URGENT >> BULLETIN >> MOVING: Purported Charity ‘We The People Inc. Of The United States’ Was ‘Only A Front To Sell Bogus Investment Products’ To Senior Citizens, SEC Charges

URGENT >> BULLETIN >> MOVING: (UPDATED 3:14 P.M. ET U.S.A.) The SEC has gone to federal court in the Southern District of Florida, alleging that an enterprise known as “We The People Inc. of the United States” (We the People) was a “front” that covered up a fraud scheme aimed at senior citizens in multiple states.

“We the People” are the first three words of the U.S. Constitution. Scammers have been known to trade on patriotic themes to fleece investors. Senior citizens may be particularly vulnerable to such pitches

Separate civil complaints have been filed against Richard K. Olive, 47, and Susan L. Olive, 48, of Vero Beach, Fla.; We the People, a Massachusetts entity operating from Tallahassee, Fla; and William G. Reeves, 61, an attorney in Tallahassee.

The scam sold an investment product described as a “charitable gift annuity” or CGA, the SEC alleged.

In the “We the People” scam, the SEC said, investors were told told to tranfser assets and that they “would receive an income stream, penalty free withdrawals, and tax benefits.”

And the scammers gathered at least $75 million, affecting at least 400 investors in Florida, Texas, Colorado and at least 27 others states, the SEC said.

The Olives are accused of telling lies to lure senior citizens with limited investment experience into the scam.

“The Olives raised millions from senior citizens by claiming that We The People’s so-called CGAs provided attractive financial benefits and were re-insured and backed by assets held in trust,” said Julie Lutz, Associate Director of the SEC’s Denver Regional Office. “Investors were not given the full story about the true value and security of their investments.”

From the SEC (italics added):

According to the SEC’s complaint against the Olives filed in U.S. District Court for the Southern District of Florida, investors were coaxed to transfer assets including stocks, annuities, real estate, and cash to We The People in exchange for a CGA. We The People claimed to operate as a non-profit organization while it was offering the CGAs from June 2008 to April 2012. However, We The People was not operating as a charity but instead for the primary purpose of issuing CGAs and using the proceeds to pay substantial sums to the Olives, third-party promoters, and consultants. On rare occasions when We The People did actually direct money raised toward charitable services, it was insignificant. For instance, the organization made public statements that it donated $21.8 million in relief aid to AIDS orphans in Zambia, but in fact the supplies were donated by others and We The People merely made a small payment to the third party that was shipping the supplies.

Criminal probes into the scam have been under way since at least 2010, and Richard Olive was indicted in Tennessee last year, the SEC said.

Reeves, the lawyer, “entered into a cooperation agreement with the SEC, and the terms of his settlement reflect his assistance in the SEC’s investigation and anticipated cooperation in its pending action against the Olives,” the agency said.

Under the settlement, Reeves will be suspended from appearing or practicing before the SEC for at least five years. He also has consented to a judgment, with financial penalties pending, the SEC said.

Meanwhile, the SEC said, “We The People consented to a final judgment that will enable the appointment of a receiver to protect more than $60 million of investor assets still held by the company. The final judgment also provides for disgorgement of ill-gotten gains and provides injunctive relief under the antifraud and registration provisions of the federal securities laws.”

More from the SEC’s complaint against “We the People” (italics added):

Investors often learned about We The People’s investment product from promoters who signed marketing agreements with We The People. We The People would provide these promoters with materials, including flyers, letters, illustrations, and even videos, to use in soliciting the investments. We The People paid these promoters significant commissions, ranging from 7-10%.

Read SEC statement and find links to complaints here.