SEC Halts $16m Fraud

by Glen Shapiro, LawAndTax-News.com, New York

20 July 2006

The US Securities and Exchange Commission on Monday filed an action charging Renaissance Asset Fund, Inc., Ronald J. Nadel, and Joseph M. Malone with fraudulently raising over $16 million from more than 190 investors nationwide.

The Commission’s complaint, filed in the United States District Court for the Central District of California in Orange County, alleges that Renaissance and its principals operated a Ponzi scheme and used investor funds to pay lavish personal expenses. Many of their victims were elderly and were solicited through Jehovah’s Witnesses congregations.

At the same time as it filed the civil injunctive action, the Commission settled administrative cease-and-desist proceedings against Senior Resources Asset Fund, LLC and Kenneth E. Baum based on their conduct in selling Renaissance investments to seniors.

SEC Enforcement Division Director Linda Chatman Thomsen explained that:

“Fraud against seniors and affinity groups is particularly egregious because it is perpetrated through abuse of trust. The filing of these actions reflects the Commission’s determination to protect seniors and other investors from securities fraud by those who would prey upon their vulnerabilities and group affiliations."

According to the SEC, from at least March 1999 through April 2004, the defendants raised at least $16 million by selling promissory notes to investors. The defendants raised funds for multiple purported projects, including a general fund, an outlet mall, an international currency exchange, and a Swiss bank. Some of the purported projects did not exist, and others were unsuccessful.

The defendants misrepresented to investors that their investments would earn returns ranging from 10% to 25% in as little as four months. The defendants also sent false account statements to investors setting forth the fictitious profits their investments had purportedly earned.

Based on the returns shown in these fraudulent account statements, many investors reinvested their principal and purported profits in other Renaissance projects.

The defendants operated Renaissance’s programs as a Ponzi scheme, paying earlier investors with funds raised from later investors. Nadel also used investor funds to pay for personal expenses, including country club memberships, car leases, and retail purchases. The majority of investors in Renaissance never received the interest or return of their principal the defendants had promised.

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