U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20513 / March 31, 2008
Securities and Exchange Commission v. Madison Real Estate Group, LLC, a Wyoming limited liability company, Richard Ames Higgins, Brandon S. Higgins, and Allan D. Christensen, Case No. 2:08CV00243 (USDC Utah, filed March 28, 2008).
On March 28, 2008, the United States District Court for the District of Utah entered an order temporarily restraining and freezing the assets of Madison Real Estate Group, LLC (Madison), Richard Ames Higgins (Higgins), Brandon S. Higgins (Brandon), and Allan D. Christensen (Christensen), from making fraudulent offers, sales and purchases of securities. The Court also appointed a receiver to take control of the frozen assets.
The complaint alleges that the defendants have obtained investments of at least $15 million from the fraudulent sale of limited partnerships interests in apartment buildings to at least 42 investors. Among the misrepresentations made to investors were: (1) that Madison is a family-owned limited liability company with over 30 years of experience in the commercial real estate business; (2) that Madison generates monthly income of $250,000; (3) that investors were guaranteed a 1% monthly return from apartment buildings purchased at below fair market value, and were then renovated and sold, ultimately generating a 30% return to investors after one to two years. However, it is alleged that the defendants actually paid above fair market value for the buildings and that the returns were paid to investors from newly-invested funds from other investors.
Additionally, the complaint alleges that the defendants have omitted to state material facts, including: (1) the defendants failed to pay the mortgages on the buildings: (2) contractors were not being paid for renovations and materials; (3) unpaid renovation costs exceeded hundreds of thousands of dollars; (4) the buildings were actually operating at a loss; (5) Higgins and Christensen were receiving undisclosed management fees, commissions, and referral fees: and (6) the defendants were using invested funds for personal expenses. Finally, it is alleged that Higgins, Brandon and Christensen failed to disclose that Higgins had been enjoined in a prior Commission enforcement action, had been convicted in an action by the State of Utah for securities fraud and had been disbarred by the State of Utah.
The complaint charged Madison, Higgins, Christensen, and Brandon with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and 10b-5 thereunder.