The Securities and Exchange Commission filed an emergency action and on Tuesday obtained a temporary restraining order and an asset freeze to stop a husband-and-wife team who, the regulator says, bilked about 1,200 investors out of nearly $500 million as part of an alleged fraudulent scheme, the SEC said Friday.
In a complaint filed July 24 in the U.S. District Court for the Southern District of Florida and unsealed Friday, the SEC claimed spouses Lisa McElhone and Joseph W. LaForte orchestrated a scheme to raise investor funds via unregistered securities offerings for Complete Business Solutions Group, the cash advance company they control that conducts business as Par Funding.
The spouses and their firm were named as defendants in the suit, along with several alleged accomplices.
From 1995 until 2000, LaForte worked for various securities broker-dealers and obtained Series 7 and Series 63 securities licenses in 1996 and a Series 24 securities license in 1997, according to the SEC. However, those licenses have expired, it noted in the complaint.
Among the other defendants named in the suit were two other former brokers: Perry S. Abbonizio, who worked for firms including Morgan Stanley, Wells Fargo and Oppenheimer & Co., according to the Financial Industry Regulatory Authority’s BrokerCheck website; and Dean J. Vagnozzi, who was suspended by the SEC, according to BrokerCheck.
Attorneys at the law firms that court documents show are representing LaForte, McElhone, Abbonizio and Vagnozzi did not immediately respond to requests for comment on Monday. Wells Fargo and Oppenheimer also didn’t immediately comment. Morgan Stanley declined to comment.
“The McElhone-LaForte duo is in the business of making opportunistic loans — some of which charge more than 400% interest — to small businesses across America,” the complaint alleges.
From August 2012 until about December 2017, Par Funding primarily issued promissory notes and offered them to the investing public directly and via a network of sales agents, the SEC said.
That changed, however, in early January 2018, when Par Funding learned it was under investigation by the Pennsylvania Department of Banking and Securities for violating state securities laws via its use of unregistered agents, according to the complaint. In September 2018, Par Funding told the Pennsylvania Securities Regulators it terminated its agreements with the unregistered sales agents — but “that was only half of the story,” according to the SEC.
“In truth and unbeknownst to the Pennsylvania Securities Regulators, after learning of the investigation Par Funding implemented a new way to fuel its loans — namely, through so-called ‘Agent Funds’ created for the purpose of issuing their own promissory notes, selling the notes to the investing public through unregistered securities offerings, and funneling investor funds to Par Funding,” according to the complaint.
The court also granted the SEC’s request to appoint a receiver for the 11 entity defendants and scheduled a hearing for Aug. 4 to determine whether a preliminary injunction should be granted against the defendants during the litigation, the regulator said.
The complaint charged the defendants with violating antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934, and the securities registration provisions of the Securities Act. The SEC seeks disgorgement of ill-gotten gains, prejudgment interest and civil penalties.
— Check out Ex-Broker Charged With Bilking Retired San Antonio Cops on ThinkAdvisor.