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IN THE MATTER OF: CONNECTICUT FORECLOSURE (Collectively, "Respondents") * * * * * * * * * * * * * * * * * |
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ORDER TO CEASE AND DESIST ORDER TO MAKE RESTITUTION AND NOTICE OF RIGHT TO HEARING DOCKET NO. CRF-12-7754-S |
I. PRELIMINARY STATEMENT
| 1. | The Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies (“Regulations”) promulgated under the Act. |
| 2. |
Pursuant to Section 36b-26(a) of the Act, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, has conducted an investigation into the activities of Respondents to determine if Respondents have violated, are violating or are about to violate provisions of the Act or Regulations (“Investigation”). |
| 3. | As a result of the Investigation, the Commissioner has reason to believe that Respondents have violated certain provisions of the Act. |
| 4. |
As a result of the Investigation, the Commissioner has the authority to issue a cease and desist order against Respondents pursuant to Section 36b-27(a) of the Act.
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| 5. |
As a result of the Investigation, the Commissioner has the authority to order that Respondents make restitution pursuant to Section 36b-27(b) of the Act. |
| 6. | As a result of the Investigation, the Commissioner has the authority to impose a fine upon Respondents pursuant to Section 36b-27(d) of the Act. |
II. RESPONDENTS
| 7. | CFDC is a purported Delaware corporation with its principal place of business last known to the Commissioner at 41-C New London Turnpike, Glastonbury, Connecticut 06033. CFDC operated under the names Connecticut Foreclosure Division Corp, Connecticut Foreclosure Division Corp CFDC HOME, Connecticut Foreclosure Division, CT Foreclosure Division Corporation, Ct Foreclosure Division Corporation, CT Foreclosure Division, CT Foreclosure Div Corp and CT Foreclosure Division Corp. |
| 8. | Beauchamp is an individual whose address last known to the Commissioner is 77 Ballard Drive, West Hartford, Connecticut 06119. |
III. STATEMENT OF FACTS
| 9. | From at least February 6, 2007 to the present, CFDC has been an issuer of securities in the form of promissory notes (“CFDC Notes”). |
| 10. | For all relevant periods, Beauchamp was the sole officer, shareholder and manager of CFDC. CFDC and Beauchamp purported to counsel people who were in financial distress and in danger of losing their homes, and represented that one of their methods of providing assistance was to stop a bank from foreclosing on a home and to sell the home, after obtaining additional time from the bank and the courts. |
| 11. | From at least February 6, 2007 to the present, CFDC and Beauchamp offered and sold CFDC Notes in or from Connecticut to at least three investors. |
| 12. | Specifically, on February 6, 2007, Respondents offered and sold a Connecticut investor (“Investor 1”) a promissory note (“CFDC Note 1”) in the sum of $30,000 for a 4-month term for a minimum return of 10% with the ability to roll the note into another 4-month term having a minimum return of 10% on the investment. The terms of CFDC Note 1 guaranteed that the investor’s principal would be available at the end of the term, even “[i]n a worst case scenario and a deal gone bad”. |
| 13. |
On June 11, 2007, Respondents offered and sold Investor 1 another CFDC Note (“CFDC Note 2”) in the sum of $30,000 for a 4 to 6-month term for a return of 20% with the ability to roll the note into another 4 to 6-month term having a minimum return of 10% on the investment. CFDC Note 2 represented a reinvestment of the principal from CFDC Note 1. The terms of CFDC Note 2 guaranteed that the investor’s principal would be available at the end of the term, even “[i]n a worst case scenario and a deal gone bad”. |
| 14. | In connection with the offer and sale of CFDC Note 1 and CFDC Note 2, Beauchamp alone and on behalf of CFDC told Investor 1 that the money would be used for CFDC’S operating expenses, to buy leads and to purchase a property if one were located. |
| 15. | On March 5, 2007, Respondents offered and sold another Connecticut investor (“Investor 2”) a promissory note (“CFDC Note 3”) in the sum of $50,000 for a 3 to 4-month term after which Respondents would pay the entire principal balance plus $10,000. |
| 16. | On March 14, 2007, Respondents offered and sold Investor 2 another CFDC Note (“CFDC Note 4”) in the sum of $50,000 for a 3 to 4-month term after which Respondents would pay the entire principal balance plus $10,000. |
