Litigation Release No. 16312 / September 28, 1999
Securities and Exchange Commission v. Chelsea Associates, Inc. and Rondall Harris, Civil Action No. 99-4595 (JEB) (D.N.J.)
The Securities and Exchange Commission announced today, that on September 27, 1999, it filed a complaint in federal district court in Newark, New Jersey charging that Chelsea Associates, Inc. and Rondall Harris of Franklin Park, New Jersey engaged in a fraudulent scheme whereby they obtained at least $2.8 million from more than 375 investors throughout the country.
The Commission's complaint charges that the defendants offered and sold securities without registering those securities with the Commission, made numerous false representations to investors including that they could expect profits of as much as a 300 percent without any risk to their principal investment, and that Chelsea Associates failed to register with the Commission as an investment company. The Commission's complaint further alleges that the defendants targeted their solicitations primarily to African-American investors by falsely claiming that investing through Chelsea Associates would afford investors an opportunity to participate in investment opportunities and substantial profits historically not available to African-American investors. The Commission's complaint alleges that, in reality, the defendants invested funds they raised in a series of speculative investments, and that Harris misappropriated some of those investor funds to pay his own personal expenses.
Without admitting or denying the Commission's allegations, Chelsea Associates and Harris have consented to the entry of a judgment which permanently enjoins each of them from violating Section 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the judgment permanently enjoins Harris from violating Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and permanently enjoins Chelsea Associates from violating Section 7(a) of the Investment Company Act of 1940. The judgment reserves the issue of the amount of disgorgement that the defendants will pay, as well as the amount of any civil penalty to be paid by Harris. The defendants also consented to the entry of an order freezing all of their assets to prevent the dissipation of funds that belong to Chelsea Associates investors.