SEC Closes Down $25m Fraud

by Philip Morton, Investors Offshore.com

24 August 2007

The US Securities and Exchange Commission on Thursday filed an emergency action to shut down a $25 million Ponzi scheme that victimized hundreds of senior and other investors nationwide who bought fractional ownership interests in life insurance policies.

The regulator asked a federal district court in Sacramento, California to grant the SEC's request for an order temporarily prohibiting further sales of the products, freezing the assets, and appointing a receiver to take control of operations in order to manage and preserve remaining investor funds.

The SEC has brought more than 40 enforcement actions over the past two years against fraudsters targeting retirees and other older investors.

In the latest action, the Commission alleged that Donald Neuhaus of Redding, California, his daughter Kimberley Snowden, and their company Secure Investment Services, Inc., orchestrated the Ponzi scheme that falsely promised safe, secure and profitable interests in life insurance policies known as "viaticals" while failing to disclose the dire financial condition of the investment venture.

Many of the investors were elderly and invested their retirement savings. The Commission also alleged that the father-daughter fraudsters pocketed $700,000 for their personal use while the scam was on the verge of collapse.

"Moving to shut down this Ponzi scheme reaffirms the Commission's overall commitment to aggressively investigating and stopping those who prey upon the retirement funds of older Americans," explained Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. "These perpetrators lined their own pockets and deliberately disguised the serious risks that investors faced, misleading senior citizens and others to believe they were making safe and secure investments when, in reality, they were being lured into a financial crisis."

Helane L. Morrison, Regional Director of the Commission's San Francisco Regional Office, added:

"The defendants engaged in a predatory scheme, making promises that they knew they could not keep to senior citizens and other investors. The requested court order temporarily halting this fraud is a critical step in protecting these investors and preserving their remaining assets."

The Commission's complaint charged the defendants with violating the antifraud and registration provisions of the federal securities laws, and is seeking permanent injunctions, disgorgement, and civil penalties.

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