Among recent enforcement actions were SEC charges against a husband and wife who defrauded seniors who thought they were investing in a charity and the sentencing of an insider trading informant who managed to avoid prison time for his cooperation.
Husband and Wife Charged in Charity Investment Fraud Against Seniors
Richard Olive and Susan Olive, a husband and wife who raised millions of dollars selling investments for a purported charitable organization in Tallahassee, Fla., were charged by the SEC with defrauding senior citizens and significantly exaggerating the amount of contributions actually made to charity.
The Olives, according to the SEC’s complaint, were hired by We The People Inc., and subsequently raised $75 million from more than 400 naïve and elderly investors in Florida, Colorado and Texas, among more than 30 states across the country. They conned the investors into transferring assets to We The People and in exchange sold an investment product they described as a charitable gift annuity (CGA).
We The People claimed from June 2008 to April 2012 to be operating as a nonprofit. Far from it—We The People’s main purpose was to issue the CGAs and use the proceeds to pay the Olives, as well as third-party promoters and consultants. The Olives raked in more than $1.1 million in salary and commissions, in addition to investor funds that they managed to divert for their personal use.
We The People’s CGAs were far from legitimate. Not only was their main purpose to benefit the Olives and others, but only a small amount of the funds raised actually went to any charitable purpose. As an example, according to the organization’s public statements, it donated $21.8 million for the relief of AIDS orphans in Zambia. The truth was that the supplies for Zambia were donated by others, and We The People only donated a little cash to the third party that shipped the supplies.
We The People’s marketing materials were full of misrepresentations and omissions, and claimed the CGAs were worth the “full” accumulated value of the assets transferred by investors when they were not. The way We the People calculated the CGAs’ value always came in substantially lower than full value, because the organization skimmed off a large percentage of the value and kept it as a “charitable gift.”
We The People also claimed to hold in trust a 110% reserve of its liabilities, and to “reinsure” its products through “highly rated” commercial insurance companies. It did no such thing; it had no restricted-access trust accounts and thus no reserves, and it never reinsured anything.