SEC News Digest

COMMISSION ANNOUNCEMENTS

SEC Charges Promoters of "Green" Investments With Operating $30 Million Ponzi Scheme Based in Denver Area

The Securities and Exchange Commission today charged four individuals and two companies involved in perpetrating a $30 million Ponzi scheme in which they persuaded more than 300 investors nationwide to participate in purported environmentally-friendly investment opportunities.

The SEC alleges that Wayde and Donna McKelvy, who were previously married and living in the Denver area, particularly targeted elderly investors or those approaching retirement age to finance such "green" initiatives of Pennsylvania-based Mantria Corporation as a supposed "carbon negative" housing community in rural Tennessee and a "biochar" charcoal substitute made from organic waste. The McKelvys promoted Mantria investment opportunities through their Denver-based company Speed of Wealth LLC. With the help of two other promoters who are Mantria executives — Troy Wragg and Amanda Knorr of Philadelphia — they convinced investors attending seminars or participating in Internet "webinars" to liquidate their traditional investments such as retirement plans and home equity to instead invest in Mantria.

The SEC alleges that the "green" representations were laced with bogus claims, and investors were falsely promised enormous returns on their investments ranging from 17 percent to "hundreds of percent" annually. In fact, Mantria's environmental initiatives have not generated any significant cash, and any returns paid to investors have been funded almost exclusively from other investors' contributions.

"These promoters fraudulently exaggerated Mantria's green initiatives and used high-pressure tactics to convince investors to chase the promise of lucrative returns," said Don Hoerl, Director of the SEC's Denver Regional Office. "In reality, the only green these promoters seemed interested in was investors' money."

The SEC's complaint, filed in federal court in Denver, charges Mantria and Speed of Wealth as well as the McKelvys, Wragg and Knorr, and seeks an emergency court order to freeze their assets. The SEC alleges that they overstated the scope and success of Mantria's operations in several ways to solicit investors. For instance, they claimed that Mantria was the world's leading manufacturer and distributor of biochar and had multiple facilities producing it at a rate of 25 tons per day. In fact, Mantria has never sold any biochar and has just one facility engaged in testing biochar for possible future commercial production. Furthermore, Mantria's only source of revenue has been from its resale of vacant lots for its purported residential communities in rural Tennessee, but those did not generate cash with which to pay investor returns because Mantria provided 100 percent financing for almost all of its vacant lot sales to buyers using other investors' funds.

According to the SEC's complaint, Speed of Wealth has frequently advertised its events through television, radio and print advertising as well as Internet marketing. At seminars and webinars sponsored by Speed of Wealth, Wayde McKelvy along with Wragg or Knorr generally conduct a two-part presentation in which they urge investors to liquidate all of their traditional investments, including individual retirement accounts, employer-sponsored 401(k) plans, mutual funds, stocks, bonds, and savings accounts. McKelvy also encourages investors to borrow as much as possible against home equity, parents' home equity, and business lines of credit. He then recommends that investors use all of their funds to invest in what he describes as the "consistent and safe" high-yield securities offered by Speed of Wealth and Mantria.

The SEC's complaint alleges that after Wragg or Knorr describe Mantria's purported operations and corresponding securities being offered, they market Speed of Wealth and Mantria securities with high-pressure tactics. They frequently offer short-term incentives and bonuses in various programs to induce investors to "pledge" their investments, or to induce those who have pledged to send in their money immediately. In seminars, webinars, and conference calls, Wayde McKelvy often calls upon past investors to provide "testimonials" about their receipt of high returns from past programs. McKelvy and Wragg also tout the safety and security of Mantria's securities based on collateral consisting of deeds of trust given to investors on Mantria's Tennessee rural land holdings. Wragg even tells potential investors that because of the valuable collateral, investors may make more money on their investments if Mantria defaults than if Mantria makes the promised payments. The promoters frequently allude to Mantria's imminent closing of sales worth hundreds of millions of dollars, initial public offerings of securities that are "sure to come" and "sure to be a very huge Wall Street hit", or upcoming investments by "Wall Street."

The SEC alleges that Mantria and Speed of Wealth used investor funds to pay returns to other investors in typical Ponzi scheme fashion. Mantria and Speed of Wealth also did not tell investors that they kept a significant amount of their funds to generously pay commissions of 12.5 percent to the McKelvys.

The SEC's complaint charges each of the defendants with violating the antifraud and offering registration provisions of the securities laws. The SEC also charged all of the defendants except for Mantria with violating broker-dealer registration requirements. The SEC seeks injunctions, disgorgement, and financial penalties from the defendants.

The Commission acknowledges the assistance of the Colorado Department of Regulatory Agencies, Division of Securities, with which the Commission has coordinated its investigation. The SEC's investigation is continuing. [SEC v. Mantria Corporation, Troy B. Wragg, Amanda E. Knorr, Speed of Wealth, LLC, Wayde M. McKelvy, and Donna M. McKelvy, Case No.: 09-CV-02676-CMA-MJW] (LR-21301; Press Rel. 2009-247)

ENFORCEMENT PROCEEDINGS

In the Matter of Brooke Corporation and Brooke Capital Corporation

On November 16, the Commission issued an Order Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Order) against Brooke Corporation (Brooke) and Brooke Capital Corporation (Brooke Capital). The Order finds that Respondents have failed to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder in that they have not filed an Annual Report on Form 10-K for their fiscal years ending Dec. 31, 2008 or periodic or quarterly reports on Form 10-Q for any fiscal period subsequent to their fiscal quarters ending June 30, 2008.

Based on the above, the Order revokes the registration of each class of Respondents' securities registered pursuant to Section 12 of the Exchange Act. Respondents consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rel. 34-61004; File No. 3-13603)

In the Matter of Aura Financial Services, Inc.

On November 16, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Notice of Hearing (Order) against Aura Financial Services, Inc. The Division of Enforcement alleges that Aura has been registered as a broker-dealer with the Commission since April 25, 1997. Additionally, the Division alleges that on Oct. 8, 2009, a final judgment was entered against Aura, permanently enjoining it from future violations of Section 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 the civil action entitled Securities and Exchange Commission v. Aura Financial Services, Inc., et al., Civil Action Number 09-21592-CIV, in the United States District Court for the Southern District of Florida. The Division alleges that the complaint in that civil action alleged that from October 2005 through at least April 2009, Aura and six of its registered representatives used fraudulent sales practices to open and fund Aura brokerage accounts. The complaint alleged that Aura and the other defendants then "churned" these accounts by causing numerous trades to be executed which enriched Aura and the other defendants through brokerage commissions and, in some cases, mark-ups, while depleting the customers' balances through trading losses and excessive transaction costs. A public hearing will be held pursuant to the Order, and an initial decision will be issued within 210 days. (Rel. 34-61007; File No. 3-13685)

In the Matter of RDM Sports Group, Inc.

An Administrative Law Judge has issued an Initial Decision as to Reward Enterprises, Inc., in Administrative Proceeding No. 3-13556, RDM Sports Group, Inc. The Initial Decision finds that Reward Enterprises, Inc., failed to file annual or quarterly reports for any period after March 31, 2005, while its securities were registered with the Securities and Exchange Commission (Commission). The Initial Decision concludes that Reward Enterprises, Inc., violated Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 thereunder. It revokes the registration of each class of the registered securities of Reward Enterprises, Inc., pursuant to Section 12(j) of the Exchange Act.

The other Respondents in Administrative Proceeding No. 3-13556 previously defaulted or settled with the Commission. (Initial Decision No. 390; File No. 3-13556)

SEC Files Settled Offering Fraud Case Against Albert Fase Kaleta and Kaleta Capital Management

On Nov. 13, 2009, the Commission sued Albert Fase Kaleta and his company, Kaleta Capital Management, Inc. (KCM), in the United States District Court in Houston, Texas. The Commission alleges that Kaleta and KCM defrauded investors in the offer and sale of KCM-issued promissory notes in an offering that raised $10 million from approximately 50 investors. The Commission also sued two other entities, Business Radio Network, L.P. d/b/a BizRadio (BizRadio) and Daniel Frishberg Financial Services, Inc. (d/b/a DFFS Capital Management, Inc.) (DFFS) as Relief Defendants solely for the purposes of equitable relief.

The Commission alleges that Kaleta lied to investors about the intended uses of offering proceeds. Among other things, the Commission contends that Kaleta took approximately $1.5 million of the offering proceeds to pay personal expenses.

Without admitting or denying the complaint's allegations, Kaleta and KCM have consented to permanent injunctions against future violations of the antifraud provisions, as well as an order appointing a receiver. The Court will determine the amount of disgorgement and civil penalty that will be assessed against Kaleta and KCM. [SEC v. Albert Fase Kaleta and Kaleta Capital Management, et al, Civil Action No. 4:09-cv-3674, United States District Court for the Southern District of Texas (Houston Division)] (LR-21293)

Court Enters Final Judgment Against Defendant Dante M. Panella

The Commission announced that on June 24, 2009, the United States District Court for the Middle District of Florida entered a Final Judgment, by consent, against Defendant Dante M. Panella. The Final Judgment enjoins Panella from violations of Section 5 of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. In addition, the Final Judgment bars Panella from participating in an offering of a penny stock for a period of five years and orders him to pay disgorgement in the amount of $314,542, prejudgment interest of $13,032 and a civil penalty of $130,000.

The Commission commenced this action by filing its complaint on May 22, 2008. The complaint alleged Panella and other defendants participated in a fraudulent "pump and dump" scheme to evade the registration provisions of the federal securities laws then sell purportedly unrestricted Global shares during a fraudulent promotional campaign. [SEC v. Global Development & Environmental Resources, Inc., et al., Civil Action No. 8:08-cv-993-T27MAP (M.D. Fla.)] (LR-21294)

Court Enters Final Judgments Ordering Disgorgement Against Defendants Concorde America, Inc., and Hartley Lord and Imposing Civil Penalties Against Defendants Lord and Thomas Heysek

The Commission announced that on Oct. 9, 2009, the United States District Court for the Southern District of Florida entered final judgments of disgorgement ordering Defendant Concorde America, Inc. to pay $841,175.69 with prejudgment interest of $259,086.58, and Defendant Hartley Lord to pay $108,824.31 with prejudgment interest of $33,518.43. The judgment against Lord also orders him to pay a civil penalty in the amount of $50,000. The Court also entered a judgment ordering Defendant Thomas Heysek to pay a civil penalty of $50,000. The Court previously entered judgments of permanent injunction, by consent, against Concorde, Lord and Heysek.

The Commission commenced this action by filing its complaint on Feb. 14, 2005, against Concorde, Lord and Heysek, among others. [SEC v. Concorde America, Inc., et al., Civil Action No. 05-80128-CIV-ZLOCH (S.D. Fla.) (LR-21295)

Court Enters Judgment of Permanent Injunction by Default Against GMC Holding Corporation and Orders the Company and Its Chief Executive, Richard Brace to Pay Disgorgement

The Securities and Exchange Commission announced that on Feb. 27, 2009, the United States District Court for the Middle District of Florida entered an Order granting the Commission's Motion for Default Judgment against Defendant GMC Holding Corporation. The Judgment enjoins the company from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. It also orders GMC to pay disgorgement in the amount of $2,090,000.00 with prejudgment interest in the amount of $111,983.73, and a civil penalty in an amount to be determined by the Court upon motion by the Commission. On May 21, 2009, the Commission filed a Notice of Voluntary Dismissal as to the civil penalty claim against GMC, which the Court dismissed on June 4, 2009.

On June 10, 2009, the Court also entered a Final Judgment of Disgorgement and Civil Penalty as to Defendant Richard Brace. The Final Judgment, entered by consent, orders Brace to pay disgorgement in the amount of $214,000 with prejudgment interest of $14,090.49 and imposes a civil penalty of $130,000.

[SEC v. GMC Holding Corporation and Richard Brace, Case No. 6:08-CV-00275-GKS-KRS (M.D. Fla.)] (LR-21296)

Court Enters Judgment of Permanent Injunction and Other Relief Against Defendant George L. Theodule

The Commission announced that on Oct. 22, 2009, the United States District Court for the Southern District of Florida entered a Judgment of Permanent Injunction and Other Relief against Defendant George L. Theodule. The Judgment, entered by consent, enjoins Theodule from violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The Judgment also orders Theodule to pay disgorgement with prejudgment interest and a civil penalty in amounts to be determined by the Court upon the Commission's motion.

