Thursday, September 2, 2010
The SEC charged Sandra Venetis, a Branchburg, N.J.-based investment adviser, and three of her firms, Systematic Financial Services, Inc., Systematic Financial Associates, Inc., and Systematic Financial Services, LLC, with operating a multi-million dollar offering fraud involving the sale of phony promissory notes to investors, many of whom are retired or unsophisticated in investments. According to the SEC, Venetis obtained at least $11 million from investors since approximately 1997. Systematic Financial Associates Inc. is an investment adviser, Systematic Financial Services LLC is an accounting and tax preparation firm, and Systematic Financial Services Inc. is an entity Venetis created to conduct the fraudulent offerings.
Venetis and the entities agreed to settle the SEC's charges and consented to all of the relief that the SEC seeks in its complaint, including the entry of a court order enjoining them from future violations of the above provisions of the securities laws, ordering the payment of disgorgement of ill-gotten gains with prejudgment interest, financial penalties, an asset freeze, accountings, and the appointment of an independent monitor. The settlement will defer the determination of the amount of the monetary relief to a later date.
The Commission's complaint alleges that Venetis told some investors that the promissory notes were guaranteed by the Federal Deposit Insurance Corporation and would earn interest of approximately 6 to 11 percent per year that would be tax-free due to a loophole in the tax code. She also told investors that she would use their money to fund loans to doctors that would be backed by Medicare reimbursement payments to those doctors. Instead of making investments, Venetis looted investor funds to pay business debts and personal expenses accrued from international travel, gambling, and home mortgages and property taxes. She also funneled cash to her relatives.