A husband and wife who raised millions of dollars selling investments for a purported charity have been charged with fraud by the SEC for allegedly bilking senior citizens across the country.
According to the SEC’s complaint filed Monday in U.S. District Court for the Southern District of Florida, after Richard K. Olive and Susan L. Olive were hired at We The People Inc., the organization obtained $75 million from more than 400 investors in Florida, Colorado, and Texas among more than 30 states across the country by selling an investment product they described as a charitable gift annuity.
However, the CGAs issued by We The People differed in several ways from CGAs issued legitimately, namely that they were issued primarily to benefit the Olives and other third-party promoters and consultants, the SEC said, adding only a small amount of the money raised was actually directed to charitable services.
Meanwhile the Olives received more than $1.1 million in salary and commissions and siphoned away investor funds for their personal use, according to the SEC.
The SEC further alleged that the Olives lured elderly investors with limited investing experience into the scheme by making a number of false representations about the purported value and financial benefits of We the People’s CGAs.
The Olives also lied about the safety and security of the investments, the SEC said. Investors were coaxed to transfer assets including stocks, annuities, real estate, and cash to We The People in exchange for a CGA, according to the SEC complaint.
We The People claimed to operate as a nonprofit organization while it was offering the CGAs from June 2008 to April 2012, the agency said. However, it 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, the SEC said.
On rare occasions when We The People did actually direct money raised toward charitable services, it was insignificant, according to the SEC complaint. For instance, the organization made public statements that it donated $21.8 million in relief aid to AIDS orphans in Zambia, but the supplies were donated by others and We The People merely made a small payment to the third party that was shipping the supplies, the SEC said.
The SEC’s complaint charged the Olives with violations, or aiding and abetting violations, of the antifraud provisions of the federal securities laws as well as violations of the securities and broker-dealer registration provisions of the federal securities laws. The SEC said it is seeking disgorgement of ill-gotten gains plus pre- and post-judgment interest and financial penalties against the Olives.
Separate complaints were filed Monday against We The People as well as the company’s in-house counsel William G. Reeves, the SEC said. They both agreed to settle the charges without admitting or denying the allegations. The settlements are subject to court approval.
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, according to the SEC. 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.
Reeves 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 SEC said.
Reeves agreed to be suspended from appearing or practicing before the SEC for at least five years, and consented to a final judgment providing injunctive relief under the provisions of the federal securities laws that he violated, according to the SEC. The court will determine at a later date whether a financial penalty should be imposed against Reeves.
“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.”