The Commission commenced this action by filing its Complaint on Dec. 29, 2009, against Theodule and his two companies, Creative Capital Consortium, LLC and A Creative Capital Concept$, LLC. The Complaint alleges violations of the antifraud provisions of the federal securities laws in connection with a Ponzi scheme through which the defendants raised at least $23.4 million from thousands of investors in the Haitian-American Community nationwide. [SEC v. Creative Capital Consortium, LLC, et al., Case No. 08-81565-CIV-Hurley/Hopkins (S.D. Fla.)] (LR-21297)

Final Judgment of Disgorgement and Civil Penalty Entered Against Defendant Jon F. Simms

The Commission announced that on July 22, 2009, the United States District Court for the Southern District of Florida entered a Final Judgment of Disgorgement and Civil Penalty as to Defendant Jon F. Simms. The Final Judgment, entered by consent, orders Simms to pay disgorgement in the amount of $2,367,350.00 with prejudgment interest of $61,657.62, and a civil penalty of $50,000.00.

Previously, the Court had entered a judgment of permanent injunction, by consent against Simms, enjoining him from violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. [SEC v. Superior Opportunities, Inc., J.F. Simms & Co., LLC, William J. Hickey, Sean A. Osborne and Jon F. Simms, Case no. 04-80021-CIV-HURLEY/HOPKINS (S.D. Fla.)] (LR-21298)

Court Enters Default Judgment of Permanent Injunction and Other Relief Against Defendant Wall Street Communications, Inc.

The Securities and Exchange Commission announced that on Sept. 8, 2009, the United States District Court for the Middle District of Florida entered an Order Granting the Commission's Motion for Default Judgment and Entering Judgment of Permanent Injunction and Other Relief against Defendant Wall Street Communications, Inc. The Judgment enjoins Wall Street from violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Sections 10(b), 15(a) and Rule 10b-5 of the Securities Exchange Act of 1934. The Judgment also orders Wall Street to pay disgorgement, plus prejudgment interest and a civil penalty in amounts to be determined by the Court upon the Commission's motion.

The Commission began this action by filing its complaint on June 5, 2009, against Wall Street, among others, charging them with securities fraud in connection with a series of stock manipulation schemes and a fraudulent, unregistered distribution of stock. [SEC v. Wall Street Communications, Inc., et al., Civil Action No. 8:09-CV-1046-T-30-T6W (M.D. Fla.)] (LR-21299)

INVESTMENT COMPANY ACT RELEASES

Pacific Investment Management Company LLC and PIMCO ETF Trust

An order has been issued on an application filed by Pacific Investment Management Company LLC and PIMCO ETF Trust to permit (a) series of certain actively managed open-end management investment companies to issue shares (Shares) redeemable in large aggregations only (Creation Units); (b) secondary market transactions in Shares to occur at negotiated market prices; (c) certain series to pay redemption proceeds, under certain circumstances, more than seven days from the tender of Shares for redemption; (d) certain affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of Creation Units; and (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the series to acquire Shares. (Rel. IC-28993 - November 10)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change (SR-NASDAQ-2009-092) filed by The Nasdaq Stock Market to eliminate rules related to Nasdaq's PORTAL Market has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of November 16. (Rel. 34-60991)

A proposed rule change filed by the International Securities Exchange (SR-ISE-2009-95) relating to $1 strike intervals for options on the KBW Bank Index (BKX) has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of November 16. (Rel. 34-60992)

Accelerated Approval of Proposed Rule Change

The Commission noticed and granted accelerated approval to a proposed rule change as amended (SR-NASDAQ-2009-095) submitted by The NASDAQ Stock Market pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to extend the pilot program and reduce fees for NASDAQ Last Sale Data Feeds and to make a technical correction to NASDAQ Rule 7039. Publication is expected in the Federal Register during the week of November 16. (Rel. 34-60990)

JOINT INDUSTRY PLANS

Notice of Filing of the Thirteenth Charges Amendment to the Second Restatement of the Consolidated Tape Association Plan and Seventh Charges Amendment to the Restated Consolidated Quotation Plan

Pursuant to Rule 608 under the Securities Exchange Act of 1934, the Participants of the Consolidated Tape Association (CTA) Plan and Consolidated Quotation (CQ) Plan filed a proposal to amend the CTA Plan and CQ Plan (SR-CTA/CQ-2009-02) to delete classification charges from the schedules of Network A and Network B computer input charges and replace the current combined Network A/Network B high speed line access charges with separate high speed line access charges for Network A and Network B. Publication is expected in the Federal Register during the week of November 16. (Rel. 34-60985)

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http://www.sec.gov/news/digest/2009/dig111609.htm