U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20099A / May 2, 2007
Securities and Exchange Commission v. Michael R. Bretzel, Lawrence Ford, II, Real Estate Funding, LLC and Heritage Funding Group, Inc., Defendants, and Seabreeze Realty Group, Inc. d/b/a Coastal Properties, Ormond Beach Auto Sales, Inc. d/b/a Liberty Automotive Group, and Dealer Lot Management, Inc., Relief Defendants, Civil Action No. 6:07-cv-609-orl-22DAB (MDFL April 30, 2007)
The Securities and Exchange Commission ("Commission") announced today that it has filed a Complaint in the U.S. District Court for the Middle District of Florida in Orlando, against defendants Michael R. Bretzel ("Bretzel") of Ormond Beach, Florida; Lawrence Ford, II, ("Ford") of Daytona Beach, Florida; and Real Estate Fund, LLC ("Real Estate Fund") and Heritage Funding Group, Inc.("Heritage"), both with principal offices in Daytona Beach, Florida. The Commission also sued relief defendants Seabreeze Realty Group, Inc. d/b/a Coastal Properties ("Coastal"); Ormond Beach Auto Sales, Inc. d/b/a Liberty Automotive Group ("Liberty"); and Dealer Lot Management, Inc. ("Dealer Lot"), each with principal offices in Daytona Beach, all of which are entities controlled by Bretzel.
The Complaint alleges that the defendants offered and sold securities in two schemes orchestrated by Real Estate Fund and Heritage (collectively, the "Funds"), and their respective principals, Bretzel and Ford. From at least February 2003 through January 2007, the Funds raised approximately $21 million from over 200 investors nationwide. The Complaint further alleges that the Funds made numerous misrepresentations to investors related to, among other things use of proceeds and the commissions actually paid. The Real Estate Fund's Private Placement Memorandum (PPM) stated, among other things, that the Real Estate Fund would use approximately 92% of investor proceeds to acquire interests in real estate, which would be titled to Real Estate Fund. In truth, the Real Estate Fund "loaned" approximately $1.38 million of investor proceeds (or 18% of the total funds raised) to Bretzel, to other companies that Bretzel owns, or to Ford. Heritage's PPM stated, among other misrepresentations, that "the net proceeds from the sale of the Notes will be used to purchase installment contracts originated by automobile dealers for financing the sale of pre-owned motor vehicles." In reality, Heritage "loaned" approximately $3.6 million of investor proceeds to entities owned by Bretzel. Heritage also "loaned" money to other Bretzel controlled entities. The Complaint further alleges that both Funds operated as Ponzi scheme, schemes since the revenue from later investors was used to pay "preferred returns" to earlier investors. The Complaint further alleges that Coastal, Liberty and Dealer Lot, which were entities owned by Bretzel, were unjustly enriched by loans from Real Estate Fund and/or Heritage made to them through Bretzel, or directly to them.
The Complaint alleged that the four defendants violated the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission also sought a temporary restraining order, preliminary and permanent injunctions, an accounting, disgorgement, pre-judgment interest and civil penalties against Bretzel, Ford, Real Estate Fund and Heritage. The Commission also sought an asset freeze as to Bretzel, Ford, and Real Estate Fund and seeks the appointment of a Receiver for Real Estate Fund. In an Order issued April 30, 2007, following a hearing on the preliminary injunction, Judge Anne C. Conway preliminarily enjoined defendants Bretzel, Real Estate Fund and Heritage. The Court declined to preliminarily enjoin Ford, and declined to appoint a Receiver for Real Estate Fund. The Court did not impose an asset freeze or direct an accounting.