Securities: Securities and Exchange Commission v. Tee to Green Golf Parks Inc.

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U.S. District Court, Western District of New York

Securities

Securities and Exchange Commission v. Tee to Green Golf Parks Inc.
00-CV-478
Judge Skretny

Background: The Securities and Exchange Commission has moved pursuant to Rule 56 of the Federal Rules of Civil Procedure for partial summary judgment against defendants Tee To Green Golf Parks Inc., and Steven D. Blumhagen, and the court has already granted the commission’s motion, including the request for injunctive relief. The Securities and Exchange Commission has also moved to withdraw with prejudice its requests in the complaint for civil penalties, disgorgement and prejudgment interest against Tee To Green and Steven Blumhagen and withdraw its requests in the complaint for an accounting from Tee To Green.
In January 2011, the court found the defendants liable. The commission had filed its complaint alleging that Tee To Green Golf Parks Inc., Blumhagen, Susan Blumhagen and four other defendants conducted a fraudulent scheme to sell promissory notes through numerous misrepresentations and falsehoods and then misappropriated the proceeds from the sale of those notes. In 1997, Tee to Green, which had a golf practice facility in Buffalo, offered and sold nearly $12 million in promissory notes to at least 320 investors in various states, including Ohio, Oregon, North Carolina, South Carolina, Mississippi and Pennsylvania.
The notes, which were not registered, offered purchasers a 10 percent return on their investment, with repayment promised in nine months.  When a sales agent sold a note, he or she notified Tee to Green, which then issued the notes, signed by Blumhagen, directly to the investors. Sales agents earned a commission on the sale of each note. Of the $12 million raised, Tee to Green paid sales agents approximately $1.8 million in commissions. The defendants used multiple misrepresentations and material omissions to induce investors to purchase the notes. Most glaringly, the offering materials, an offering summary, brochure and application, falsely represented that the notes were bonded, insured, and reinsured.

Ruling: The court grants the requests to withdraw made by the SEC. Among the court’s orders, the defendants are permanently restrained and enjoined from violating Section 17(a) of the Securities Act of 1933 in the offer or sale of any security by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly.

Charles D. Riely of the Securities & Exchange Commission for the plaintiff; Tee To Green Golf Parks, defendant pro se