New Jersey Division of Consumer Affairs and its
Bureau of Securities Announce $400,000 Civil Penalty
In Investor Fraud Case Against a Purported
Alternative Energy Company
NEWARK—The New Jersey Bureau of Securities, within the Division of Consumer Affairs, has issued a Summary Order against a purported alternative energy company and its chief executive after finding they defrauded investors and used investor funds for personal benefit.
ForeverGreen Enterprises, Inc., and Michael D. Kelly, the firmís founder, president, and chief executive officer, have been assessed a $400,000 civil penalty for violating provisions of the stateís Uniform Securities Law, which requires, among other things, that both the securities sold and the individuals selling them in New Jersey be registered with the Bureau of Securities. The violations against ForeverGreen and Kelly include not only acting as an unregistered agent and offering and selling unregistered securities, but also making false statements of material facts or omitting material facts, and committing fraud and deceit.
The Bureau found that Kelly sold unregistered shares in ForeverGreen in three private placement offerings between January 2007 and July 2009. Private placement offerings are generally exempt from registration, if the person claiming the exemption can prove that the offering qualifies for an exemption under the Uniform Securities Law. The Bureau found the securities that ForeverGreen was offering were not exempt from registration. Furthermore, Kelly was not registered to sell securities, or registered in any other capacity, with the Bureau.
According to the Bureau's investigation, Kelly misrepresented to investors that the proceeds of the offering would be used to fund ForeverGreen's purported business purpose of deriving fuels and alternative energy resources from industrial, chemical, and medical wastes. The Bureau found that Kelly, rather than investing the funds in energy opportunities, diverted 55 percent of the approximately $576,000 raised from the offering, into his personal bank account. The money was used to fund personal living expenses for himself and his family.
The Bureau also found that Kelly made false promises to investors that the company would be
going public in the near future and that investors would receive high rates of return on the investment.
"Kelly offered investors the opportunity to get in on the ground floor of a seemingly lucrative investment opportunity, but we allege there was no upside because of the frauds he committed," Attorney General Paula T. Dow said. "Rather than using investor funds to grow the company, Kelly allegedly used investors' hard-earned money to benefit himself and his family."
The Bureau found that in 2009, Kelly, who operated ForeverGreen from his residences in Tinton Falls and Ocean Township, offered to repurchase shares from investors at the original sales price but then failed to do so.
"Our investigators found a series of lies and a trail of deceit committed by these respondents," said Thomas R. Calcagni, Director of the Division of Consumer Affairs. "No matter how good an investment opportunity sounds, consumers must take a step back and perform their due diligence."
"The Bureau is the front-line agency regulating the Securities industry in New Jersey, and investors should contact us to verify that the person offering to sell a security, and also the security itself, are registered," said Abbe R. Tiger, Bureau Chief. "In the case of a private placement offering, investors should carefully investigate the claims made in the offering documents and seek to verify those claims before making the investment. Most private placement offerings are highly speculative. Investors should be prepared to lose their entire investment, and, if they cannot afford to lose that money, they should think twice before investing."
Rudolph Bassman, the Bureauís Chief of Enforcement, performed the investigation of this case.
The Bureau of Securities can be contacted toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600. The Bureau's website is located at www.njsecurities.gov.
View Summary Order