U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21850 / February 10, 2011
SEC v. Algird M. Norkus and Financial Update, Inc., Case No. 1:10-cv-06582 (N.D. Ill.) (Dow, J.)
The Securities and Exchange Commission announced that on February 7, 2011, the United States Attorney's Office for the Northern District of Illinois filed a criminal information against Algird M. Norkus, a defendant in the Commission's above-captioned litigation. According to the information, Norkus engaged in mail fraud in violation of 18 U.S.C. §1341 in connection with a fraudulent scheme in which he raised more than $9 million from investors through the offer and sale of promissory agreements and misrepresented to investors the expected return of investments, the risk associated with the investments, the status of the investments and the use of proceeds obtained. United States v. Algird M. Norkus, Case No. 11-CR-50010 (N.D. Ill.) (Kapala, J.).
Previously, on October 14, 2010, the Commission filed a civil injunctive action against Norkus and a corporation he controlled, Financial Update, Inc. ("Financial Update"), charging them with violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. On October 19, 2010, the Honorable Robert M. Dow Jr. entered a Partial Final Judgment and Order of Permanent Injunction, Asset Freeze and Other Relief by consent against Norkus and Financial Update which, among other things, permanently enjoined them from future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and ordered them to pay disgorgement and civil penalties in an amount to be determined at a later date.
In its Complaint, the Commission alleged that from as early as 1993 through at least July 2010, Norkus, acting as President of Financial Update, raised at least $6.4 million through the offer and sale of promissory notes issued by Financial Update. The complaint further alleged that Norkus told investors that their money would be used to fund Financial Update's business activities and promised investors interest rates between 11% and 24% per year. The complaint alleges that Norkus, however, used investor money to pay for personal expenses such as his mortgage and a car and used the money provided by newer investors to make interest and principal payments to earlier investors. Finally, the complaint alleges that Norkus never disclosed to investors that he was using their money in this fashion.
The Commission's investigation of this matter is continuing. Additional information may be found in Litigation Release No. 21693 (October 14, 2010).