SEC Charges 26 Defendants in $428 Million Securities Fraud That Targeted Senior Citizens and Retirement Savings

Commission's Crackdown on Financial Fraud Against Seniors ContinuesWashington, D.C. - The Securities and Exchange Commission filed charges stemming from a $428 million securities fraud that victimized thousands of seniors and other investors throughout the United States. The SEC's action, filed in federal district court in Chicago, Ill., charges 26 defendants and alleges that they participated in a massive fraud that involved the sale of securities in the form of "Universal Leases." The investments were structured as timeshares in several hotels in Cancun, Mexico, coupled with a pre-arranged rental agreement that promised investors a high, fixed rate of return. The fraudulent Universal Lease scheme eventually collapsed, leaving investors with losses that exceed $300 million. The case is part of the Commission's crackdown on financial fraud against senior citizens, which has already resulted in more than 40 enforcement actions over the past two years.In the latest action, the SEC alleges that Michael E. Kelly and those working with him duped thousands of U.S. investors into using their retirement savings to buy Universal Leases on the false promise of safe and guaranteed returns. The SEC alleges that from 1999 until 2005, Kelly and others raised at least $428 million through the Universal Lease scheme from investors throughout the United States, with more than $136 million of the funds invested coming from IRA accounts. The SEC further alleges that a nationwide network of unregistered salespeople who sold the Universal Leases collected undisclosed commissions totaling more than $72 million. For most of the scheme, the complaint alleges, Kelly and his organization used new investor funds raised in the scheme to make illusory "rental income" payments to Universal Lease investors. The SEC also alleges that Kelly and others ran the scheme from Cancun through a number of foreign entities in Mexico and Panama.For the rest of this article please feel free to visit www.sec.gov.