Say it ain’t so, Rudy.
Daniel “Rudy” Ruettiger, the 5-foot-6 walk-on Notre Dame football player whose underdog story became the 1993 movie “Rudy,” has seen his sports drink venture turn out less happily — with allegations of securities fraud.
In a lawsuit Friday, the Securities and Exchange Commission accused Ruettiger, 63, and 12 others of swindling investors in Rudy Nutrition, a Gatorade challenger he started with a college friend in South Bend, Ind.
Ruettiger got in trouble when he moved the company to Las Vegas in 2007 and joined a fast crowd that pumped out promotions to penny-stock investors. The SEC said the participants dumped $11 million worth of stock in a company that had few customers and no profits.
The drink, called Rudy, carried the slogan “Dream Big! Never Quit!” A promotional mailing claimed that in “a major Southwest test, Rudy outsold Gatorade 2 to 1!” An email boasted that in “several blind taste tests, Rudy outperformed Gatorade and Powerade by 2:1,” the SEC suit states.
Both statements were false, according to the lawsuit, filed in federal court in Las Vegas. The promoters are accused of manipulating trading to artificially inflate the price of Rudy Nutrition stock while selling unregistered shares to investors.
Only $800,000 of the more than $11 million raised went back into Rudy Nutrition, said Scott W. Friestad, associate director of the SEC’s enforcement division.
“Investors were lured into the scheme by Mr. Ruettiger’s well-known, feel-good story but found themselves in a situation that did not have a happy ending,” Friestad said.
Ruettiger and 10 other defendants settled the suit without admitting or denying wrongdoing, Friestad said; the two who have not settled also face criminal prosecution.
Ruettiger paid back $185,750 he made in the alleged scam, a fine of the same size and interest that brought his total to $382,866. He also agreed to be banned from serving as an officer or director of a public company and from promoting penny stocks.
“He was a willing participant in the scheme, but not the ringleader,” Friestad said, adding that Ruettiger had honest intentions when he founded the company and got caught up in the promotional scheme after it struggled.
The SEC revoked registration of the stock in late 2008 and Rudy Nutrition shut down.
Ruettiger, a dyslexic child with 13 siblings who applied to Notre Dame four times before he was admitted, was on a practice squad and took part in just one game for the Fighting Irish. He sacked the opposing quarterback in a play that became a centerpiece of the movie.
Currently a motivational speaker, he also started a foundation to benefit children’s advocacy programs and hand out the College Football Rudy Award to players of exceptional commitment.
Ruettiger and his attorney, Michael Eldredge of Salt Lake City, could not be reached for comment.