A Redondo Beach, Calif., resident and his investment companies are facing civil charges and an asset freeze by the SEC over allegations he defrauded seniors, including an investor suffering from a stroke and dementia, in a real estate scam.
The SEC alleges that Alvin R. Brown raised more than $3 million from investors who were falsely promised high profits for investing in his companies, First Choice Investment and Advanced Corporate Enterprises (ACorp).
The clients were told their investments would be used to fund commercial and residential rental properties in California and other western states, but Brown actually used the money for personal expenses and to pay earlier investors, according to the SEC.
Brown particularly targeted an elderly investor suffering from a stroke and dementia, according to the SEC. The investor made a $30,000 initial investment, followed by an additional $45,000. The second investment was made after the investor’s daughter, who had power of attorney, repeatedly requested Brown cease-and-desist from contacting her father. However, ACorp circumvented the daughter to get the investor’s signature as well as an additional $45,000 investment. The money has not been returned despite requests from the daughter.
The SEC alleges that Brown and First Choice lured investors by falsely promising 10 percent annual returns and promising an initial public offering at the end of 2012 that would net investors 150 percent of their original investment. The IPO and investment returns never materialized, according to the SEC.
Instead, Brown and his companies used investor funds to make Ponzi-like payments to pre-existing investors. Brown also routinely withdrew cash for his personal use and he failed to disclose to investors that he had twice filed for personal bankruptcy, according to the SEC.
To fool investors, the ACorp website displayed the seals of the SEC, NYSE, NASDAQ, the State of California and the Better Business Bureau implying that the investments were endorsed by these organizations, which they were not, according to the SEC.
“Brown promised exorbitant returns and investment safety, but in the end he merely took investor money for his own purposes,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office.
There are several charges against Brown. One is the unregistered offer and sale of securities. There are also two fraud charges regarding misrepresentation and omission of information to investors regarding the use of investor funds by Brown and his companies, according to the complaint.
The securities offerings by First Choice and ACorp were not registered with the SEC, says Victoria Levin, assistant regional director of SEC’s Los Angeles regional Office.