April 5, 2013 — When investment brokers lie to their customers just to earn a hefty commission, the Securities and Exchange Commission (SEC) frequently finds out from brokerage firm insiders who notify the agency. The SEC maintains a whistleblower program that allows it to handle information received from informants. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010 allows the SEC to reward government collaborators with a percentage — as much as thirty percent — of the government’s full recovery, so long as the amount recouped is in excess of $1 million.
Investors in Clean Energy Company Duped While Brokers Earned Big Commissions
The SEC has filed fraud charges against Charles Vista LLC, a New York brokerage firm, Gregg Lorenzo, a broker who founded the firm, and Frank Lorenzo, an investment banker. According to the SEC, the two Lorenzos, who are not related, duped Charles Vista customers with a host of false statements into investing into what was billed as clean energy company that would generate enormous returns. Waste2Energy Holdings Inc., the pair allegedly told investors, was a promising company that had developed the technology to convert waste into clean energy.
The company’s speculative debt securities — convertible into stock — were without risk, the brokers allegedly boasted. With the baseless prediction that Waste2Energy’s stock would be traded on the NASDAQ within a year, Gregg Lorenzo allegedly made the stock conversion option seem valuable to at least one investor. Charles Vista was the only placement agent for the issuance of the debt securities and reportedly received a commission on sales, as well as other consulting fees and commissions. An email from the Charles Vista firm to its customers claimed that Waste2Energy had more than $10 million in confirmed assets, when in truth, the energy company had assets of less than $1 million. While the two men and the brokerage firm earned lucrative commissions through sales to investors, Waste2Energy struggled for survival until it ultimately filed for bankruptcy.
Brokerage Firm Tipsters Aid SEC in Preventing Investment Scams
Tipsters with information about investment scams deserve to understand their legal rights under the Dodd-Frank Act. The only way whistleblowers can safeguard their anonymity, for instance, is to act through an attorney. The lawyers at Waters & Kraus have the background to protect the interests of informants who notify the SEC about illegal investment scams. Contact us or call our securities fraud lawyers at 800.226.9880 to discuss our qui tam practice.