropriated, the SEC alleged. The SEC in 2011 accepted Rothenberg’s settlement offer suspending him from appearing or practicing before the commission as an attorney. He did not admit or deny the allegations. Rothenberg, a former judge in DeKalb County Recorder’s Court, then ran in 2012 for a DeKalb Superior Court judgeship when a DeKalb grand jury charged him with six felony counts of theft stemming from $440,000 collected by his company. Among the allegations are that he spent investor money at various restaurants, newspaper advertisements and a massage parlor. The case is pending.

Angelo A Alleca's Summit Wealth Management was accused of misleading investors about where their money was going. To cover up substantial losses, the SEC alleged, he misappropriated client money and issued false statements to clients. Investors say they lost about $17 million. The SEC filed a civil suit accusing him of fraud and in November 2012 agreed to his offer to settle the case without his admitting or denying the accusations. The settlement bars him from association with any broker, dealer or investment adviser and from participating in any penny stock offering. After the SEC action, Georgia revoked Alleca's registration.

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Most people don't realize how easy it is to fall victim to investment fraud. They trust their money to a financial adviser, rely on the recommendation of their pastor, get drawn in by smooth talkers. In just the past two years alone, investment fraud nationwide has led to losses of more than $20 billion, and schemes are on the increase both in Georgia and nationwide. These are a few of the Georgia residents or companies accused of violating laws designed to protect investors. Georgia Secretary of State Brian Kemp (left) and his general counsel, Vincent Russo, have overseen efforts to rewrite securities rules. “I think the strides we’ve made in the course of the securities division have been relatively remarkable...” Kemp said. To find out how Georgians may be vulnerable to investment schemes, read Sunday’s Atlanta Journal-Constitution examination.

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