$4.6 Million Elderly Ponzi Shell Game Ends With SEC Settlement
November 16, 2015
Yeah, I know, Wall Street is a very sophisticated place. You got your MBAs. Your certified planning so-and-sos. You got stockbrokers and analysts and all sorts of know-it-alls. They see the future. They predict what's gonna happen. All you got is the cash in your pocket. They want that too. So . . . step right up, sucka, and put your money on the table and pick the shell with the pea. In today's BrokeAndBroker.com Blog, that pea is a golden opportunity to purchase some amazin' unsecured notes from a tax planner looking to help out a lot of clueless retirees.
Case In Point
In a civil Complaint filed in the federal district court for the Northern District of Texas ("NDTX"), the Securities and Exchange Commission ("SEC") alleged that since 2010, Bobby M. Collins, 56, Wichita Falls, TX, had victimized at least 36 elderly investors (many over 65 years of age) by defrauding them into investing at least $4.6 million in high-yield, unsecured notes with 12, 18, and 24 month maturities. Securities and Exchange Commission, Plaintiff, v. Bobby M. Collins, Defendant (Complaint, NDTX, 15-CV-3620, November 10, 2015).
In seeking out investors, the Complaint alleges that Collins' used his website and local newspaper advertisements to market his expertise as "helping retirees and those transitioning into retirement reduce tax burdens and increase income." The unsecured notes were issued through Collins Insurance Companies a/k/a BMC Planning (the business was not incorporated). Collins, who is a Texas and Oklahoma registered insurance agent, represented to the investors that their funds would be used to grow his retirement planning business and, as the business flourished, the investors would reap significant returns.
The Shell Game
Although investors were given the impression that the main source of revenue for the planning business was derived from the sale of fixed index annuities, Medicare supplements, and similar products, in fact, from about 2010, the sale of unsecured high-yield notes was the main source of revenue. Stripped down to its basics, Collins' had set up a cardboard box on a busy street corner and was challenging investors, amid a lot of legerdemain, to find the little pea under the shell.
It's a promisin' tax plannin' biz right under this middle shell. Now I'm movin' the shell. There it is. No, there. No, there. Keep your eye on the tax biz pea. Okay, go ahead, point to where ya think it is. Nice try, but ya got nuthin but nuthin' under that shell -- it's just unsecured notes funding a dubious biz. Ya wanna try again? Maybe Lady Luck will smile on ya next time!
The Complaint alleges that contrary to his representations, Collins used under $70,000 (less than 2% of the investors' funds) to expand his supposed tax-planning business; and, diverted the bulk of investor funds towards his personal expenses, such as over $100,000 in luxury car payments; over $100,00 in cash withdrawals, over $150,00 for personal retail expense, and over $200,00 in credit card and loan payments.mortgage and luxury car payments. Moreover, the Complaint asserts that Collins investment offer was little more than a Ponzi whereby newer and repeat investors' funds were used to pay principal and interest to earlier investors.
Plea
On November 10, 2015, the SEC announced that Collins had agreed to settle the charges and consented to an injunction against further violations of federal securities laws and he agreed to pay $573,234.16 in disgorgement and prejudgment interest plus a $160,000 civil penalty. The settlement is pending approval by NDTX.
READ the BrokeAndBroker.com Blog "Elderly" archive
Wall Street Legal, Regulatory and Compliance Issues
Final Two Episodes To Be Released November 17th and 24th