U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18872 / September 8, 2004
SEC CHARGES TWO SOUTHERN CALIFORNIA FIRMS AND THEIR PRINCIPALS WITH RUNNING A $6.7 MILLION "PRIME BANK" PONZI SCHEME
SECURITIES AND EXCHANGE COMMISSION v. RC INVESTMENT CORP., PINNACLE INVESTMENT CORP., ROBERT A. COBERLY, JR., AND CURTIS D. SOMOZA, No. CV 04 -7400 GHK (Ex)(C.D. Cal.)
The Securities and Exchange Commission ("Commission") filed a complaint today against two Southern California firms and their principals, alleging securities fraud and securities registration violations in a $6.7 million "prime bank" Ponzi scheme. Named in the complaint are RC Investment Corp. of Westlake Village, Pinnacle Investment Corp. of Westlake Village, Robert A. Coberly, Jr., 36, of Westlake Village, and Curtis D. Somoza, 36, of Beverly Hills. As alleged in the complaint, "prime bank" instruments are supposedly high-yield, low-risk, and confidential investments. One form of a "prime bank" scheme involves a supposed bank trading program where investor funds are purportedly used to trade high-grade bank notes. In fact, such bank notes do not exist and are used to defraud investors.
The complaint alleges that, from September 2002 to May 2003, the defendants offered and sold $6.7 million worth of notes to fifty investors nationwide, claiming that the funds would be used to finance a purported trading program that would buy and sell high-grade AA and AAA-rated bank notes, which is a common form of "prime bank" instrument. The complaint also alleges that the defendants represented that investors would receive a "guaranteed" 120% per year return. The complaint further alleges that, contrary to their representations, the defendants instead operated a Ponzi scheme, whereby they used $3.11 million in new investor funds to pay existing investors. The complaint also alleges that the defendants misappropriated another $2.61 million in investor funds to support their lavish lifestyles, such as down payments on two luxury homes in Southern California and weekends at posh resorts, and to finance other business ventures. In addition, the complaint alleges that, contrary to the defendants' representations, there was no bank note trading program.
The complaint, which was filed in the United States District Court for the Central District of California - Western Division, alleges that each of the defendants violated the securities registration and antifraud provisions of the federal securities laws, Sections 5(a), 5(c), and 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 seeks permanent injunctions and civil penalties against each of the defendants.
For more information about prime bank frauds, visit the SEC's "Prime Bank Information Center" at http://www.sec.gov/divisions/enforce/primebank.shtml. To report suspicious activity involving possible fraud, visit http://www.sec.gov/complaint.shtml.