International Law

W Financial Group, LLC, and others Scam Elderly Investors

SEC Charges Houston Company With Sales of Fraudulent Securities to Mostly Elderly Investors, W Financial Group, LLC, Adley H. Abdulwahab, Michael K. Wallens, Sr. and Michael K. Wallens, Jr.

"The Commission's Complaint alleges that the defendants, directly and through sales agents, have raised at least $17.9 million from September 2006 through February 2007 from the sale of SDOs to at least 182 investors located primarily in Texas, with additional investors in Wisconsin.

Most of WFG's customers were elderly or seeking to invest retirement funds.

WFG investors were lured into purchasing SDOs through a series of misrepresentations and omissions that portrayed SDOs to be a higher-yielding, but equally safe, alternative to bank CDs.

For instance, the defendants' offering materials asserted that SDOs were insured or reinsured by Lloyd's of London and The Republic Group.

WFG's offering materials also represented that WFG would keep investor funds separate and apart from its property and would use investor funds for limited, specially enumerated purposes, such as creating or purchasing automobile financing receivables or placing the funds in government securities or highest-quality corporate bonds.

The Commission alleges, however, that these representations are materially false and misleading.

For instance, the Commission contends that the SDOs are not insured as represented, if at all.

Indeed, according to the Complaint, the Lloyd's and Republic Group insurance provides only miniscule coverage at best. Moreover, as detailed in the Complaint, the defendants misused investor funds.

The Complaint alleges, for example, that defendants did not maintain investor funds in separate accounts and placed only a fraction of the funds in the investment vehicles disclosed to investors.

Instead, defendants allegedly have used millions of dollars to purchase the majority interest in an electric power company and fund its operations, to buy and develop residential real estate, and to buy unauthorized investment vehicles, such as a life settlement contract."

Would like to know about how this pitch worked.

Seems a little hard to understand how investing in automobile receivables is attractive as an investment.

Anyone have any ideas about the scripts used in this one?

Full post as published by Misleading Advertising Law on April 10, 2008 (boomark / email).