The Securities and Exchange Commission has accused a Vero Beach, Fla., couple of hoodwinking senior citizens out of $75 million in a charitable-gift-annuity scheme.
The SEC on Feb. 4 filed suit against Richard K. Olive and Susan L. Olive in the U.S. District Court for the Southern District of Florida, claiming that the husband and wife took over an inactive charity called We The People Inc. of the United States and drew millions from more than 400 mostly elderly investors in at least 30 states.
We The People started out as a nonprofit organization that promoted nuclear safety. The charity was inactive, however, and held no assets between the late 1990s and early 2008.
The SEC claims that the Olives signed an employment agreement with the organization in March 2008 under which they would receive commissions for raising money via sales of charitable-gift annuities.
BIG BUCKS
Over four years, the pair paid themselves more than $1.1 million in salary and commissions, plus hundreds of thousands in unauthorized payments, the SEC alleges.
Much of the money coming in went either to the Olives or third-party promoters and consultants, according to the complaint.
At one point, the group claimed to have donated $21.8 million to help orphans with AIDS in Zambia, but We The People in fact made only a small payment to a third party that was shipping supplies to Africa, the SEC alleges.
Elderly investors were encouraged to exchange stocks, annuities, real estate and cash for a phony charitable-gift annuity that purported to make charitable payments for the remainder of the client's life, the SEC charges.
For instance, the group's marketing materials allegedly asked prospects, “Who's going to bail out your annuity at the full accumulated value — and you can receive cash back?”
Instead, clients' “annuities” were worth just 65% to 75% of the full value because the organization took a cut of the asset's value and held it as a charitable gift, the SEC alleges.
Clients also were told falsely that We The People kept its reserve account in a trust account and that the products were covered with reinsurance to “minimize the risk,” according to the complaint.
The agency charged the couple with, among other things, fraud, the sale of unregistered securities and the sale of securities by an unregistered broker-dealer.
This isn't the first time the Olives have run into trouble with their charitable activities.
Mr. Olive faces criminal charges of mail fraud, wire fraud and money laundering in federal court in Tennessee. In that case, he allegedly oversaw the National Foundation of America and obtained some $20 million in another charitable-gift-annuity scheme.
A related civil suit to wind down NFOA was filed in 2007. Regulators in a number of states, including California, Florida and Texas, either determined that these gift annuities weren't properly registered, or found that NFOA made misleading statements to clients.
UNAWARE OF HIS PAST
Investors in the We The People case weren't made aware of Mr. Olive's past, the SEC said.
Contact information for the Olives wasn't immediately available, and the two aren't yet represented by an attorney in the SEC case.
The SEC separately filed charges against We The People and the firm's in-house counsel, William G. Reeves, and both have agreed to settle the charges without admitting or denying the allegations.
“The SEC's papers fairly spell out who the major players were in terms of culpability between Mr. and Ms. Olive versus Mr. Reeves, who is a peripheral player but accepts responsibility,” said William Nortman, the attorney representing We The People and Mr. Reeves.
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