Investment firm targeted Latinos in Ponzi scheme, SEC alleges
The Securities and Exchange Commission filed a lawsuit Monday against an El Segundo investment firm, accusing its owner of operating a $23-million Ponzi scheme that targeted Latino investors from seven states.
Clelia A. Flores and her company, Maximum Return Investments Inc., attracted about 150 investors from 2006 to 2008 by offering returns of 25% a month, the lawsuit alleged.
Instead of profiting in real estate, banking, and oil, silver and gold exploration as she promised, Flores used money from new investors to make “interest” payments to old investors, the lawsuit said.
The lawsuit accused Flores of diverting $3.5 million for personal use, including a $443,000 down payment on a $1.9-million home in El Segundo. She also used investor money to pay for a lavish party at the Ritz-Carlton hotel in Marina del Rey, the SEC alleged. The catered party included a rented boat and free hotel rooms for guests and was intended to celebrate the company’s “alleged success,” according to the SEC.
Neither Flores nor her attorney could be reached for comment. SEC officials would not say whether a criminal investigation was underway.
The lawsuit, which seeks restitution and penalties from Flores, was filed at the federal courthouse in Los Angeles.
Federal authorities bring dozens of cases each year against companies accused of defrauding investors by offering unreasonably high returns. What made the Flores case unusual was its target investors.
“We have not in this region seen an investment fraud that we’re aware of, or brought a case against, that involved the Hispanic community,” said Finola H. Manvelian, assistant director of the SEC’s regional office in Los Angeles.
Of the $23 million collected from investors in California, New York, Georgia, Utah, Nevada, Texas and Illinois, about $13 million was paid out as returns to investors, the SEC said. Flores lost more than $5 million in high-risk and speculative investments, according to the lawsuit.
“There’s no money left. It’s horrible,” Manvelian said. “The money has just been completely misappropriated by her.”
Flores attracted investors through word of mouth -- she paid a 10% referral fee to anyone who brought her new customers -- and through brochures in Spanish and English. One advertisement was titled, “A Brief Introduction to Modern Money Creation.” Another, titled “Maximum Return Investments,” provided different payout scenarios.