|Ponzi scheme suspected in local offices|
|Written by By WILL MALONE Sentinel Staff Writer|
|Monday, 17 August 2009 08:58|
PERRYSBURG - Two Michigan men, who leased a couple of their several business offices in Wood County, are being charged by the U.S. Securities and Exchange Commission with conducting a Ponzi investment scheme.
The SEC's complaint in the U.S. District Court for the Eastern District of Michigan describes a scenario wherein John Bravata and Richard Trabulsy raised more than $50 million from about 440 investors through BBC Equities LLC and Bravata Financial Group Inc. by offering membership interests in a real estate fund with promised annual returns of 8 to 12 percent.
But the SEC contends that not half of that money was spent on real estate. The commission told the court that proceeds from the operation were used to finance the "expensive lifestyles" of the two men as well as Bravata's wife, Shari Bravata. The complaint states that several million dollars of investor money funded luxury homes, watercraft, jewelry, gambling, exotic vacations and expensive cars.
"Investors thought they were investing in a safe and profitable real estate investment fund, but instead their money was being used to pay for luxury homes, exotic vacations, and gambling debts of the defendants," said Merri Jo Gillette, director of the SEC's Chicago regional office, in a release from the SEC.
The SEC accuses John Bravata and Trabulsy of misappropriating $7.2 million for personal use and then spending another $11.3 million of investor funds to make quarterly payments to other investors.
Casey Pogan, a spokesperson for Levis Commons, said BBC Equities and Bravata Financial leased second-floor offices from the shopping center but that the businesses closed their offices effective Aug. 8.
The SEC's complaint seeks permanent injunctive relief and disgorgement from the all of the defendants, and financial penalties from John Bravata, Trabulsy and Bravata's son Antonio Bravata. The SEC's complaint further seeks disgorgement of all investor funds or assets acquired with investor funds from relief defendant Shari Bravata.
Antonio Bravata is being charged with selling unregistered securities and acting as an unregistered broker.
According to the SEC, a temporary restraining order and asset freeze was granted against John Bravata, Trabulsy, and the investment companies. The SEC says assets also have been frozen for Antonio Bravata and Shari Bravata, who is named as a relief defendant in the case for the purposes of recovering investor funds.
As the SEC's Division of Enforcement can only recommend investigations of securities law and bring civil actions in federal court, the parties are not charged in the complaint with a crime. A spokesperson with the Federal Bureau of Investigation's office in Toledo did not return a message seeking comment on the possibility of criminal charges. And the U.S. Attorney's Office in Toledo declined comment.
"The commission brings this lawsuit to put an immediate halt to the defendants' ongoing misconduct, to prevent further harm to investors, to hold defendants accountable for their flagrant and repeated violations of the federal securities laws, and to disgorge ill-gotten gains from defendants and Shari Bravata," the commission stated in its complaint.
Gregory Bartko, an Atlanta corporate attorney representing the Bravatas, said his clients are "pretty stung" by the allegations - which, he said, "are just off the mark. They're just not correct, and it's going to unfortunately take some time and a fair amount of resources to establish the true set of facts here."
He also took issue with "inflammatory buzz words" and phrases such as "Ponzi scheme" and "luxury cars" used in the SEC complaint.
Bartko said any use of the dollars received by investors was disclosed in clear language. He said the materials did not seek to mislead investors with any easy-to-overlook small print. He would not comment on charges that Antonio Bravata sold unregistered securities until more records were obtained for review.
The business asked investors to participate in a long-term plan, he said.
He said the business model included a portfolio of distressed real estate properties that were to be refurbished and resold when the market improved. He said the SEC captured a "snap-shot" of the business and filed suit.
"You don't get a return on investment in buying distressed assets in the first year or even the first two years," he said. "There's a life cycle to the business. That life cycle would not have turned around for three to five years."
|Last Updated on Monday, 17 August 2009 09:54|
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