Litigation Release No. 22449 / August 15, 2012
Securities and Exchange Commission v. Bridge Premium Finance, LLC, Michael J. Turnock and William P. Sullivan, II, Defendants, (United States District Court for the District of Colorado, Civil Action No. 1:12-cv-02131-JLK)
SEC HALTS DENVER-BASED PONZI SCHEME
The Securities and Exchange Commission today announced fraud charges and an emergency asset freeze against Bridge Premium Finance LLC, Michael J. Turnock, and William P. Sullivan, II, for allegedly perpetrating a Ponzi scheme. Bridge Premium is based in Denver, Colorado. Turnock resides in Denver, Colorado, and Sullivan resides in Highlands Ranch, Colorado.
According to the SEC’s complaint filed yesterday in federal court in Denver, Bridge Premium raised at least $15.7 million from more than 100 promissory note investors nationwide by promising annual returns of up 12 percent. Turnock and Sullivan represented that investor funds would be used to make loans to small businesses to pay their up-front, annual commercial insurance premiums. They also told investors that Bridge Premium’s business was performing well, and that their funds were “100% Protected” through various forms of collateral on the underlying loans.
However, the SEC alleges that in fact, since at least 2002, Bridge Premium has paid investor returns with funds from other investors because Bridge Premium’s business has been unprofitable and its obligations to noteholders have far exceeded its total assets. Because most funds were diverted for Ponzi payments, any collateral available on Bridge Premium’s underlying loan portfolio will only protect a small fraction of its promissory note investors. Bridge Premium’s offering was not registered with the SEC as required under the federal securities laws.
The Complaint alleges that, based on this conduct, Bridge Premium and Turnock violated Sections 5(a), 5(c) and 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, or in the alternative, Turnock is liable as a control person under Section 20(a) of the Exchange Act for Bridge Premium’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Complaint alleges that Sullivan violated Section 17(a)(1) and (3) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) thereunder, or in the alternative, he is liable for aiding and abetting Turnock’s and Bridge Premium’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. On the Commission’s motion, the Court issued a Temporary Restraining Order, Asset Freeze, Other Equitable Relief, and Order Setting Preliminary Injunction Hearing (“Order”) on August 14, 2012. Among other things, the Court’s Order froze the assets of Bridge Premium, Turnock, and Sullivan derived from the scheme alleged in the Complaint, pending determination of the Commission’s Motion for a Preliminary Injunction.