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U.S. Securities and Exchange Commission

HAROLD R. LOFTIN, JR.
Attorney for Plaintiff
U.S. SECURITIES AND
EXCHANGE COMMISSION
Texas Bar No. 12487090
Burnett Plaza, Suite 1900
801 Cherry Street, Unit #18
Fort Worth, Texas 76102-6882
Telephone: (817) 978-6450
Fax: (817) 978-4927

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA


Securities and Exchange Commission,

Plaintiff,   

vs.

PENSION PLANS OF AMERICA, INC.,
and LLOYD BENTON SHARP,

Defendants.   


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Case No.

COMPLAINT

Plaintiff Securities and Exchange Commission ("Commission") alleges as follows:

SUMMARY

1. In this action the Commission charges Pension Plans of America, Inc. ("PPA") and Lloyd Benton Sharp ("Sharp") with perpetrating an Internet-based scheme to fraudulently raise investor funds through unregistered securities offerings to the public. Defendant PPA is a Nevada Corporation based in Vancouver, Washington, controlled by Defendant Sharp. PPA offered for sale to the public investments in limited partnerships, including the Pension Plans of America 12/12 Green Tree Growth Fund 001, Ltd. ("Green Tree Fund"), through its website located at www.pensionamerica.org, interstate telephone calls, and the mail. The limited partnerships were to plant, raise, and sell paulownia trees, paying a 16% return on investment.

2. In the course of offering and selling these securities, Defendants made numerous misrepresentations and omissions relating to, among other things, the investment risk, the prospects for return on the investment, fees to be charged by PPA and Sharp, the control of Defendant PPA and related entities, the use of investor proceeds and Defendant Sharp's background. In addition, Defendants failed to file a registration statement with the Commission prior to offering the securities to the public.

3. The Commission, in the interest of protecting the public from any further unscrupulous activity by the Defendants, brings this action against PPA and Sharp seeking injunctive relief against both defendants and a civil monetary penalty against Sharp.

JURISDICTION

4. This Court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77v(a)] and Section 27 of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78aa].

5. The Defendants directly and indirectly made use of the means or instrumentalities of interstate commerce and/or the mails in connection with the transactions described in this Complaint. Certain of the acts and transactions described herein took place in the Western District of Washington.

DEFENDANTS

6. Pension Plans of America, Inc. is a Nevada corporation located in Vancouver, Washington, and is controlled by Sharp.

7. Lloyd Benton Sharp, age 67, is a resident of Vancouver, Washington. Sharp is PPA's founder, chairman, and majority owner. He was also responsible for the content of PPA's website, the offering information provided to investors, and otherwise directed PPA's actions. Sharp was not registered as a broker or dealer with the Commission while making offers for sale and sales of securities issued by PPA.

BACKGROUND FACTS

8. Defendant Sharp, who was previously convicted of securities fraud in Arizona, enjoined by two federal district courts for his conduct in investments scams, ordered to cease and desist by three different state securities divisions for his part in fraudulent investment offerings, decided it was time to enter the business of growing and harvesting lumber. Predictably, Sharp's plan involved raising funds from investors across the United States to fund his forestry adventure. Sharp established a website at www.pensionamerica.org and used the website to offer securities in the form of limited partnership interests in the Green Tree Fund to the public over the Internet. The PPA website included a video presentation, a PowerPoint presentation and a summary document regarding the PPA offerings. Sharp also discussed the PPA offering with prospective investors, many located outside the state of Washington, over the telephone. PPA and Sharp made the following representations about the Green Tree Fund offering:

a. The Green Tree Fund provided a "fixed high rate of return and at a limited risk," and was open to both pension funds and individuals;

b. PPA had contracted to pay a company called "Sherwood Forest" to plant and maintain 50 million paulownia trees in California over a six year period, including paying Sherwood Forrest $33,600,000 to plant the first million trees in 2003;

c. Sherwood Forest had agreed to pay PPA $81,862,000 in six years for the one million paulownia trees to be planted in 2003, generating a 16% return to PPA and its investors;

d. After six years the annual return on the investment would increase from 16% to 17%;

e. Sherwood Forest would buy each tree for $81.82 at the end of six years leaving a net profit of $48.22 per tree for the investor, the equivalent of a 16 percent annual return;

f. PPA would purchase paulownia seedlings for $12.00 each and charge investors $.30 per seedling per month for maintenance and would donate $1.00 for each tree bought to charity;

g. PPA was a non-profit company and because of this, it "eliminate[d] greed from the equation and return[ed] 100% of the profits to the pension holder;"

h. A retired banker named Kenneth Wright controlled PPA, an attorney named William Reed and a "group of businessmen" controlled Sherwood Forest, and a businessman named Charles Schaumberg controlled Global Hardwoods, Inc., the company that was supposed to market the paulownia wood;

i. The Green Tree Fund investment was "very, very secure," that the security of this investment was rated a "2" if "1" was gold in Fort Knox, and the investment was "totally secure" because PPA "ha[d] the UCC filing on all the trees;"

j. Other investors had invested $900,000 and PPA had raised more than one million dollars in the paulownia tree program; and,

k. The investment was passive on the investor's part.

