Marketer in Alleged Ponzi Scheme Is Ordered to Pay

A financial advisor accused of marketing fraudulent real estate investments on a Christian-themed Internet site was ordered to repay more than $1.1million, regulators said Tuesday.

Thomas G. Cloud and his Cloud Associates Consulting firm in Atlanta also were fined $660,000, the latest development in a Securities and Exchange Commission probe of TLC America Inc. of Brea and its president, E. Frank Cossey.

Cossey, of Diamond Bar, settled with the SEC in August by accepting an $11-million judgment, although investigators said his assets total only about $3 million. He was accused of running a Ponzi scheme, paying interest to early investors with money from later victims.

U.S. District Judge David O. Carter in Santa Ana last week ordered Cloud and his business to repay the $1.1 million Cloud was paid to promote TLC, plus $39,707 in interest. The judge fined Cloud $110,000 and his business $550,000.

Cloud contended he was deceived by Cossey’s claims, but Carter said the evidence showed Cloud attended a sales meeting at which he learned that TLC was losing money. The judge also noted that Cloud failed to tell investors of a previous tax fraud conviction and that he was being paid to promote TLC.

Cloud’s attorney, Gary Barnes, didn’t return a call seeking comment.

Cloud sold TLC investments through his Internet site, which says he “believes in combining his knowledge of scripture with his knowledge of investing.”

The receiver liquidating TLC’s holdings, Robb Evans Associates of Sun Valley, has estimated that TLC attracted $151.6million from investors and still wound up owing them about $106million.

The investors, most of them elderly, are expected to recover about half that amount, said Kent Johnson, one of the Evans investigators. Sales of TLC assets have netted about $8.2 million, bringing total recoveries to $13.4 million, Johnson said.

TLC’s chief financial officer, Gary W. Williams, also was accused of fraud. He settled the SEC’s civil suit last July.