ATLANTA (CN) - Invoking God, two 70-year-old fraudsters duped investors for $15 million in a prime bank Ponzi scheme, the SEC claims in court.
Billy W. McClintock, of Bradenton, Fla., and Dianne Alexander aka Linda Dianne Alexander, of Carlsbad, Calif., took $15 million from 220 or more investors, primarily in Georgia, where Alexander used to live, according to the SEC.
McClintock "was convicted of cocaine trafficking in 1989, and served time in prison in Kentucky," according to the SEC complaint. "On information and belief, McClintock has never been registered as or associated with a broker. He claims to have earned a living as a gospel singer."
The SEC also sued McClintock's business MSC Holdings, and affiliates, which are, or were, incorporated in Georgia.
McClintock was nothing if not inventive. According to the SEC complaint: "This matter involves an ongoing 'prime bank' scheme (a brand of Ponzi scheme), promising annual returns of38 percent to be generated by a purported clandestine, highly exclusive organization in Europe known only as 'the Trust.'
"The defendants told hundreds of investors that the Trust was created after World War II by a group of extremely wealthy families, that the Trust owns European banks, and that it has the power to create money through fractional banking and the sale of bank debentures. But, according to the defendants, access to the Trust is open only to close friends and family members of current investors, and is subject to strict secrecy rules, violation of which results in banishment from further investment in the Trust.
"From at least 2004, defendants Billy Wayne McClintock ('McClintock') and Dianne Alexander ('Alexander') collected more than $15 million from over 220 investors in more than 20 states, including Georgia, by repeating the lies set forth above, and others.
"The Trust, on which the whole venture depends, does not exist. The defendants used fund raised to make payments to themselves, to pay sums owed to earlier investors and for other undisclosed purposes.
"Alexander especially resorted to an appeal to Christian faith when pitching the investment, calling the old adage 'If it sounds too good to be true, it probably is,' 'A lie that came from the pit of hell,' and saying, 'Put your money in the Trust and your trust in God.'
"Although the defendants called their transaction with investors 'loans,' each transaction was the sale of a 'security' as defined in federal securities law, and defendants were acting as 'brokers' as defined in those laws.
"Defendants did not register with the Commission as brokers, and did not register the securities with the Commission before offering them.
"The defendants sold the supposed loans through a host of bold misrepresentations and material omissions about the fictitious Trust.
"McClintock, a Florida resident and convicted felon, claimed to be the United States Director of the Trust.
"Alexander, a former Georgia resident, claimed to be a United States Regional Director for the Trust.
"McClintock and Alexander led investors to believe they could loan money to the Trust and receive 38 percent interest annually on their investment, provided that they abide by the Trust's strict secrecy rules.
"McClintock and Alexander have conducted, and continue to conduct, a fraudulent scheme, making material misrepresentations and omissions of fact to investors concerning, among other things, the expected returns, the use of investor funds, and the investment risks.
"Unless restrained by this Court, the defendants will continue with their scam."