9. Sharp, however, was not particularly candid with his prospective investors. While he extolled the lucrative nature of the investment opportunity PPA was offering, he made the following material misrepresentations and omissions:

a. PPA and Sharp failed to disclose that PPA intended to charge investors an additional $5 fee per tree and $.10 per tree per month in commissions and fees;

b. Kenneth Wright did not control PPA, William Reed did not control Sherwood Forest, and Charles Schaumberg did not control Global Hardwood; in fact, Defendant Sharp controlled all three companies;

c. PPA and Sharp had, in fact, not raised any significant funds from investors and had not raised anything approaching $900,000 from investors;

d. Sherwood Forest Corporation was, in reality, "Universal Dimensions Trust," a Bahamas corporation; William Reed had nothing to do with the corporation, and the "group of businessmen" described in the offering materials did not exist;

e. The paulownia tree investment program was risky because:

i.) Sharp, PPA, Sherwood Forest, and Global Hardwood had no experience planting, growing, harvesting or marketing timber;

ii.) No current market exists for paulownia tree wood in the United States, much less a market for 50 million trees as described in PPA's investment program; and,

iii.) Sharp, PPA, Sherwood Forest, and Global Hardwood had insufficient financial resources to develop PPA's paulownia tree program;

f. Sharp was previously convicted of fraudulent schemes and artifices, illegal enterprise, selling unregistered securities, and acting as an unregistered securities salesperson in State of Arizona v. Lloyd Benton Sharp, Superior Court of the State of Arizona, Mojave County, Case No. CR11065 (June 21, 1989), and sentenced to more than five years incarceration in the Arizona Department of Corrections;

g. The U.S. District Court for the District of Oregon had permanently enjoined Sharp from violations of the Section 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder in SEC v. Lloyd B. Sharp and George Anderson (U.S. District Court, C.D. Oregon), Cause No. 83-564 (March 14, 1984);

h. The U.S. District Court for the District of Nevada, had permanently enjoined Sharp from falsely representing risks, potential profits, and future earnings in the sale of investments and imposed a judgment for "consumer redress" in the amount of $4,762,230 in Federal Trade Commission v. Sharp, et. al., (U.S. District Court, D. Nevada) Cause No. CV-S-89-870 RDF (September 10, 1991);

i. Sharp was ordered by the Arizona Corporation Commission in 1989 to Cease-and-Desist from violations of the Arizona Securities Act's provisions relating to securities fraud, the sale of unregistered securities and selling securities through unregistered agents in In the Matter of White Rock Mining, Inc., et al., Arizona Corporation Commission Docket No. S-2553-I, Decision No. 56733, December 6, 1989;

j. Sharp was ordered by the Indiana Securities Commissioner in 1988 to Cease-and-Desist violations of the Indiana Securities Act's provisions relating to the sale of unregistered securities and selling securities through unregistered agents in In the Matter of Wealth Investment Management, et al., Indiana Securities Division Order Cause No. 88-0042-CD, August 3, 1988; and,

k. Defendant Sharp was enjoined from violating the anti-fraud and securities registration provisions of the Oregon Securities Act and violating a Cease-and-Desist Order issued by the Oregon Securities Division in 1981 in In the Matter of Progressive Financial Management, Inc. et al., Oregon Corporation Commissioner, Consent Order to Cease and Desist, December 7, 1981.

10. PPA and Sharp made use of means or instruments of transportation, or communication in interstate commerce, or of the mails, including the Internet and interstate telephone calls, to sell, offer to sell, or offer to buy securities in the form of limited partnership interests in the Green Tree Fund without a registration statement having been filed or in effect with the Commission as to such securities, or while a registration statement filed with the Commission as to such securities was the subject of a refusal order or stop order or (prior to the effective date of the registration statement) any public proceeding of examination under Section 8 of the Securities Act as amended.

11. Sharp made use of means or instruments of transportation, or communication in interstate commerce, or of the mails, including the Internet and interstate telephone calls, to directly or indirectly engage in the business of effecting transactions in, or inducing or attempting to induce the purchase or sale of securities in the form of limited partnership interests in the Green Tree Fund without being registered as a broker or dealer in accordance with Section 15(b) of the Exchange Act.

12. After being contacted by Commission staff, Sharp caused PPA to remove the PPA website on or about February 5, 2003, and ceased offering PPA securities.

