The Hockey Barn LLC and Jeffrey J. Coleman: Lit. Rel. No. 20180 / July 3, 2007
The Hockey Barn LLC and Jeffrey J. Coleman: Fraudulent Roll Program
SEC v. The Hockey Barn LLC and Jeffrey J. Coleman, Civ. Action No. 07-CV-438-C (W.D.N.Y.)
The Securities and Exchange Commission announced that today it filed an expedited enforcement action against The Hockey Barn LLC and Jeffrey J. Coleman, Hockey Barn's Chief Executive Officer, in the United States District Court for the Western District of New York. In the complaint, the Commission alleged that from approximately October 2006 through the present, Coleman and the Hockey Barn defrauded investors through an offering of promissory notes and other investment contracts. Among other things, Coleman falsely told investors that they could obtain a return of at least 400% within 60 days from an investment in a purported bond trading program.How does anyone really believe that such returns exist? Well they don't, but the large return serves as an anchor with respect to their reasoning. They cannot fully discount the possibility that what Coleman was saying might be true. After all, nothing is a 100% certainty, is it?
In November 2006, Coleman solicited a 70-year old man ("Investor 2") to invest in "The Barn." Coleman told Investor 2 that the minimum investment in the Hockey Barn was $100,000, and that it would provide a 50% return within 60 days. Coleman described his purported plans for the Hockey Barn to Investor 2. Coleman also falsely told Investor 2 that the Buffalo Sabres professional hockey club was interested in using the Hockey Bam as a practice facility. Further, Coleman falsely told Investor 2 that the Coca-Cola Company was interested in buying the facility in three to four years to compete with the Pepsi Center (an ice facility in the Buffalo area). Although Investor 2 responded that he only could invest $40,000, Coleman agreed to accept the investment.
I like this lie because it has the veneer of truth -why wouldn't the Coca-Cola company want to compete with Pepsi?
Investor 2 invested a total of $40,000 by two separate investments of $20,000 each (one in November and the second in early December 2006), and he received purported promissory notes from Coleman in return (one in Coleman's name and one in the name Coleman/Hockey Barn.
There is something about the promissory note which functions as a type of guarantee, many frauds use them as way of closing the deal even though they provide nothing in the way of security.
After Investor 3 made his investments, Coleman provided Investor 3 with two documents entitled "Memorandum of Understanding regarding Paper Purchase" that purportedly memorialized a group of investors' (including Investor 3's) respective "ownership"units of the paper purchase. For example, one undated Memorandum of Understanding sets out an allocation of ownership in units of the paper purchase to six investors, including Coleman and Investor 3. The Memorandum of Understanding states that this group owns 70% of the paper purchase.The Memorandum of Understanding further falsely states that "each Unit holder
will receive $550,000 of total monies returned per unit for the first roll of the paper purchase," and that "monies will be wired into each particular individuals (sic) selected bank account by February 23, 2007."Finally, the Memorandum of Understanding regarding the first roll falsely states
that "[a] total profit was made of $7,865,000" and that the investment group "controls 70% of that profit totaling $6,050,000."Coleman's statements concerning the returns on an investment in the "paper
purchase" or bond trading program would generate were completely unfounded and otherwise false.
Coleman's representations to the Investors were similar to those made in
investment schemes that the Commission, the Federal Reserve Bank of New York, and theFederal Bureau of Investigations have wamed the public about. For example, all three agencies have highlighted that fraudulent scams promising extremely high returns are often called "roll programs." Similarly, Coleman described the "paper purchase" as "rolls" to certain investors.
This highlights a very simple skepticism trick that is available to anyone online. If you are interested in X, then do a search for "X scam" or "X fraud". In this case, I did a search on "sec roll program fraud" The SEC warning page about prime bank fraud was the first page.
In addition, Coleman's statements to the Investors regarding Hockey Barn's purported plans to build hockey facilities were without any reasonable basis in fact and otherwise false. Coleman has not taken any significant steps to build or develop any hockey facilities. Further, contrary to Coleman's representations, the Buffalo Sabres never committed to using a Hockey Barn facility.
Really? How odd. And that Coleman chap seemed like such a nice gentleman.
