SEC Claims Couple Hijacked a Charity

SEC Claims Couple Hijacked a Charity

The SEC has brought a stream of Ponzi scheme cases in recent months in which little has been left for investors. SEC v. We the People, Inc. (S.D. Fla. Filed Feb. 4, 2013) and two related cases are a different kind of financial fraud action however, with a different result. Here the Commission claims that the husband and wife team of Richard and Susan Olive essentially hijacked what was a legitimate, albeit essentially dormant, charity that had been devoted to promoting nuclear safety to line their own pockets. Unlike many of these cases the settlement here preserved over $60 million for investors. See also SEC v. Olive (S.D. Fla. Filed Feb. 4, 2013)(action against the couple); SEC v. Reeves (S.D. Fla. Filed Feb. 4, 2013)(settled action against firm attorney).

In March 2008 Richard and Susan Olive were employed by We The People to assist with fund raising on a commission basis. The couple did not disclose their checkered regulatory history. Previously, Alabama, California, Florida, Iowa, Tennessee, Texas and Washington concluded that the pair had engaged in fraud in connection with the marketing of products from an earlier venture. In 2010 a Tennessee grand jury indicted them and in 2012 a federal grand jury in that state returned charges against Richard Olive on several counts of fraud.

At We the People the couple embarked on a fund raising campaign which raised over $75 million from 400 investors in over 30 states over a four year period. Investors were offered the right to purchase a tax deductible gift annuity or a charitable gift annuity. Investors were enticed to transfer cash, securities and other property to We the People to secure a charitable gift annuity. The annuity was supposed to make charitable contributions for the life of the donor and in some instances their designated beneficiary.

Investors were assured that the funds would be donated to reputable charities, that the value of the gift annuity would reflect the full accumulated value of the transferred assets and that the investment was safe. Indeed, the assets were supposedly backed by a cash collateral account and "reinsurance."

While We the People did make minimal charitable contributions, in fact much of the money was siphoned off by the Olives in huge salaries. Other sums were misappropriated. Investors did not received the promised "full credit" for their assets but only abut 65% to 75%. There was no safety, collateral account or "reinsurance." Investors also were not told about the regulatory past of Mr. and Mrs. Olive.

The company settled with the Commission, consenting to the entry of a permanent injunction prohibiting future violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Section 10(b). We the People also agreed to pay disgorgement and consented to the appointment of a receiver who will marshal the over $60 million in remaining investor assets.

The Reeves action also settled. It is against attorney William Reeves who essentially served as in-house counsel. He is alleged to have been a director of the company and counsel. He participated and reviewed a number of documents regarding the operations of the company. The complaint naming Mr. Reeves as a defendant alleges violations of Securities Act Sections 5(a) and 5(c) as well as each subsection of Section 17(a). To resolve the case Mr. Reeves consented to the entry of a permanent injunction prohibiting future violations of the Sections cited in the complaint and agreed to be suspended from practicing before the Commission for a period of five years. The court will determine at a later date what financial penalty, if any, should be imposed. Mr. Reeves entered into a cooperation agreement with the Commission, which is reflected in the terms of the settlement.

The complaint against the Olives and another company owned by Mrs. Olive, We're Not Alone, LLC, alleges violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Sections 10(b) and 15(a). The case is in litigation.

The SEC has brought a stream of Ponzi scheme cases in recent months in which little has been left for investors. SEC v. We the People, Inc. (S.D. Fla. Filed Feb. 4, 2013) and two related cases are a different kind of financial fraud action however, with a different result. Here the Commission claims that the husband and wife team of Richard and Susan Olive essentially hijacked what was a legitimate, albeit essentially dormant, charity that had been devoted to promoting nuclear safety to line their own pockets. Unlike many of these cases the settlement here preserved over $60 million for investors. See also SEC v. Olive (S.D. Fla. Filed Feb. 4, 2013)(action against the couple); SEC v. Reeves (S.D. Fla. Filed Feb. 4, 2013)(settled action against firm attorney).

In March 2008 Richard and Susan Olive were employed by We The People to assist with fund raising on a commission basis. The couple did not disclose their checkered regulatory history. Previously, Alabama, California, Florida, Iowa, Tennessee, Texas and Washington concluded that the pair had engaged in fraud in connection with the marketing of products from an earlier venture. In 2010 a Tennessee grand jury indicted them and in 2012 a federal grand jury in that state returned charges against Richard Olive on several counts of fraud.

At We the People the couple embarked on a fund raising campaign which raised over $75 million from 400 investors in over 30 states over a four year period. Investors were offered the right to purchase a tax deductible gift annuity or a charitable gift annuity. Investors were enticed to transfer cash, securities and other property to We the People to secure a charitable gift annuity. The annuity was supposed to make charitable contributions for the life of the donor and in some instances their designated beneficiary.

Investors were assured that the funds would be donated to reputable charities, that the value of the gift annuity would reflect the full accumulated value of the transferred assets and that the investment was safe. Indeed, the assets were supposedly backed by a cash collateral account and "reinsurance."

While We the People did make minimal charitable contributions, in fact much of the money was siphoned off by the Olives in huge salaries. Other sums were misappropriated. Investors did not received the promised "full credit" for their assets but only abut 65% to 75%. There was no safety, collateral account or "reinsurance." Investors also were not told about the regulatory past of Mr. and Mrs. Olive.

The company settled with the Commission, consenting to the entry of a permanent injunction prohibiting future violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Section 10(b). We the People also agreed to pay disgorgement and consented to the appointment of a receiver who will marshal the over $60 million in remaining investor assets.

The Reeves action also settled. It is against attorney William Reeves who essentially served as in-house counsel. He is alleged to have been a director of the company and counsel. He participated and reviewed a number of documents regarding the operations of the company. The complaint naming Mr. Reeves as a defendant alleges violations of Securities Act Sections 5(a) and 5(c) as well as each subsection of Section 17(a). To resolve the case Mr. Reeves consented to the entry of a permanent injunction prohibiting future violations of the Sections cited in the complaint and agreed to be suspended from practicing before the Commission for a period of five years. The court will determine at a later date what financial penalty, if any, should be imposed. Mr. Reeves entered into a cooperation agreement with the Commission, which is reflected in the terms of the settlement.

The complaint against the Olives and another company owned by Mrs. Olive, We're Not Alone, LLC, alleges violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Sections 10(b) and 15(a). The case is in litigation.

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