U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22805 / September 23, 2013
Securities and Exchange Commission v. Benjamin Sydney Staples, et al.,, Civil Action No. 3:13- 2575-MBS (D.S.C., filed September 20, 2013)
SEC Files Injunctive Action Against South Carolina Father and Son for Fraudulent Program Designed to Profit from Fate of Terminally Ill
The Securities and Exchange Commission (“Commission”) today announced the filing of a complaint in federal district court against Benjamin Sydney Staples (“Benjamin Staples”) and his son, Benjamin Oneal Staples (“Oneal Staples”) (collectively, the “Defendants”) of Lexington, South Carolina for operating a fraudulent investment program designed to profit illegally from the deaths of terminally ill individuals.
The complaint alleges that Defendants deceived bond issuers out of at least $6.5 million by lying about the ownership interest in bonds they purchased in joint brokerage accounts opened with people facing imminent death who were concerned about affording the high costs of a funeral. According to the Commission’s complaint, Benjamin and Oneal Staples operated what they called the Estate Assistance Program from early 2008 to mid-2012. They recruited at least 44 individuals into the program and purchased approximately $26.5 million in bonds from at least 35 issuers.
The Complaint further alleges that Defendants required the terminally ill individuals to sign documents relinquishing any ownership interest in the assets in the joint account, including the bonds that Defendants later purchased. According to the complaint, Defendants purchased discounted corporate bonds containing a “survivor’s option” that allowed them to redeem the bonds for the full principal amount prior to maturity under such circumstances as the death of a joint owner of the bond. The Commission alleges that after a terminally ill participant died, Defendants wrote a letter to the brokerage firm where the joint account was held, requesting the bonds to be redeemed under the survivor’s option. In the redemption request letters, Defendants falsely represented that the deceased participant was an “owner” of the bonds. Defendants did not inform the brokerage firms or bond issuers that the deceased program participants had signed the estate assistance agreements and participant letters relinquishing all ownership interest in the bonds.
The Commission’s complaint charges Benjamin and Oneal Staples with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Commission is seeking disgorgement of ill-gotten gains plus prejudgment interest, financial penalties and permanent injunctions. The Commission’s complaint names another son of Benjamin Staples, Brian Staples, also of Lexington, South Carolina, as a relief defendant for the purposes of recovering $400,000 in illicit profits that were transferred into his possession. Brian Staples had no active role in the scheme.