SEC Charges Purported Real Estate Business and Owner for Conducting Ponzi Scheme
FOR IMMEDIATE RELEASE
“Investors were led to believe that their money was being safely invested in Anderson's real estate ventures.”
Merri Jo Gillette
Director, SEC Chicago
Washington, D.C., Oct. 7, 2010 — The Securities and Exchange Commission today charged a Chicago-area company and its owner for perpetrating a Ponzi scheme in which they promised investors extraordinary returns generated from a purportedly successful real estate business.
The SEC alleges that Robert R. Anderson of Mt. Prospect, Ill., issued promissory notes through his company Rosand Enterprises that he claimed would generate investor returns ranging from 10 to 20 percent per month. Anderson misrepresented to investors that Rosand Enterprises purchased, constructed, rehabbed, and sold homes in the Chicago area and other locations. However, Anderson was not making any money in the real estate market and was instead conducting a Ponzi scheme to pay earlier investors with funds from new investors. He also helped himself to investor money to buy cars, make hefty credit card payments, and pay for his daughter's wedding.
"Investors were led to believe that their money was being safely invested in Anderson's real estate ventures," said Merri Jo Gillette, Director of the SEC's Chicago Regional Office. "Instead, he was paying investors in Ponzi-like fashion to keep his scheme afloat while also using their money for his personal expenses."
The SEC's complaint, filed in U.S. District Court in Chicago, alleges that Anderson raised approximately $12 million from at least 77 investors between approximately December 2005 and May 2008. Anderson told investors that Rosand Enterprises purchased and rehabilitated existing homes and constructed pre-fabricated modular homes. Anderson told investors that their returns were to be generated from the sale of the homes.
The SEC alleges that Anderson's representations were false and he did not use investor funds to construct or rehabilitate homes. Anderson invested $550,000 of the $12 million raised in a company that he did not control that, in turn, purchased a piece of commercial real estate that was not profitable and nearly all of the money that Rosand invested was lost. Rosand did not disclose the investment loss to investors.
According to the SEC's complaint, Anderson used approximately $7.9 million to make monthly "interest" and return of principal payments to investors, and he used approximately $1.9 million to invest in several suspicious offerings. He misused $632,000 to pay employees, independent contractors, and office expenses with investor funds. Anderson also illegally siphoned off $818,000 for his own and his family's personal expenses, including $326,000 for credit card payments, $142,000 on tuition and a wedding for his daughter, and $38,000 on cars.
The SEC's complaint charges Anderson and Rosand Enterprises with violations of the antifraud and registration provisions of the federal securities laws. The SEC is seeking a permanent injunction and disgorgement of ill-gotten gains with prejudgment interest, jointly and severally, against Anderson and Rosand and a financial penalty against Anderson.
The SEC coordinated the filing of these civil charges with the U.S. Attorney's Office for the Northern District of Illinois, which today announced criminal charges against Anderson.
Justin M. Delfino, Wilburn Saylor and Steven L. Klawans of the SEC's Chicago Regional Office conducted the SEC's investigation. The SEC's litigation will be led by Steven C. Seeger.
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For more information about this enforcement action, contact:
Timothy L. Warren
Associate Director, SEC's Chicago Regional Office
Steven L. Klawans
Assistant Director, SEC's Chicago Regional Office