Oh Thank Heaven for the SEC - Fraud, Deceit, a Tropical Paradise and Slurpees

Oh Thank Heaven for the SEC - Fraud, Deceit, a Tropical Paradise and Slurpees

Press releases from the Securities and Exchange Commission are a treasure trove of stories. Stories involving fraud and deceit. This story begins in 2004 with an ambitious Florida company called Prime Time Group (now known as Hunt Gold Corporation) and ends this month in Miami federal courtroom. Unfortunately, for investors, the end of legal proceedings doesn't mean the end of their nightmare.According to the complaint filed by the SEC last year, Prime Time Group lied and defrauded investors.In 2005, the company began negotiating with 7-Eleven to purchase 14 stores in Puerto Rico. An agreement was reached but Prime Time was unable to secure the monies needed to close. Using borrowed funds and a complex arrangement among company insiders, Prime Time ultimately took control of the stores. (There is no allegation that 7-Eleven participated in any fraud or engaged in any wrong doing.)To this point, the story isn't very sexy. Perhaps some failed disclosures and complex technical violations but nothing on a scale of what was to happen next.In an effort to prop share prices, Prime Time began lying to investors. Lying on a grand scale. First, Prime Time reported positive financial figures while omitting loss and deficit figures.When it announced the false and misleading financials for the 14 franchise stores, Prime Time failed to disclose a much bigger fact. It no longer even held the license to operate those stores. That licensed had been transferred to one of Prime Time's lenders.If the lies surrounding the 7-11 franchises were not enough, the company announced it had formed a wireless division and was acquiring a company that had negotiated exclusive marketing agreements with Virgin Mobile, FIDO and T-Mobile. False according to the SEC.The company also reported that it acquired a company called Southern Wheel Workz and that the investment could "easily be a $100 million venture." It wasn't. The company wasn't able to finalize its acquisition, didn't have the money to open a single Southern Wheels store and did not even have any store locations in mind.If this were a private company, the losses may have been limited to a few investors or banks. Prime Time, however, was a public company. Tens of millions of shares of stock were traded on the open market. Traded by people who relied on false financial statements and press releases.The losses by these frauds extend well beyond the investors who purchased essentially worthless stock. Investment fraud schemes undermine confidence in the entire market. When that happens, we all suffer.The SEC has wrapped up its enforcement action against the corporate insiders who lied and manipulated stock prices. According to the complaint, Prime Time has changed its name to Hunt Gold and was last marketing "gold exploration." It is unknown whether the company is still in business but its shares are worthless. The total value of the millions of outstanding shares? Not even worth a Slurpee.

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