NEWARK, N.J. (Legal Newsline) - New Jersey Attorney General Paula Dow announced a summary order on Wednesday against a purported alternative energy company and its chief executive over allegations of fraud.
ForeverGreen Enterprises Inc. and Michael D. Kelly, the firm's chief executive officer, have been assessed a $400,000 civil penalty for allegedly violating provisions of the state's Uniform Securities Law. The law requires, among other things, that both the securities sold and the individuals selling them in New Jersey be registered with the Bureau of Securities. The alleged violations against ForeverGreen and Kelly include acting as an unregistered agent, offering and selling unregistered securities, making false statements of material facts or omitting material facts, and committing fraud and deceit.
The bureau alleged that Kelly sold unregistered shares in ForeverGreen in three private placement offerings between January 2007 and July 2009. Private placement offerings are typically exempt from registration if the person claiming the exemption can prove that the offering qualifies for an exemption under the Uniform Securities Law. The bureau alleged that the securities that ForeverGreen offered were not exempt from registration. In addition, Kelly was allegedly not registered to sell securities or registered in any other capacity with the bureau.
According to the bureau's allegations, Kelly misrepresented to investors that the proceeds of the offering would be used to fund ForeverGreen's purported business purpose of deriving fuels and alternative energy resources from medical, industrial and chemical wastes.
The bureau alleged that Kelly, rather than investing the funds in energy opportunities, diverted 55 percent of the approximately $576,000 raised from the offering into his personal bank account. The money was allegedly used to fund personal living expenses for himself and his family.
"Kelly offered investors the opportunity to get in on the ground floor of a seemingly lucrative investment opportunity, but we allege there was no upside because of the frauds he committed," Dow said. "Rather than using investor funds to grow the company, Kelly allegedly used investors' hard-earned money to benefit himself and his family."
The bureau also alleged that Kelly made false promises to investors that the company would be going public in the near future and that investors would receive high rates of return on the investment.
"Our investigators found a series of lies and a trail of deceit committed by these respondents," Thomas R. Calcagni, the director of the Division of Consumer Affairs, said. "No matter how good an investment opportunity sounds, consumers must take a step back and perform their due diligence."
The bureau alleged that in 2009, Kelly, who operated ForeverGreen from his residences in Tinton Falls and Ocean Township, offered to repurchase shares from investors at the original sales price but then failed to do so.
"The bureau is the front-line agency regulating the securities industry in New Jersey, and investors should contact us to verify that the person offering to sell a security, and also the security itself, are registered," Abbe R. Tiger, the bureau chief, said. "In the case of a private placement offering, investors should carefully investigate the claims made in the offering documents and seek to verify those claims before making the investment. Most private placement offerings are highly speculative. Investors should be prepared to lose their entire investment, and, if they cannot afford to lose that money, they should think twice before investing."