February 18, 2000 -
State Banking Commissioner John P. Burke issued a cease and desist order against a Madison company and its president for selling unregistered promissory notes as investments that purportedly were guaranteed by an overseas insurance company.
Cease and Desist Order Issued Against Firm
Selling Unregistered Promissory Notes
The order, issued Tuesday, prevents Corlogic Corporation, of 762 Boston Post Road, and Theodore William Russell from offering or selling unregistered securities in Connecticut. The company could be fined up to $200,000 for alleged violations of Connecticut’s securities law. Russell could also face a $75,000 fine for authorizing the company’s questionable transactions. Corlogic and Russell may request a hearing before the department within 14 days to contest the allegations.
According to Burke, an ongoing investigation by his agency’s Securities Division uncovered a number of investors in Connecticut and throughout the United States who invested millions of dollars in nine-month and three-year notes of Corlogic. Insurance agents nationwide were recruited to sell the investments and were falsely told that the products were not securities and that the investments were fully backed by a foreign surety company.
Burke said that promissory notes are considered to be securities under Connecticut securities law and that they must be registered with the Securities Division and only sold by registered agents. Corlogic not only failed to register the promissory notes but also allegedly misrepresented certain facts associated with the investments. Furthermore, the company supposedly guaranteeing the investments, - New England International Surety, Inc. of Brussels, Belgium - was recently named in a cease and desist order signed by Burke and is under scrutiny by other state and federal securities regulators. Regulators are concerned that the company may not be able to meet its obligation to pay investors in the event of a default on the notes.
According to Burke, the recruitment of insurance agents to sell what are often worthless promissory notes is a troublesome, nouveau-style investment scheme that regulators say has become widespread throughout the country. Earlier this year, for instance, the banking department took administrative action against two Florida-based businesses for bilking over $2 million from Connecticut residents in the fraudulent sale of high-interest promissory notes. As a result of the activities associated with those companies, Burke and Connecticut’s Insurance Commissioner, George M. Reider, Jr., warned insurance salespeople to avoid promoters seeking to enlist their help in selling "high yield, low risk" investments such as promissory notes and commercial paper.
"We won’t tolerate these unscrupulous investment promoters in Connecticut," Burke said. "We’ve only just begun to clamp down on their callous tactics. I promise to do all that I can administratively to halt these investment abuses and will seek criminal sanctions when warranted."
Burke added: "Before investing in any promissory note, investors are urged to check with the Securities Division to confirm that the note is properly registered for sale in Connecticut."
Consumers can call the Securities Division at 1-800-831-7225 or write to the Department of Banking, 260 Constitution Plaza, Hartford, CT 06103-1800.