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Securities and Exchange Commission

Litigation Release No. 18067 / April 3, 2003

Richard J. Collins, Previously Sued by SEC in a Prime Bank Scheme, Charged in a Criminal Information

US v. Richard J. Collins, (United States District Court for the Northern District of Illinois, 02-CR-831).

SEC v. Richard J. Collins, et. al. (United States District Court for the Northern District of Illinois, 01-C-3085).

On March 26, 2003, Richard J. Collins, 56, of Plainfield, Illinois was charged in a criminal information with three counts of mail fraud and one count of wire fraud for allegedly defrauding approximately 400 prospective investors and investors of more than $10 million. Collins and others owned and controlled the Gateway Association, Inc. ("Gateway"), based in Naperville, Illinois which sold "memberships" and purported to offer and sell investments to its members with a guaranteed, risk-free, high yield return of as much as 1,250 percent. Between November 1997 and March 1999, Collins and others, through Gateway, allegedly offered and sold investment interests in a non-existent international bank debenture trading program. Collins and others allegedly made material misrepresentations and omitted to state material facts about the existence of the trading program, the risk and expected return on the investment, the use of money raised from the investors, and the ability of investors to obtain a full refund at any time. Collins and others raised approximately $10,984,564 from at least 400 investors and allegedly misused almost all of the funds for their own benefit, including autos, charter airplanes, guns, credit card bills, printing expenses, a country club membership, a piano and landscaping.

According to the charges, Collins and others organized meetings at various locations in the United States and Puerto Rico, where they informed prospective investors that they could become members in Gateway for a fee of $2,500, which would enable them to receive various benefits, including discounts on shopping, travel, hotels and health care. Gateway members also would be eligible to invest additional money in the so-called international bank debenture trading program. Collins allegedly fraudulently promised investors a 1,250 percent rate of return on a 10-month $100,000 investment, which included a $759,768 balloon payment at the end of 10 months. Almost no investors have received a refund of their original investment, according to the charges. Collins is scheduled to be arraigned on April 8 before U.S. District Court Judge Suzanne B. Conlon in Chicago. If convicted, Collins faces a maximum statutory penalty of five years in prison and a $250,000 fine on each count of mail and wire fraud. As an alternative fine, the Court may impose a fine totaling twice the gross loss to any victim or twice the gross gain to the defendant, whichever is greater.

In the civil action filed by the SEC, SEC v. Richard J. Collins, et. Al, filed in United States District Court for the Northern District of Illinois, Civil Action No. 01-C-3085, in August 2002, Collins consented, without admitting or denying the allegations in the Commission's complaint, to the entry of a permanent injunction, payment of disgorgement of $10,988,564.76, plus prejudgment interest of $4,024,871.47 and a civil penalty of $10,988,564.76. In December 2002, Bill Wilson, of Naperville, Illinois, the President of Gateway, also consented, without admitting or denying the allegations in the Commission's complaint, to the entry of a permanent injunction, payment of disgorgement, plus prejudgment interest and a civil penalty, the amounts of which are to be determined later at a separate hearing. The two corporate defendants, Gateway and Gateway Association (IL) defaulted and the judge granted judgments against them enjoining them from future violations and ordering them to pay, jointly and severally, $10,583,564.76 in disgorgement, $3,272,037.76 in prejudgment interest and a civil penalty of $2.5 million. In addition, in November 2002, James Knauer, of Kroger, Regas and Gardis, LLP of Indianapolis, Indiana was appointed as a receiver to marshal, conserve, protect, hold funds, operate and, with approval of the court, dispose of all assets of any nature, wherever those assets may be found..

 

http://www.sec.gov/litigation/litreleases/lr18067.htm


Modified: 04/03/2003