SEC Charges Operators of Boiler Room Scheme Targeting Seniors to Invest in Football-Related Scam
The Securities and Exchange Commission today charged the operators of a South Florida-based boiler room scheme with defrauding seniors and other investors they pressured into purchasing stock in a company that purportedly developed ground-breaking technology for the National Football League to use in the Super Bowl.
The SEC alleges that Peter Kirschner of Delray Beach, Fla. and his business partner Stuart Rubens of North Miami struck an agreement with Thought Development Inc. (TDI) to solicit investors and sell unregistered company stock to help the Miami Beach-based company raise capital. TDI states that its signature invention is a laser-line system that generates a green line on a football field that is visible as a first-down marker not only on television, but also within the stadium to players, fans, and officials. TDI claims its technology would decrease the time needed by officials to determine first downs and generate more time to be sold to television advertisers.
The SEC alleges that through sales agents paid by their company Premiere Consulting, Kirschner and Rubens schemed to misrepresent to investors that their money would be used to develop TDI’s technology and fund a purported IPO of its stock. Instead, 75 percent of the offering proceeds were retained by Premiere Consulting or paid to sales agents through undisclosed commissions and fees. Investors also were falsely promised that TDI’s laser-line technology would be used during NFL games, and one individual invested an additional $75,000 because a sales agent lied and said that NFL Commissioner Roger Goodell purchased the technology for use in the 2013 Super Bowl. TDI did not have any agreements with the NFL or any team to feature its technology during football games, let alone at the Super Bowl.
“Kirschner and Rubens used boiler rooms and high-pressure sales tactics to swindle seniors into believing they could help revolutionize the way we watch football,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “But these fraudsters merely did an end run with investor money.”
Kirschner has a prior history of securities law violations. In 2006, he was charged by the SEC for fraudulent sales of prematurely issued stock dividend shares and agreed to pay nearly $165,000 to settle the charges. Kirschner and Rubens agreed to settle these latest SEC charges. They will be barred from participating in any penny stock offerings, and monetary sanctions against them will be determined by the court at a later date.
Glenn S. Gordon, Associate Director for Enforcement in the SEC’s Miami Regional Office, said, “It is vitally important to crack down on those who think they can get away with breaking the same laws twice. We will continue to aggressively pursue repeat violators like Kirschner.
According to the SEC’s complaint filed in U.S. District Court for the Southern District of Florida, TDI terminated its relationship with Premiere Consulting, Kirschner, and Rubens in late 2011 when it found out about the lies being told to investors and the undisclosed commissions and other fees. However, Kirschner and Rubens then expanded their scheme by forming a new company Advanced Equity Partners and continuing to solicit investors and sell purported TDI stock. They generated false trade documents to dupe investors into believing they had purchased TDI shares when in fact they had not. Kirschner and Rubens took nearly all investor funds for personal use and payments to sales agents.
According to the SEC’s complaint, Premiere Consulting and Advanced Equity raised more than $2.4 million from approximately 200 investors nationwide from July 2011 to November 2012. Kirschner, Rubens, and their companies failed to disclose to investors that they retained or paid sales agents through commissions and fees that comprised a significant chunk of the money raised from investors. For example, Advanced Equity sales agents lied to a 79-year-old retiree living on a fixed income by telling him they would only take a commission if he resold the stock for a profit in the future. In reality, Advanced Equity, Kirschner, and Rubens immediately paid their sales agents $15,000 of the $27,000 that he invested, and kept the rest of the money in their own accounts.
The SEC alleges that investors were falsely promised that TDI was about to go public when Kirschner and Rubens knew that TDI had not taken any of the required steps. They falsely promised guaranteed returns to investors when they had no basis to do so. For example, Rubens directly solicited a 77-year-old retiree to invest in TDI in February 2012. After the retiree declined to invest, Rubens and his sales agents engaged in high-pressure sales tactics and further enticed him with false promises about “guaranteed returns.” Advanced Equity later sent the retiree a false trade confirmation letter to deceive him into believing he had purchased $100,000 worth of TDI shares when, in fact, he had not. Ultimately, the retiree relented to the pressure and invested $25,000.
The SEC’s complaint charges Advanced Equity, Premiere Consulting, Kirschner, and Rubens with violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5. They are settling the charges without admitting or denying the allegations.
The SEC separately filed a complaint in federal court against TDI and its chairman Alan Amron to charge them with securities registration violations. The federal securities laws require all issuances of common stock to be registered with the SEC or meet a legal exemption from registration, and the complaint alleges that they enabled the unregistered solicitation of investors in their original agreement with Kirschner and Rubens. TDI and Amron agreed to settle the charges without admitting or denying the allegations, and Amron agreed to pay a $10,000 penalty.
The SEC’s investigation, which is continuing, has been conducted by Kevin B. Hart and Fernando Torres in the Miami office, and supervised by Jason R. Berkowitz. The investigation followed an examination conducted by Anson Kwong, Michael Nakis, and George Franceschini under the supervision of Nicholas A. Monaco and the oversight of John C. Mattimore.