ForeverGreen
Enterprises, Inc., and Michael D. Kelly,
the firm’s founder, president, and
chief executive officer, have been assessed
a $400,000 civil penalty for violating provisions
of the state’s 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 Bureau’s 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.