U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19161 / March 30, 2005
Securities and Exchange Commission v. Pension Fund of America, LC, et al., Case No. 05-20863-CIV-MOORE (S.D.Fla., filed March 28, 2005)
SEC BRINGS EMERGENCY ACTION AGAINST UNREGISTERED INVESTMENT ADVISER AND AFFILIATED ENTITIES AND PRINCIPALS
The Securities and Exchange Commission ("SEC") announced today that on March 28, 2005, it filed an emergency civil action to halt an ongoing offering fraud that targeted Latin American investors. The action was filed against Pension Fund of America, LC and PFA Assurance Group, Ltd. (collectively, "PFA"), unregistered investment advisers operating in Coral Gables, Florida, affiliated entities PFA International, Inc. and Claren, TPA, and their principals Luis Cornide and Robert de la Riva.
Acting on the Commission's request for emergency relief, on March 28, 2003, Judge K. Michael Moore of the United States District Court for the Southern District of Florida, issued temporary restraining orders, asset freezes and other relief against the defendants. The Court also appointed Thomas G. Schultz as Receiver over all of the entities named in the Commission's Complaint.
The Commission's complaint alleges that from October 1999 to the present, PFA and its principals, Cornide and de la Riva, raised approximately $127 million from over 3,400 investors, through the sale of "retirement trust plans" that purportedly combine life insurance and investments in mutual funds purchased through U.S. banks and broker-dealers. Through a network of over 500 sales agents in Central and South America, PFA promotes the investment as a "trust" plan, assuring prospective investors that their funds are secure because they are held and invested by large and well-established U.S. banks and broker-dealers who act as "trustees" or "custodians" of investors' funds. The investment component of the plan provides prospective investors with a choice of up to eight mutual funds offered by well-known U.S. fund companies. The offering materials provided to investors (available in Spanish and Portuguese) fail to disclose, however, that up to 90% of funds invested in The Liberty Trust - PFA's flagship program chosen by 85% of investors - are used to pay exorbitant commissions, an "administrative fee" taken by PFA and other costs. The defendants also fail to disclose that front-end load charges of up to 6.5% are assessed on each mutual fund purchase. Additionally, the Complaint alleges that defendants have misrepresented their relationship with financial institutions and broker-dealers, and perpetuated those misrepresentations by creating false certificates bearing unauthorized seals. The Complaint alleges that Cornide and de la Riva have misappropriated at least $15 million of investors funds for themselves.
The Commission's complaint alleges that defendants violated Sections 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder, that Cornide and de la Riva further violated Section 15(a)(1) of the Exchange Act, and that defendants PFA, Cornide and de la Riva violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. In addition to the emergency relief obtained on March 28, 2005, the Commission's civil action is seeking, among other things, preliminary and permanent injunctions, an order that the defendants disgorge all ill-gotten gains, with pre-judgment interest, and an order imposing civil money penalties.
The Commission acknowledges the assistance in this case of the U.S. Department of Homeland Security's Bureau of Immigration and Customs Enforcement.
The Commission's investigation is continuing.