A Fountain Hills company has been fined for its unregistered investment sales in connection with a residential real estate development.
The Arizona Corporate Commission issued a default order against Promise Land Properties, LLC, and ordered it to pay $958,000 in restitution and a $25,000 administrative penalty.
The Commission said it found that the firm was not registered to offer or sell securities in Arizona when it offered and sold LLC membership interests to six investors in order to fund the acquisition and development of 1,280 acres near Tombstone.
The Commission found that the Promise Land Properties' manager met potential investors through a network of acquaintances, including people from Arizona, Nebraska and Minnesota. The Commission found that an institutional lender eventually foreclosed on the Tombstone real estate development project.
In a separate case, the commission ordered Patrick Hammons, of Mesa, and his affiliated companies to pay $174,000 in restitution and a $20,000 administrative penalty.
Hammons is accused of committing securities fraud and transacting business as an investment adviser without a license. The Commission said it found that Hammons and the company he managed, Pacific Ventures & Trading, LLC, fraudulently offered and sold unregistered LLC membership interests to investors.
The Commission found that Hammons failed to use investor funds as promised and to disclose aspects of the payments made by Pacific Ventures & Trading to another company Hammons managed, TF6 Advisors, LLC.
The Commission found that Hammons and TF6 Advisors violated the Arizona Investment Management Act by providing investment advice for a fee without being licensed.
Hammons and TF6 Advisors committed fraud in connection with their investment advisory services by failing to use investor money as promised, follow required auditing procedures while having control over client funds, act in the best interests of their client, accurately disclose the compensation structure of TF6 Advisors and by misrepresenting the market value of the assets of TF6 Advisors, the commission said.
In settling this matter, Hammons and his companies neither confirmed nor denied the commission's findings but agreed to the entry of the consent order.
In another matter, Morrie S. Friedman, of Scottsdale, was ordered to pay $79,625 in restitution and a $5,000 administrative penalty for fraudulently offering and selling unregistered stock shares to investors.
The Commission found that, while not registered to offer or sell securities in Arizona, Friedman offered and sold unregistered stock in connection with two companies, Beyond Juice Inc. and VIP ComLink Inc.
The Commission said it revoked the securities registration of Fountain Hills resident Donna Kay Beers for her dishonest and unethical conduct . Beers was ordered to pay $86,815 in restitution and a $15,000 administrative penalty.
The Commission found that Beers, who was also a former investment adviser representative, recommended unsuitable investments for a senior couple who was searching for a safe and prudent way to invest their retirement funds.
Beers recommended the couple sell their well-known stock holdings such as Walmart and Costco and invest the proceeds plus additional cash into multiple private placement investments and direct participation programs, which were risky and illiquid, the commission said.
One of the investments, Fountain Hills Town Square, LLC, involved a 12.67-acre real estate development in which Beers had an undisclosed financial interest, the commission said.
The Commission found that, despite knowing the real estate project had difficulty obtaining financing, Beers touted the investment as good and safe and pressured her clients to invest. In settling this matter, Beers neither confirmed nor denied the Commission's findings, but agreed to the entry of the consent order.
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