U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19570 / February 17, 2006
SEC v. Kirkland, Civil Action No. 06-CV-183-ORL-28 KRS Antoon (M.D. Florida, filed February 16, 2006)
SEC Obtains Emergency Orders Halting a Securities Offering Involving Investments in Real Estate Developments
The United States Securities and Exchange Commission ("SEC") announced that on February 16, 2006, it filed an emergency federal civil action seeking to halt an alleged fraudulent securities offering being perpetrated by Tropical Village, Inc., Clarity Development Corporation, Senior Adult Living Corporation, and their principal, Patrick Kirkland (collectively "the Defendants"). On the same day, the Honorable John Antoon II, United States District Judge for the Middle District of Florida, entered, among other things, a temporary restraining order, a freeze of the Defendants' assets, and an order appointing a receiver over Tropical, Clarity, and Senior Adult and four Relief Defendants.
The SEC's complaint alleges that from at least April 1999 to the present, the Defendants have raised at least $59 million from about 115 investors nationwide by offering and selling unregistered securities in the form of investments in real estate developments located in Florida, Georgia, and Texas. According to the complaint, the Defendants were selling investments called triplexes, which are apartments designed for shared senior rental living. The Defendants promised investors exorbitant profits of 23% to 55%. The SEC contends that in connection with the offer and sale of the triplexes, the Defendants have made material misrepresentations and omissions to potential and actual investors. Specifically, the complaint alleges that the Defendants profit projections of 23% to 55% are based on false tenant occupancy levels for each development. The complaint also alleges that the Defendants, through sales agents, falsely assured prospective investors that more than 200 calls a day were coming in from seniors interested in leasing the properties, and that there was a waiting list. In fact, according to the complaint, since their inception, the completed developments have had rental rates of 34% or less, and investors who purchased triplexes are losing money. While investors have been suffering significant losses, Kirkland has profited handsomely from the sale of the triplex investments, paying himself millions in investor funds to maintain his lavish lifestyle that includes expensive homes, cars, jewelry, and a jet aircraft.
The SEC's complaint further alleges that the Defendants failed to disclose, among other things, that the State of California issued desist-and-refrain orders against Kirkland, Tropical and Clarity for state securities law violations. Moreover, according to the complaint, after each California desist-and-refrain order, Kirkland simply incorporated a new company and continued doing business as usual.
The SEC's complaint charges the defendants with violating the anti-fraud and registration provisions of the federal securities laws. Specifically, the Commission alleges that Tropical, Clarity, Senior Adult, and Kirkland violated Sections 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 to the emergency relief described above, the complaint seeks permanent injunctions prohibiting future violations of the securities laws, disgorgement of ill-gotten gains, and civil penalties.
Also named in the SEC's action as relief defendants are Sunset Bay Club, Inc., Summerhill Ventures, Inc., Pelican Bay Club, Inc., and Isleworth Adult Community, Inc.
A separate criminal action was filed by the Florida Office of Statewide Prosecutor. The SEC acknowledges the assistance of the State of Florida's Department of Financial Regulation and the Florida Office of Statewide Prosecutor.