For many people “Rudy” conjures up the inspirational cinematic tear-jerker of the same name from 1993. Today “Rudy” is likely conjuring up tears for another reason. Daniel Ruettiger, the famed Notre Dame football player who inspired the movie, and 12 others have been charged in a pump-and-dump scheme by the Securities and Exchange Commission.
According to the SEC, Ruettiger deceived investors into buying stock in Rudy Nutrition, his sports drink company meant to compete with Gatorade. Instead, Ruettiger used the company as a vehicle for a pump-and-dump scheme that occurred in 2008 and generated more than $11 million in profits.
The SEC claims the company gave investors false and misleading information about its activities in press releases, SEC filings and promotional materials. This included materials that claimed the company's sports drink “Rudy” outperformed Gatorade and Powerade in taste tests, and outsold Gatorade. The participants also manipulated trading to artificially inflate the price of the company's stock while selling unregistered shares to investors.
Ruettiger has agreed to settle with the SEC for $382,866, and other participants have agreed to final judgments also ordering disgorgement, prejudgment interest, and financial penalties.
Like Father, Like Son
Utah-based Wendell A. Jacobson and his son Allen R. Jacobson were charged by the Securities and Exchange Commission with securities fraud for operating a $220 million Ponzi scheme.
According to the SEC, the father-son duo were running a real estate business in Fountain Green, Utah, where they were offering investors the opportunity to invest in limited liability companies to share ownership of large apartment complexes in eight states. Allegedly, the two were trying to connect with prospective investors through the Church of Jesus Christ of Latter-Day Saints. They would tell people they were buying low-occupancy apartment buildings at discounted prices to fix them up and resell within five years.
In reality, the LLCs saw large losses, and the Jacobsons were pooling the money into large bank accounts, which they tapped for family expenses and operating costs for their various companies. They were also paying earlier investors with funds received from new investors. The SEC also alleges that investors were told numerous times that the property owned in their LLC had been sold and that they generated a profit, but the properties were not sold.
Promising investors annual returns from 5 to 8 percent, the Jacobsons raised $220 million from 225 investors, the SEC claims.
Former Bernie Madoff employee Enrica Cotellessa-Pitz is in deep with the Securities and Exchange Commission for allegedly falsifying books and records to keep Madoff's fraudulent scheme under wraps. The SEC claims Cotellessa-Pitz played a key role in hiding facts about Madoff's operations.
For example, Cotellessa-Pitz, who worked at Bernard L. Madoff Investment Securities (BMIS) for more than 30 years, created false internal accounting documents that showed the investment company was generating hundreds of millions of dollars of income, the SEC says. Other false documents were filed with regulators, including the SEC, and were meant to fool examiners, federal and state tax auditors and other external reviewers.
“To keep his massive fraud alive, Madoff had to hide as many facts about his advisory operations as possible,” said George S. Canellos, director of the SEC's New York regional office. “Cotellessa-Pitz along with other senior BMIS personnel played a critical role in this effort by creating false documents to deceive federal and state regulators.”
The U.S. Attorney's Office for the Southern District of New York announced criminal charges against Cotellessa-Pitz on the same day as the SEC. She pled guilty and consented to the entry of a partial judgment in the SEC's civil case against her.