In early March 2010, the United States Securities and Exchange Commission obtained an asset freeze and other emergency relief to halt a Ponzi scheme that targeted retired bus drivers living in the Los Angeles, California area. The SEC has alleged that Thomas L. Mitchell, (“Mitchell”) and his investment advisory firm, Mitchell, Porter & Williams, Inc., operated two entities, the Adivanala AA Investment Trust (the “AAA Trust”) and AB3, Inc., (“AB3”), that collectively raised at least $14.7 million from 82 clients.
The SEC’s complaint alleges that Mitchell and Mitchell, Porter & Williams encouraged the retired bus drivers to take their lump sum payments from their retirement pensions and invest the money in promissory notes that offered fixed-interest payments ranging from 10% to 15% per year for up to six-year terms. The complaint further alleges that Mitchell represented to the retired bus drivers that he generated such large returns by investing in stocks, bonds, and real estate.
But according to the SEC, rather than making any securities investments for the clients, Mitchell actually used new investor money to pay interest to existing investors, in classic Ponzi-scheme fashion. Mitchell also is accused of diverting approximately 20 percent of new investor money for himself in the form of “operating expenses” and used clients’ money to fund his luxury car payments, mortgage payments, payments for a cruise, and tickets to sporting events.
