Blotter: November 2012

.44-Caliber Con

The so-called .44 Magnum Leveraged Financing Program proved to be a bad shot for investors who lost $5.77 million in what the SEC described as a securities fraud. It charged Geoffrey H. Lunn and two colleagues in federal court in Colorado with creating a fictitious financial services company, Dresdner Financial, which the team claimed had connections with Dresdner Bank in Germany.  Lunn and his partners, Darlene A. Bishop and Vincent G. Curry, told investors that .44 Magnum securities involved the lease and monetization of bank instruments; a $44,000 investment would produce a $2 million payment in 10 to 12 banking days. The SEC said the team kept postponing the payout date, claiming that the delays were due to holds placed by banks or the government. Lunn began withdrawing investors’ money after their first payment, the agency says; among other things, the money was spent on business and personal expenses, including $848,500 to three Las Vegas call girls and $1 million to a favored investor in a Ponzi-like payment. The SEC says Lunn pulled out more than $1 million in cash and cash transfers that he claimed to have given to Dresdner’s creator, someone he described as a one-eyed man who used the alias “Robert Perello.”

No Charity

The SEC charged James S. Quay, a convicted felon and disbarred attorney, with steering two elderly Atlanta-area women into a bogus investment scheme that cost them $560,000. The agency said Quay and his brother, Jeffrey A. Quay, created a bogus limited partnership called Trinity Charitable Solutions and told the women they were investing in a covered call equities trading program. But the partnership was never officially executed; the Quays put the money into a Scottrade account and misused at least $180,000 for mortgage payments, lavish restaurant meals, and membership at a massage spa. In a previous scam, Quay had received $1.4 million in illicit sales commissions for steering investors into fraudulent schemes; the SEC says he used fake names and hosted free dinner seminars to target retirees. At his office he displayed legal diplomas, certifications and other professional licenses to victims who were unaware that none was valid because of his previous prosecution. Quay agreed to settle the charges by paying more than $2 million in disgorged payments and penalties. His brother’s case has not yet been disposed.