U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17503 / May 3, 2002
SECURITIES AND EXCHANGE COMMISSION v. U.S. FUNDING CORPORATION, U.S. FUNDING COMPANY, CAPITAL CONCEPT MARKETING, INC., ANGELICA GWINNETT, and CHARLES FREMER, United States District Court for the District of New Jersey, Civil Action No. 02-2089 (KSH)
SEC BRINGS EMERGENCY ACTION AGAINST NEW JERSEY COMPANY, FLORIDA TELEMARKETER FOR BILKING INVESTORS IN INTERNET SCAM
The Securities and Exchange Commission today sued a New Jersey company alleges that it defrauded investors out of at least $2 million since October 2001 in an e-mail marketing scam. According to the Commission, U.S. Funding Corporation guaranteed investors annual returns of 20% to 25%. Instead, the complaint alleges that U.S. Funding diverted so much of the investment proceeds to its president, Angelica Gwinnett of Paramus, New Jersey, and to its telemarketers, that it is impossible for investors to recover their principal, much less earn the promised returns. On the Commission's motion, the court issued an order temporarily restraining defendants from violating the antifraud and registration provisions of the federal securities laws, freezing defendants' assets, and granting other emergency relief.
In a complaint filed in the United States District Court for the District of New Jersey, the Commission alleges that U.S. Funding and Gwinnett hired telemarketers to solicit investors in its accounts receivable factoring business - the practice of buying a company's receivables at a discount. Persons responding to the spam e-mail received documents in which U.S. Funding claimed to have been in business since 1998, as well as financial statements showing substantial assets and revenue. The Commission alleges that the representations were entirely false; in fact, U.S. Funding did not even begin operations until December 2001, several months after it had begun to spam investors.
According to the complaint, U.S. Funding promised to pay investors 20% in annual returns, or 25% annually for a two-year investment, plus the full return of their principal at the end of the term. Although U.S. Funding used some of the proceeds to purchase accounts receivable, the Commission alleges that, unbeknownst to investors, 35% of investor funds were going to U.S. Funding's telemarketers. In addition, Gwinnett misappropriated over $300,000 for personal use. Among other things, Gwinnett withdrew $75,000 of investor funds for a weekend in Las Vegas. As a result of these and other undisclosed expenditures, investors cannot possibly earn the promised returns.
The Commission's complaint charges U.S. Funding and Gwinnett with violating the antifraud and registration provisions of the federal securities laws, specifically Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Commission also charged the company's telemarketing firm, Florida-based Capital Concepts Marketing and its president, Charles Fremer of Coral Springs, Florida, with violating the registration provisions and acting as unregistered securities brokers in violation of Section 15(a) of the Securities Exchange Act. In addition to emergency relief, the Complaint seeks permanent injunctions prohibiting future violations of the securities laws, disgorgement, and civil penalties.