Tuesday, January 17, 2017

No. 198: Torchia and Guess—an Update on Their Connection

In No. 128 (posted November 19, 2015), I discussed a civil complaint in which the Securities and Exchange Commission (SEC) alleges that James A. Torchia, a Georgia resident, engaged in securities fraud. Five other defendants are entities that Torchia controlled. In that post, I quoted a radio promotion by Bobby Eugene ("Bob") Guess, a Texas resident. In No. 184 (October 31, 2016), I posted an update. Here I present another update, and also discuss criminal charges filed against Guess at the behest of the Texas State Securities Board (TSSB).

The Torchia Case
In November 2015, the SEC filed its civil complaint against Torchia and his companies alleging securities fraud, including the operation of a Ponzi scheme. The case involves the marketing of unregistered promissory notes arising from subprime automobile loans, and the marketing of unregistered interests in viatical and life settlements. In December 2015, the defendants filed a motion to dismiss the complaint. The SEC, having already sought an asset freeze and the appointment of a receiver, filed a motion for a preliminary injunction.

In January 2016, the judge held a two-day preliminary injunction hearing. In April 2016, he denied the defendants' motion to dismiss the complaint, granted the SEC's motions for a preliminary injunction and an asset freeze, and appointed a receiver. Discovery was to be completed by December 30, 2016.

On November 23, 2016, Torchia requested a stay of the proceedings. On December 15, the judge denied Torchia's request for a stay and said discovery was to be completed by February 3, 2017. On December 20, Torchia filed an unopposed motion to delay the completion of discovery. The next day the judge granted the motion and said discovery is to be completed by March 31, 2017. A trial date has not been set. (See SEC v. Torchia, U.S. District Court, Northern District of Georgia, Case No. 1:15-cv-3904.)

Torchia's Connection with Guess
In No. 128, I described Torchia's connection with Guess. I reported that, according to the SEC's complaint, Torchia raised tens of millions of dollars from investors who purchased unregistered promissory notes, most of which promised a 9 percent return. The notes were described as "100% asset backed" and "backed by hard assets dollar for dollar." The notes were promoted through newspaper and radio advertisements. Here is one of the radio advertisements:
Attention investors. My name is Bob Guess. I'm with Credit Nation and I'm here to help. Don't get blindsided by the next stock market correction. Remember the correction in 2008; some investors lost 40 to 50 percent of the money that they had in brokerage and retirement accounts. Well, history tends to repeat itself. It's not too late to lock in your gains and take the stock market risk out of your portfolio. If you need income, we have a blended asset investment that'll pay you nine percent annual return. Your investment is backed dollar for dollar with hard assets and is non-correlated to the stock market. For those who don't need additional income but are looking for growth, we have investments that have historically produced double-digit returns that are also non-correlated to the stock market. Give us a call at 1-800-542-9513, that's 1-800-542-9513. Don't gamble with your financial future. Call us today for an appointment. 1-800-542-9513.
In the above advertisement, "Credit Nation" is a Torchia entity. I believe that the investments supposedly providing a 9 percent annual return are promissory notes arising from subprime automobile loans. I believe that the investments supposedly providing double-digit returns are interests in life settlements.

The Criminal Charges against Guess
On August 15, 2016, TSSB issued an emergency cease and desist order directed at Guess and two entities. Guess is founder, president, and chief executive officer of Texas First Financial LLC (TFF) and a member of Mechanical Motion Solutions LLC. According to the order, Guess and TFF were offering unregistered promissory notes through a website and through radio advertisements in Texas. The order also says the respondents were in violation of Texas securities laws.

On December 15, 2016, a grand jury in Collin County (McKinney is the county seat, and a portion of Dallas is in the county) filed a series of indictments charging Guess with theft, securities fraud, and money laundering. The indictments show the names of 27 individuals and 35 couples allegedly victimized, the dates (from November 2014 through August 2016), and the amounts, which total about $5.8 million.

General Observations
As I mentioned in the two previous posts, the SEC's civil charges against Torchia appear serious. The criminal charges against Guess add a significant further dimension to the case. I plan to follow both cases and report further significant developments.

Available Material
The complimentary material I offered in Nos. 128 and 184 about the SEC civil charges against Torchia are still available. Now I am offering a complimentary 17-page PDF consisting of documents relating to the criminal charges against Guess, consisting of the TSSB press release (2 pages), the TSSB emergency cease and desist order (5 pages), and the indictments (10 pages). Email jmbelth@gmail.com and ask for the January 2017 package relating to Guess.