U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19536 / January 20, 2006
Securities and Exchange Commission v. Fortress Financial Group, Inc. and Jeffrey A. Richie, Civil Action EDCV 06-00063 VAP (SGLx) (C.D. Cal.)
The United States Securities and Exchange Commission announced that it filed a complaint in federal court in Riverside, California against Fortress Financial Group, Inc. ("Fortress") and its CEO and president, Jeffrey A. Richie ("Richie"), for conducting an unregistered and fraudulent offering of Fortress securities. Fortress is in the business of providing 401(k) services to the clients of broker-dealers and investment advisers and employees of small companies. Richie, age 39, resides in Temecula, California.
The Commission's complaint alleges that between March 2000 and April 2001, Fortress raised approximately $2.9 million through the sales of shares of preferred stock to approximately 85 investors in a purported private placement. Richie and Fortress made material misrepresentations and omissions to investors relating to (1) financial projections, (2) undisclosed liabilities in excess of $1 million, (3) plans to conduct an IPO, and (4) representations that Fortress would not spend any of the offering proceeds until it raised $2 million. For example, even though Fortress had no prior operational history, Fortress and Richie projected that Fortress' revenue would grow from $26 million in its first six months of operations in 2001 to over $564 million by 2004. In fact, Fortress' actual revenue was only $298,000 in 2001, $32,000 in 2002, and $104,000 in 2003. In addition, Richie and Fortress failed to provide unaccredited investors with an audited balance sheet or other information required for a valid exemption from registration, and they began spending the offering proceeds before the $2 million minimum was raised. Finally, The Commission's complaint seeks a permanent injunction, disgorgement, prejudgment interest, and civil penalties against Fortress and Richie for violating Sections 5 and 17 of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rules 10b-5 and 10b-9 thereunder.