U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20997 / April 13, 2009
Securities and Exchange Commission v. Maximum Return Investments, Inc. and Clelia A. Flores, United States District Court for the Central District of California, Civil Action No. CV 09-2536 ODW (SHx).
The Securities and Exchange Commission today filed securities fraud charges against a promoter and her firm for operating a $23 million investment scheme that primarily targeted California’s Hispanic-American community.
The SEC’s complaint, filed in U.S. District Court in Los Angeles, charges Clelia A. Flores, 42, of El Segundo, California, and her El Segundo, California-based company Maximum Return Investments, Inc. (MRI) for operating a fraudulent investment scheme that attracted more than 150 investors in seven states between late 2006 and early 2008. According to the complaint, the scheme purported to use investor funds to invest in risk-free, high-yield investment programs in real estate, commodities, and bank instrument trading. Flores and MRI raised approximately $23 million from investors while promising returns of up to 25 percent within 30 to 45 days. The SEC alleges, however, that Flores and MRI were operating a Ponzi-like scheme that used approximately $13 million from new investors to pay principal and returns due to earlier investors. The complaint further alleges that Flores also misappropriated more than $3.5 million of investor funds for personal expenses, including $443,000 to purchase a home, and almost $1.5 million of investor money to finance MRI’s operations, most of which was used to pay for a lavish party celebrating MRI’s alleged financial success.
According to the SEC’s complaint, Flores and MRI solicited investors in the Hispanic-American community through word of mouth, referrals, and testimonials by investors. As alleged in the complaint, Flores claimed all investor funds would be used to invest in MRI’s risk-free, high-yield investment programs and touted to investors that their principal would be “guaranteed safe.” Promotional materials falsely represented that an investor’s principal would be fully secured by a bank-endorsed guarantee and MRI’s promissory notes claimed the investment was insured. However, the SEC alleges that Flores and MRI neither guaranteed nor insured the $23 million raised from investors and only used $5.6 million of this amount to invest in high-risk ventures and start-up companies that had never paid MRI any returns.
The SEC’s complaint charges Flores and MRI with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctions, disgorgement of ill-gotten gains, and civil penalties.
MRI investors seeking more information about this case should contact the SEC’s hotline that is in English, at 323-965-3313, or in Spanish, at 323-965-3314.