SEC Sues Companies and Individuals Involved in a Ponzi Scheme that Raised Approximately $6 Million from 600 Haitian-American Investors Living in South Florida
FOR IMMEDIATE RELEASE
Washington, D.C., June 9, 2005 The Securities and Exchange Commission announced today that it filed a civil injunctive action against Focus Financial Associates, Inc. and Focus Development Center, Inc. (collectively, the Focus Companies), and their principals, Max Francois, Aiby Pierre-Louis, and Jean Fritz Montinard. According to the complaint, the defendants engaged in an affinity fraud that targeted members of the Haitian-American community in Miami through local radio programs and presentations to Haitian-American church congregations.
The Commission’s complaint alleges that from February 2002 to July 2004, the Focus Companies and their principals raised approximately $6 million from approximately 600 Haitian-American investors living in South Florida. Defendants claimed that the investment in twelve-month term notes provided a unique opportunity for members of the Haitian community to earn a guaranteed return of over 15%, while at the same time creating jobs and making an investment in their own community. In truth, defendants’ scheme was a Ponzi scheme because all principal and interest payments made to investors were made with new investor funds, and not the new businesses’ profits.
David Nelson, Director of the Commission’s Southeast Regional Office in Miami, said, “This case illustrates why affinity frauds are so egregious. The defendants here used their shared race and nationality to gain investors’ trust. They also enticed investors with the assurance that their money would be used to develop and strengthen their own community.”
The SEC’s complaint alleges that the defendants offered twelve-month term notes that purportedly generated “guaranteed” annual returns of 15 to 20% and told prospective investors that the funds they invested would be distributed to companies operating under a related “Focus” name, including an airline providing direct flights between Miami and Haiti, a tax return preparation service, a chiropractic center, a landscaping service, an auto dealership, and two auto repair shops, among others. The individual defendants touted their experience in running these businesses, and claimed that the returns to investors would be paid from the profits that were being generated by the businesses.
The complaint further alleges that:
- Defendants’ statements to prospective investors that the notes generated 15 to 20% annual returns from the profits of the businesses funded by investors were patently false. The defendants had little or no experience in running a company, and the businesses were mismanaged and operated at a loss almost since inception. All “profits” paid to investors were paid from new investor funds.
- Defendants’ oral and written assurances that the invested principal was safe and that investors were “guaranteed” to receive a return of their entire principal at the end of the twelve-month term were false. Contrary to these assurances the Focus Companies’ investment strategy consisted of funding businesses with few assets and almost no operating income and, therefore, was fraught with investment risk.
- Defendants’ representation that they would use investor funds to finance the Focus Companies’ related business ventures was false because the majority of investor funds was used to make principal and interest payments to existing investors, and pay the individual defendants’ salaries and commissions.
In addition to permanent injunctions, the Commission is seeking an order that the defendants disgorge all ill-gotten gains, with pre-judgment interest, and an order imposing civil money penalties.
The Commission has recently translated certain of its investor education brochures into Creole. In addition, the Commission’s Southeast Regional Office is currently planning to hold an investor assistance program to answer questions about this case in particular and also to provide information that investors can use to help them avoid similar affinity scams in the future. The date and location of the meeting will be posted in the near future on the SEC’s website at www.sec.gov.
Investors are advised to read the SEC’s “Affinity Fraud” Investor Alert, which provides tips on how to avoid being a victim in an affinity fraud. This and other investor alerts can be found on the SEC’s web site, at www.sec.gov/investor/pubs.shtml. The “Affinity Fraud” Investor Alert has also been translated into Creole and posted on the SEC’s website.
For further information, contact:
Regional Director, Southeast Regional Office
Glenn S. Gordon
Associate Regional Director (Enforcement), Southeast Regional Office
Teresa J. Verges
Assistant Regional Director (Enforcement), Southeast Regional Office
Additional materials: Creole translation of this press release