The Department of Banking News Bulletin 

CONSUMER CREDIT DIVISION ACTIVITY

Notice of Automatic Suspension, Temporary Oder to Cease and Desist, Notice of Intent to Revoke Consumer Collection Agency License, Notice of Intent to Issue Order to Cease and Desist

On November 19, 2012, the Commissioner issued a Notice of Automatic Suspension, Temporary Order to Cease and Desist, Notice of Intent to Revoke Consumer Collection Agency License, Notice of Intent to Issue Order to Cease and Desist and Notice of Right to Hearing (“Notice”) in the Matter of:  Wyse Financial Services, Inc. (“Respondent”), Denver, Colorado.  The Notice alleged that Respondent failed to maintain a surety bond during the entire period of its consumer collection agency license, in violation of Section 36a-802(a) of the Connecticut General Statutes.  The Commissioner also found that public welfare required the issuance of a Temporary Order to Cease and Desist.  Respondent was afforded an opportunity to request a hearing with regard to the allegation set forth in the Notice.

Consent Orders

On November 30, 2012, the Commissioner entered into a Consent Order with M & G Mortgage Services Inc (NMLS # 90740) and John Grad (NMLS # 92042) (“Respondents”), West Hartford, Connecticut.  The Consent Order was based on an investigation by the Consumer Credit Division.  As a result of such investigation, on June 5, 2012, the Commissioner issued a Notice of Intent to Revoke Mortgage Correspondent Lender License, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing against Respondents, among others.  The Consent Order required that Respondents pay $20,000 as a civil penalty, that John Grad cease and desist from making false or misleading statements to the Commissioner, in violation of Section 36a-53a of the Connecticut General Statutes, and that M & G Mortgage Services, Inc cease and desist from:  (1) engaging the services of mortgage loan originators who are not licensed, in violation of Section 36a 486(b)(1) of the Connecticut General Statutes, (2) engaging in the business of making residential mortgage loans in Connecticut from a branch office which is not licensed, in violation of Section 36a 486(a) of the Connecticut General Statutes, (3) making false or misleading statements to the Commissioner in violation of Section 36a-53a of the Connecticut General Statutes, and (4) accepting applications or referrals of applicants from, or paying fees to mortgage loan originators who are not licensed, in violation of Section 36a-496 of the Connecticut General Statutes.

On December 10, 2012, the Commissioner entered into a Consent Order with A & S Collection Associates, Inc. (“A & S Collection”), Williamstown, Vermont.  The Consent Order was based on an investigation by the Consumer Credit Division.  As a result of such investigation, the Commissioner alleged that A & S Collection (1) acted within this state as a consumer collection without a consumer collection agency license, in violation of Section 36a-801 of the Connecticut General Statutes and Section 36a-801 of the 2012 Supplement to the General Statutes, (2) failed to account for and remit to its clients all money collected which is not in dispute within 60 days from the last day of the month in which said money was collected, in violation of Section 36a-805(a)(9) of the Connecticut General Statutes, and (3) added charges or fees to the amount of claims which it received for collection or knowingly accepted for collection claims to which charges and fees had already been added to the amount of the claim, which charges and fees the consumer debtors were not legally liable for and which also exceeded 15% of the amount actually collected on the debt, in violation of Section 36a-805(a)(13) of the Connecticut General Statutes.  As part of the Consent Order, A & S Collection was ordered to pay $5,000 as a civil penalty, to promptly refund all charges and fees paid by Connecticut consumer debtors, waive any charges and fees added to Connecticut consumer debtors’ accounts that could not be legally added to such claim, and withdraw information sent to credit reporting agencies regarding all Connecticut consumer debtors during which it was not licensed.

On December 10, 2012, the Commissioner entered into a Consent Order with Sound Mortgage, LLC (NMLS # 71423) (“Sound Mortgage”), Guilford, Connecticut.  The Consent Order was based on an investigation by the Consumer Credit Division.  As a result of such investigation, on October 26, 2012, the Commissioner issued a Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing against Sound Mortgage.  The Commissioner alleged that Sound Mortgage failed to file certain quarterly and annual information required by standard mortgage call reports, in violation of Section 36a-534b(c)(3) of the 2012 Supplement to the General Statutes and/or Section 36a-534b(c)(3), as amended by Public Act 12-96.  As part of the Consent Order, Sound Mortgage was ordered to file the reports and paid $2,500 as a civil penalty.

SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY

Order to Cease and Desist and Notice of Intent to Fine Issued

On December 21, 2012, the Banking Commissioner issued an Order to Cease and Desist and Notice of Intent to Fine against Maxcomusa Group Inc. (“Maxcom”) of Norwalk, Connecticut and Christos Christoforou, president, director and control person of the company.  Maxcom sold electronics, such as cell phones and prepaid calling cards, to retail and wholesale consumers.

The action alleged that in October 2007, Maxcom entered into a business relationship with Euro Group of Companies, Inc. (“Euro”), an OTC Bulletin Board traded company (symbol:  EGCO), pursuant to which Maxcom would receive compensation for purportedly selling products of Euro and Euro’s subsidiaries to wholesalers.  The action also alleged that, at various times in 2008, respondent Christoforou purchased restricted shares of Euro in one or more private placements at a purchase price of $.12 and $.15 per share, and that, from approximately May 7, 2008 through approximately September 17, 2008, respondent Maxcom sold Euro restricted shares at a price of $.50 per share to at least six investors in Connecticut and other states.  In most instances, each individual investor allegedly sent the respondents a check made out to either Maxcom or Europhone USA, LLC (“Europhone”), a Euro subsidiary, and respondent Christoforou then either wrote a check to Europhone from Maxcom’s checking account for the same amount or forwarded the investor’s check to Euro and/or Europhone.  Euro then sent the restricted share certificate directly to the investor or to Christoforou for delivery to the investor.  The action also alleged that, at the time of the sales, unrestricted Euro shares were trading on the OTC Bulletin Board for between $.10 and $.35 per share; and that none of the investors purchasing Euro restricted shares through the respondents held a controlling interest in Euro, nor was there any demonstrated basis for their paying a premium over market value for the Euro securities.

The action further alleged that 1) the respondents failed to disclose to investors that Euro was  a public company trading on the OTC Bulletin Board for significantly less than $.50 per share;  2) the respondents misrepresented to investors that the respondents were the exclusive means by which investors could purchase Euro shares and that Euro was going to become a public company in the near future; and 3) the respondents failed to provide investors with a private placement memorandum or other offering document disclosing the risks associated with a purchase of Euro restricted shares or that the Euro restricted shares were not registered under the Connecticut Uniform Securities Act.

The action also alleged that 1) Maxcom transacted business as an unregistered broker-dealer in violation of Section 36b-6(a) of the Act; 2) respondent Christoforou transacted business as an unregistered broker-dealer agent in violation of Section 36b-6(a) of the Act; 3) respondent Christoforou transacted business as an unregistered agent of issuer in contravention of Section 36b-6(a) of the Act; 4) the respondents offered and sold unregistered securities in violation of Section 36b-16 of the Act; and 5) the respondents violated the antifraud provisions in Section 36b-4(a) of the Act.

The respondents were afforded an opportunity to request a hearing on the Order to Cease and Desist and Notice of Intent to Fine.

Order to Cease and Desist and Notice of Intent to Fine Issued

On January 3, 2013, the Banking Commissioner issued an Order to Cease and Desist and Notice of Intent to Fine against First Financial LLC (“FFL”) of Branford, Connecticut and Wolcott, Connecticut.  Also named in the action was Feisal Sharif, managing member of FFL.

The action alleged that, from at least January 2007 forward, respondent Sharif, alone and under the auspices of FFL, pooled the funds of at least 80 investors for the purported purpose of investing those funds in an account managed by FFL and Sharif, and that Sharif guaranteed monthly and yearly returns of 1 percent to 15 percent.  The action also alleged that, in reality, Sharif commingled investor funds, paid off earlier investors with later investors' money and diverted investor funds for his personal use.  According to the action, to hide his conduct, Sharif allegedly created and provided some investors with fictitious account statements reflecting false and inflated account balances.  In addition, the respondents allegedly failed to disclose to investors any risk factors related to the investment, any financial information concerning the respondents and that investor funds would be applied to pay for the respondents' personal expenses and to pay off earlier investors.

The action further alleged that 1) the respondents offered and sold unregistered securities in violation of Section 36b-16 of the Connecticut Uniform Securities Act; and 2) the respondents violated the antifraud provisions in Section 36b-4(a) of the Act.

The respondents were afforded an opportunity to request a hearing on the Order to Cease and Desist and Notice of Intent to Fine.

Dated:  Tuesday, January 8, 2013