SEC claims investment firm took L.A. bus drivers for a ride

The commission files charges in an alleged $14.7 million Ponzi scheme aimed at retired bus drivers in Los Angeles.
APR 20, 2010
The Securities and Exchange Commission today announced that it has filed charges in an alleged $14.7 million Ponzi scheme, this one aimed at retired bus drivers in Los Angeles. The action comes just a day after the regulator said it had charged a Miami couple for operating a $135 million Ponzi operation targeting elderly Cuban-Americans. The latest SEC complaint, filed March 3 in United States District Court for the Central District of California, Western Division, alleges that Thomas L. Mitchell and his firm Mitchell Porter & Williams Inc., has been operating a Ponzi scheme since at least 1995 by taking bus drivers' retirement money and putting it in promissory notes provided by two entities that Mr. Mitchell operates, Adivanala AA Investment Trust and AB3 Inc. Mr. Mitchell offered rates of return of 10% to 15% for three- to six-year terms, to about 82 clients nationwide, according to the SEC filing. Apparently, the firm said it was able to achieve such high returns, to use one example, by "using leverage to invest in certain government-backed-bond funds and zero-coupon discount bonds." But in fact, the SEC alleges, Mr. Mitchell used new investor money to pay interest to existing clients. Indeed, the SEC said in the complaint that Mr. Mitchell has admitted that so far this year, he owes $1.2 million in interest and principal payments to his investors. Mr. Mitchell, the SEC claims, has been keeping about 20% of the money for his own expenses. A call placed to Mitchell Porter in Los Angeles was not returned. According to the complaint, Mr. Mitchell, the principal of his firm, which is a registered investment adviser with the SEC, would get new clients by word of mouth and would also write to retirement-age bus drivers working in the Los Angeles County Metropolitan Transit Authority, suggesting that they turn over their retirement savings to him in a lump sum. One client received such a letter from Mr. Mitchell in June of 2008, according to the complaint, boasting of Mitchell Porter's long association with MTA retirees and its connection with several well-known financial institutions. A judge for the U.S. District Court for the Central District of California has granted the SEC's request for a temporary restraining order and asset freeze against Mr. Mitchell and his companies, the SEC said.

Latest News

Social Security trustees see one less year in insolvency countdown, project shortfall to start 2034
Social Security trustees see one less year in insolvency countdown, project shortfall to start 2034

New report shows dimmed outlook for benefits to retirees and disabled Americans, creating further pressure for federal tax hikes or more borrowing.

NY Republican Stefanik presses SEC to probe Harvard bond sale
NY Republican Stefanik presses SEC to probe Harvard bond sale

Open letter to SEC Chair Paul Atkins questions whether the Ivy League university withheld material information prior to its $750 million taxable bond offering.

Ex-LPL leader re-emerges at The Wealth Consulting Group
Ex-LPL leader re-emerges at The Wealth Consulting Group

The Las Vegas-based hybrid RIA overseeing $8.8 billion in assets has named Andy Kalbaugh president to help scale its advisor platform.

Envestnet extends investment offerings with new alts model portfolios
Envestnet extends investment offerings with new alts model portfolios

The wealth tech giant – in collaboration with Fidelity, BlackRock, State Street, and Franklin Templeton – is offering its advisor and wealth firm users more ways to diversify.

Just as wealth industry M&A was picking up, economic uncertainty could kill it again
Just as wealth industry M&A was picking up, economic uncertainty could kill it again

Deal volume increased post-election but now caution has taken over.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave