SEC Charges Pastor with Defrauding Retirees
The Securities and Exchange Commission announced fraud charges and an emergency asset freeze obtained against a Michigan-based pastor accused of exploiting church members, retirees, and laid-off auto workers who were misled to believe they were investing in a successful real estate business.
The SEC alleges that Larry Holley, the pastor of Abundant Life Ministries in Flint, Mich., cloaked his solicitations in faith-based rhetoric, replete with references to scripture and biblical figures. Holley allegedly told prospective investors that as a person who “prayed for your children,” he was more trustworthy than a “banker” with their money. According to the SEC’s complaint, Holley held financial presentations masked as “Blessed Life Conferences” at churches nationwide during which he asked congregants to fill out cards detailing their financial holdings, and he promised to pray over the cards and invited attendees to have one-on-one consultations with his team. He allegedly called his investors “millionaires in the making.”
According to the SEC’s complaint, which also charges Holley’s company Treasure Enterprise LLC and his business associate Patricia Enright Gray, approximately $6.7 million was raised from more than 80 investors who were guaranteed high returns and told they were investing in a profitable real estate company with hundreds of residential and commercial properties.
According to the complaint, Gray advertised on a religious radio station based in Flint and singled out recently laid-off auto workers with severance packages to consult her for a “financial increase.” Gray allegedly promised to roll over investors’ retirement funds into tax-advantaged Individual Retirement Accounts (IRA) and invest them in Treasure Enterprise. The SEC alleges that no investor funds were deposited into IRAs, and Treasure Enterprise struggled to generate enough revenue from its real estate investments to support the business and make payments owed to investors. Treasure Enterprise owes investors an estimated $1.9 million in past due payments, according to the SEC’s complaint.
“As alleged in our complaint, Holley and Gray targeted the retirement savings of churchgoers, building a bond of trust purportedly based on faith but actually based on false promises,” said David Glockner.
According to the SEC’s complaint, Holley, Gray, and Treasure Enterprise were not registered to sell investments. The SEC encourages investors to check the background of anyone offering to sell them investments by doing a quick search on the SEC’s investor website.
The SEC has obtained a temporary restraining order in U.S. District Court for the Eastern District of Utah that freezes the assets of Holley, Gray, and Treasure Enterprise. The court’s order also appoints a receiver and imposes other emergency relief.
The SEC’s complaint alleges violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks disgorgement of ill-gotten gains plus interest, penalties, and permanent injunctions.
The SEC’s investigation, which is continuing, is being conducted by Ana P. Doncic, Delia L. Helpingstine, and Sruthi Koneru of the Utah office. The case is being supervised by Steven L. Klawans, and the litigation is being led by Jonathan S. Polish.
SEC ADOPTS JOBS ACT AMENDMENTS TO HELP ENTREPRENEURS AND INVESTORS
The Securities and Exchange Commission today announced that it has adopted amendments to increase the amount of money companies can raise through crowdfunding to adjust for inflation. It also approved amendments that adjust for inflation a threshold used to determine eligibility for benefits offered to “emerging growth companies” (EGCs) under the Jumpstart Our Business Startups (JOBS) Act.
“Regular updates to the JOBS Act, as prescribed by Congress, ensure that the entrepreneurs and investors who benefit from crowdfunding will continue to do so,” said SEC Acting Chairman Michael S. Piwowar. “Under these amendments, the JOBS Act can continue to create jobs and investment opportunities for the general public.”
The SEC is required to make inflation adjustments to certain JOBS Act rules at least once every five years after it was enacted on April 5, 2012. In addition to the inflation adjustments, the SEC adopted technical amendments to conform several rules and forms to amendments made to the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”) by Title I of the JOBS Act.
The Commission approved the new thresholds March 31. They will become effective when they are published in the Federal Register.
BACKGROUND ON THE SEC JOBS ACT
Section 101 of the JOBS Act added new Securities Act Section 2(a)(19) and Exchange Act Section 3(a)(80) to define the term “emerging growth company” (“EGC”). Pursuant to those sections, every five years the SEC is directed to index the annual gross revenue amount used to determine EGC status to inflation to reflect the change in the Consumer Price Index for All Urban Consumers (“CPI-U”) published by the Bureau of Labor Statistics (“BLS”). To carry out this statutory directive, the SEC has adopted amendments to Securities Act Rule 405 and Exchange Act Rule 12b-2 to include a definition for EGC that reflects an inflation-adjusted annual gross revenue threshold. The JOBS Act also added new Securities Act Section 4(a)(6), which provides an exemption from the registration requirements of Section 5 under the Securities Act for certain crowdfunding transactions. In October 2015, the SEC promulgated Regulation Crowdfunding to implement that exemption. Sections 4(a)(6) and 4A of the Securities Act set forth dollar amounts used in connection with the crowdfunding exemption, and Section 4A(h)(1) states that such dollar amounts shall be adjusted by the SEC not less frequently than once every five years to reflect the change in the CPI-U published by the BLS. The SEC has adopted amendments to Rules 100 and 201(t) of Regulation Crowdfunding and Securities Act Form C to reflect the required inflation adjustments.
In addition, Sections 102 and 103 of the JOBS Act amended the Securities Act and the Exchange Act to provide several exemptions from a number of disclosure, shareholder voting, and other regulatory requirements for any issuer that qualifies as an EGC. The exemptions reduce the financial disclosures an EGC is required to provide in public offering registration statements and relieve an EGC from conducting advisory votes on executive compensation, as well as from a number of accounting and disclosure requirements. The regulatory relief provided under Sections 102 and 103 of the JOBS Act was self-executing and became effective once the JOBS Act was signed into law. The technical amendments that the SEC is adopting conform several rules and forms to reflect these JOBS Act statutory changes.
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