The Securities and Exchange Commission yesterday charged the publisher of two North Carolina investment publications, a New York attorney and three venture capital companies with fraud in connection with the sale of unregistered securities.
The agency accused the investment companies not only with failing to register with the SEC but also with engaging in activities forbidden to unregistered investment companies. And it asked the U.S. District Court here to order the defendants to halt their activities.
The three investment companies -- Venture Capitalists Inc., Venture Finance Corp. and Genesis Capital Corp. all of Charlotte, N.C. -- each raised $500,000 from a total of 2,600 investors. The SEC alleges that the material prepared by publisher John V. Holmes failed to disclose that Holmes controlled the activities of these companies.
According to the complaint, Holmes allegedly touted three companies and their securities in The Profit Strategy Letter and The Venture Capital News, and this touting allegedly constituted the illegal offer of securities. In exchange for Holmes' assistance, it said, the firms agreed to grant Venture Capitalists the right to purchase stock.
The firms were La-Man Corp., a Nevada company making products to remove contaminants from compressed air lines; Clover Mini-Marts, a Florida company that builds and maintains convenience stores and self-service gasoline pumps; and Professional Athletes, a North Carolina firm that provides consulting services to professional sports figures.
In registration statements prepared for these companies, the attorney, Robert D. Schulman, did not reveal that Holmes was being paid to publicize the securities.