U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21258 / October 22, 2009
SEC v. Charles C. Slowey, Jr.; Endeavor Partners, LLC; Endeavor Capital Management Group, LLC; Edward D. Puttick, Sr.; Advanced Planning Securities, Inc.; Gregory L. Oldham; Glenn R. Harris; and Oldham Harris Inc., Civil Action No. 09-CV-4547 (EDNY) (LDW)
SEC Charges Promoter and Brokers With Antifraud and/or Section 5 Violations in Real Estate Investment Scheme Targeting Seniors at Free Lunch Seminars
On October 22, 2009, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Eastern District of New York charging Charles C. Slowey, Jr.; Endeavor Partners, LLC; Endeavor Capital Management Group, LLC; Edward D. Puttick, Sr.; and Advanced Planning Securities, Inc. with violations of the antifraud provisions of the securities laws in connection with the sale of unregistered securities representing interests in four real estate funds to investors, many of whom were unsophisticated retirees and senior citizens. The SEC also charged the above defendants, along with two brokers, Gregory L. Oldham and Glenn R. Harris and their company Oldham Harris Inc., with violations of the registration provisions of the securities laws.
According to the SEC's complaint, the securities fraud was orchestrated by Charles C. Slowey, Jr., 65, of Oak Beach, NY, and two companies controlled by Slowey, Endeavor Partners, LLC and Endeavor Capital Management Group, LLC. The SEC alleges that the four real estate funds were managed by Endeavor Partners or Endeavor Capital Management Group. The SEC alleges that these three defendants made misrepresentations to investors who invested approximately $12 million in the funds, and, further, that these defendants misappropriated investor proceeds. The SEC also alleges that Advanced Planning Securities, Inc. (APS) a formerly registered broker-dealer firm in Smithtown, N.Y., and its former president Edward D. Puttick, Sr., 70, of Setauket, New York, failed to conduct sufficient due diligence prior to authorizing brokers to sell interests in the funds to investors, including unsophisticated senior citizens. Finally, the SEC alleges that these defendants; the brokers, Gregory L. Oldham, 59, of Kenosha, Wisconsin, and Glenn R. Harris, 34, of Santa Rosa, California; and Oldham Harris Inc. (OHI) violated the registration provisions of the securities laws.
According to the SEC's complaint, Oldham, Harris, and OHI solicited investors by means of invitations to free lunch or dinner "seminars" at restaurants. On several occasions, Slowey joined Oldham and Harris at the gatherings to help them make sales of Endeavor Securities to potential investors at the seminars or in meetings at the OHI office scheduled shortly afterwards. Many of the investors to whom Oldham, Harris, and OHI sold these investments were elderly and of limited means and few had previously invested in private placement securities or securities based on distressed or subprime mortgages.
The SEC alleges that when the funds began to have increasing financial difficulties, Slowey continued to make false statements to investors. For example, told one senior investor in Florida in mid-2006 that his investment was safe, when in fact the funds had little money left by that time. Slowey told another senior investor in January 2007 that the funds would recover by the following year, and he had no basis for making that statement. In June, July, and November 2006, Slowey asked investors to reinvest their maturing interest in the Endeavor Funds even though he knew that the funds had lost substantial sums of money, and owned only a handful of properties worth far less than the $10 million initially deposited by investors.
The SEC's complaint alleges that Puttick and APS failed to conduct sufficient due diligence into the private placement securities they were selling and failed to resolve numerous red flags concerning Slowey and the funds, and, as a result, violated the implicit representation that all brokers make to their customers that there is an adequate basis for recommending an investment. Puttick and APS also failed to disclose to investors their lack of due diligence.
The SEC further alleges that the defendants violated the registration provisions of the securities laws by selling fund securities for which there was no registration statement in effect. Many of the customers were elderly, unsophisticated investors who could not have been expected to understand the risks associated with the funds' investments in distressed mortgages and other real-estate plays.
The SEC's complaint charges each of the defendants with violations of Sections 5(a) and 5(c) of the Securities Act of 1933. Further, the SEC's complaint charges Slowey, the Management Companies, Puttick, and APS with violations of Section 17(a) of the Securities Act, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC's complaint seeks a final judgment permanently enjoining the defendants (except APS) from future violations of the above provisions of the federal securities laws, ordering them to disgorge their ill-gotten gains plus prejudgment interest on a joint and several basis, and ordering them to pay financial penalties.