FIRST CLAIM
Violations of Section 17(a) of the Securities Act

13. Plaintiff Commission repeats and incorporates paragraphs 1 through 12 of this Complaint by reference as if set forth verbatim.

14. PPA and Sharp, in connection with the offer and sale of securities, by use of the means and instruments of transportation and communication in interstate commerce and by use of the mails, directly and indirectly, have employed schemes and artifices to defraud; made untrue statements of material fact and have omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and engaged in acts, practices, courses of business which have operated as a fraud and deceit upon purchasers and sellers.

15. As a part of and in furtherance of their scheme to defraud, Defendants PPA and Sharp, directly and indirectly, prepared, disseminated or used contracts, written offering documents, promotional materials, investor and other correspondence and oral presentations which contained untrue statements of material facts and misrepresentations of material facts and which omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, including, but not limited to, those set forth above.

16. PPA and Sharp made these misrepresentations and omissions knowingly, recklessly and/or negligently.

17. By reason of the foregoing, PPA and Sharp have violated and, unless enjoined, will continue to violate the provisions of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].

SECOND CLAIM
Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder

18. Plaintiff Commission repeats and incorporates paragraphs 1 through 12 of this Complaint by reference as if set forth verbatim.

19. PPA and Sharp directly or indirectly, singly or in concert with others, in connection with the purchase and sale of securities, by use of the means and instrumentalities of interstate commerce and by use of the mails, have: (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaged in acts, practices, and courses of business which operate as a fraud and deceit upon purchasers, prospective purchasers, and other persons.

20. As a part of and in furtherance of their scheme, Defendants PPA and Sharp directly and indirectly, prepared, approved, and disseminated offering information for securities which contained untrue statements of material facts and misrepresentations of material facts, and which omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, including, but not limited to, those set forth in paragraphs 1 through 12 above.

21. PPA and Sharp engaged in the foregoing conduct knowingly or recklessly.

22. By reason of the foregoing, PPA and Sharp have violated, and unless enjoined, will continue to violate the provisions of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

THIRD CLAIM
Violations of Sections 5(a) and 5(c) of the Securities Act

23. Plaintiff Commission repeats and incorporates paragraphs 1 through 12 of this Complaint by reference as if set forth verbatim.

24. PPA and Sharp, directly or indirectly, singly or in concert with others: (a) without a registration statement in effect as to the securities, (i) made use of the means or instruments of transportation or communication or the mails to sell such securities through the use or medium of a prospectus or otherwise, or (ii) carried or caused to be carried through the mails, or in interstate commerce, by any means or instruments of transportation, such securities for the purpose of sale or for delivery after sale; and (b) made use of the means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of a prospectus or otherwise securities for which a registration statement had not been filed as to such securities.

25. By reason of the foregoing, PPA and Sharp have violated and, unless enjoined, will continue to violate Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a) and 77e(c)].

FOURTH CLAIM
Violations of Section 15(a) of the Exchange Act

26. Plaintiff Commission repeats and incorporates paragraphs 1 through 12 of this Complaint by reference as if set forth verbatim.

27. Sharp was in the business of effecting transactions in securities for the accounts of others.

28. In connection with such conduct, Sharp made use of the mails and of the means and instrumentalities of interstate commerce to effect transactions in and to induce or attempt to induce the purchase of those securities.

29. Sharp was not and is not registered with the Commission as a broker or dealer or associated with a registered broker or dealer, as required by section 15(a) of the Exchange Act [15 U.S.C. § 78o(a)].

30. By reason of the foregoing, Sharp violated and, unless enjoined, will continue to violate section 15(a) of the Exchange Act [15 U.S.C. § 78o(a)].

PRAYER FOR RELIEF

The Commission respectfully requests that this Court enter a judgment:

31. Permanently enjoining PPA and its agents, servants, employees, attorneys, and those in active concert or participation with it, who receive actual notice by personal service or otherwise, from violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Sections 10(b) of the Exchange Act and Rule 10b-5 thereunder;

32. Permanently enjoining Sharp and his agents, servants, employees, attorneys, and those in active concert or participation with him, who receive actual notice by personal service or otherwise, from violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder;

33. Ordering Sharp to pay civil money penalties as provided by the Securities Act and the Securities Exchange Act;

34. Granting such other relief as this Court may deem just and appropriate.

Dated this 14th day of May, 2003.

Respectfully submitted,

By: _________________
HAROLD R. LOFTIN, JR.
Texas Bar No.: 12487090
U.S. Securities and Exchange Commission
Fort Worth Office
Burnet Plaza, Suite 1900
801 Cherry Street, Unit #18
Fort Worth, Texas 76102-6882
(817) 978-6450
(817) 978-4927 (facsimile)

 

http://www.sec.gov/litigation/complaints/lr18140.htm


Modified: 05/16/2003