| 17. | In connection with the offer and sale of CFDC Note 3 and CFDC Note 4, Beauchamp alone and on behalf of CFDC told Investor 2 that he was looking for investors to pool funds for the purpose of purchasing foreclosed homes, fixing and reselling them. |
| 18. | On June 17, 2007, Respondents offered and sold another Connecticut investor (“Investor 3”) a promissory note (“CFDC Note 5”) in the sum of $50,000 for a 4-month term for a minimum return of 10%. In connection with the offer and sale of CFDC Note 5, Beauchamp alone and on behalf of CFDC told Investor 3 that CFDC’s business was to help people get out of foreclosure, to save their credit and, if the opportunity arose, to invest in properties that Beauchamp would locate during his interviews with individuals who were in foreclosure. Beauchamp alone and on behalf of CFDC told Investor 3 that he needed Investor 3’s money for this business purpose. |
| 19. | The CFDC Notes offered and sold by Respondents were never registered in Connecticut under Section 36b-16 of the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they the subject of a filed exemption claim or claim of covered security status. |
| 20. | Respondents used some of the money raised from selling the CFDC Notes to Investors 1, 2, and 3 to pay for the personal and medical expenses of Beauchamp and Beauchamp’s family as well as the business expenses of Beauchamp’s spouse. |
| 21. | Respondents failed to pay Investors 1, 2, and 3 all of the money due under the CFDC Notes. |
| 22. | Both CFDC and Beauchamp failed to disclose, inter alia, any risk factors related to the investment, any financial information on CFDC or Beauchamp, and/or that Respondents would use part of the investors’ money to pay for the personal, medical and household expenses of Beauchamp and Beauchamp’s family as well as the business expenses of Beauchamp’s spouse. Each of these omitted items was material to investors and prospective investors of the CFDC Notes. |
IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST,
ORDER TO MAKE RESTITUTION AND ORDER IMPOSING FINE
a. Violation of Section 36b-16 of the Act –
Offer and Sale of Unregistered Securities
| 23. | Paragraphs 1 through 22, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 24. |
Respondents offered and sold unregistered securities in or from Connecticut to at least three Connecticut investors, as more fully described in paragraphs 9 through 22, inclusive, which securities were not registered in Connecticut under the Act, as more fully described in paragraph 19. The offer and sale of such securities absent registration constitutes a violation of Section 36b-16 of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the Act, an order that Respondents make restitution under Section 36b-27(b) of the Act, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the Act. |
b. Violation of Section 36b-4(a) of the Act –
Fraud in Connection with the Offer and Sale of any Security
| 25. | Paragraphs 1 through 24, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 26. | The conduct of Respondents, as more fully described in paragraphs 9 through 22, inclusive, constitutes, in connection with the offer, sale or purchase of any security, directly or indirectly employing a device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates as a fraud or deceit upon any person. Such conduct constitutes a violation of Section 36b-4(a) of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the Act, an order that Respondents make restitution under Section 36b-27(b) of the Act, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the Act. |
V. ORDER TO CEASE AND DESIST, ORDER TO MAKE RESTITUTION,
NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, CFDC has committed at least one violation of Section 36b-16 of the Act and at least one violation of Section 36b-4(a) of the Act;
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Beauchamp has committed at least one violation of Section 36b-16 of the Act and at least one violation of Section 36b-4(a) of the Act;
WHEREAS, the Commissioner further finds that the issuance of an Order to Cease and Desist, Order to Make Restitution, and the imposition of a fine upon Respondents is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policies and provisions of the Act;
WHEREAS, notice is hereby given to Respondents that the Commissioner intends to impose a maximum fine not to exceed one hundred thousand dollars ($100,000) per violation;
WHEREAS, the Commissioner ORDERS that CFDC CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, (1) offering and selling unregistered securities, and (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person;
