Supplement to Press Release 2000-72:
Statistics on the Promissory Note
Enforcement Sweep

Statistics

• Charges made in 11 SEC injunctive actions and 2 administrative proceedings

• Total money raised in SEC actions: Over $300 million

• Total number of SEC defendants/respondents: 60
  • Individuals: 38
  • Entities: 22

• Total Relief Defendants: 6

• Total Number of Issuers Involved in SEC Actions: 21

Common Elements

Sales by Insurance Agents:  Insurance agents were involved in most of the fraudulent offerings. Of the 38 individuals that we filed actions against, 22 of them were insurance agents. Further, insurance agents were involved in selling notes for 18 of the 21 issuers involved in the SEC actions announced today.

Misuse of Proceeds – Payment of High Sales Commissions:  Contrary to most of the defendants' statements about how the money raised would be used to further the issuers' business plans, the defendants used significant portions to pay sales commissions. In five of the actions, the defendants paid commissions of as much as 20 to 30 percent.

Purported Guarantee or Collateral for the Notes:  Sales persons for 20 of the 21 issuers involved told investors that the notes were guaranteed or backed by collateral. Most often, these issuers purported to issue "bonded" notes, or notes that were "guaranteed," "insured," or backed by "surety bonds." In other instances, these issuers purported to have collateral for the notes, for example, accounts receivables or titles to automobiles. Without exception, these 20 issuers either had no insurance, collateral or other means to guarantee payment, or significantly under insured or collateralized the notes.