WHEREAS, the Commissioner ORDERS that Beauchamp CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, (1) offering and selling unregistered securities, and (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person;
WHEREAS, the Commissioner ORDERS that Respondents MAKE RESTITUTION of any sums obtained as a result of Respondents’ violations of Sections 36b-4(a) and 36b-16 of the Act, plus interest at the legal rate set forth in Section 37-1 of the General Statutes of Connecticut. Specifically, the Commissioner ORDERS that:
| 1. | Within thirty (30) days from the date this Order to Make Restitution becomes permanent, Respondents shall provide the Division with a written disclosure which covers the period from January 1, 2007 to the date this Order to Make Restitution becomes permanent and which contains (a) the name and address of each Connecticut investor, (b) the amount Respondents collected from each Connecticut investor, and (c) the amount of any refunds of principal or purported interest payments Respondents made to each Connecticut investor; |
| 2. | Within forty-five (45) days from the date this Order to Make Restitution becomes permanent, Respondents shall reimburse each Connecticut investor the amount of funds collected from the investor plus interest, less funds returned in the form of purported refunds of principal and purported interest payments made to the investor, with respect to all transactions effected from January 1, 2007 to the date this Order to Make Restitution becomes permanent. Such restitution shall be made by certified check, and shall be sent by certified mail, return receipt requested, to each affected Connecticut investor; and |
| 3. | Within ninety days (90) days from the date this Order to Make Restitution becomes permanent, Respondents shall provide the Division with proof in the form of copies of the certified checks and the return receipts required by paragraph 2 of Section V of this Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (collectively “Order”), that Respondents have reimbursed each Connecticut investor the amount of funds collected from each such investor plus interest, less funds returned in the form of purported refunds of principal and purported interest payments, with respect to all transactions effected from January 1, 2007 to the date this Order to Make Restitution becomes permanent. |
THE COMMISSIONER FURTHER ORDERS THAT, pursuant to subsections (a), (b) and (d) of Section 36b-27 of the Act, each Respondent will be afforded an opportunity for a hearing on the allegations set forth above if a written request for a hearing is received by the Department of Banking, Securities and Business Investments Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following each Respondent’s receipt of this Order. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If any Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”. Once a written request for a hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a presiding officer and sets the date of the hearing in accordance with Section 4-177 of the General Statutes of Connecticut and Section 36a-1-21 of the Regulations of Connecticut State Agencies. If a hearing is requested, the hearing will be held on July 12, 2012 at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
The hearing will be held in accordance with the provisions of Chapter 54 of the General Statutes of Connecticut. At such hearing, each Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
This Order to Cease and Desist shall remain in effect and become permanent against any Respondent that fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
This Order to Make Restitution shall remain in effect and become permanent against any Respondent that fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
The Commissioner may order that the maximum fine be imposed upon any Respondent that fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
| Dated at Hartford, Connecticut, | ________/s/________ | |
| this 29th day of May 2012. | Howard F. Pitkin | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 29th day of May 2012, the foregoing Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing was sent by certified mail, return receipt requested, to Connecticut Foreclosure Division Corp., at 41-C New London Turnpike, Glastonbury, Connecticut 06033, certified mail no. 7011 0470 0002 2573 4414; and c/o The Company Corporation, Agent, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, certified mail no. 7011 0470 0002 2573 4421; and Alfred R. Beauchamp, 77 Ballard Drive, West Hartford, Connecticut 06119, certified mail no. 7011 0470 0002 2573 4438.
_______/s/_________
Paul A. Bobruff
Prosecuting Attorney