State and federal agencies are investigating an allegedly fraudulent investment scheme targeting service members that apparently has spread to 23 states and to troops in Iraq and Afghanistan, officials said.
South Carolina officials have frozen $17 million in bank assets belonging to Capital Consortium Group Inc. and 3 Hebrew Boys LLC after obtaining a court order, said Mark Plowden, spokesman for South Carolina Attorney General Henry McMaster's office.
"But we hear the total investments could be as high as $50 million," Plowden said.
Although the companies and their bank accounts are based in that state, Plowden said officials believe most of the alleged victims were in North Carolina and other states. The two companies share an address and phone number in Columbia, S.C.
The information has been referred for possible criminal prosecution in South Carolina, Plowden said. The attorney general alleges the companies violated state securities laws "by engaging in fraudulent sales practices" and selling improperly registered securities. However, as of June 13, no criminal charges had been filed in the case.
None of the funds has been invested as promised to investors, authorities said. Instead, bank records indicate the money allegedly has gone into the pockets of company officials Tony Pough, Tim McQueen and Joseph Brunson. The three, named in court documents, did not return phone calls.
Reached by phone, their representative, Sakima Bey, said, "I have nothing to say," and hung up.
The North Carolina secretary of state has issued a "cease and desist" order against the firms and four individuals to stop selling their unregistered securities there. At least one of the individuals reportedly was a service member, but that could not be confirmed.
Capt. Timothy Sers, an attorney with the staff judge advocate's office at Fort Benning, Ga., said a soldier's spouse called the Benning staff judge advocate's office to say that another soldier was soliciting for the companies in her husband's unit. The spouse said that soldier had recently been reassigned from Bragg to Benning.
Sers said the Fort Benning installation commander has placed the two businesses off-limits to service members in the Columbus, Ga., area, and the Army Criminal Investigation Division is investigating.
Military officials have information indicating that solicitations for the companies are being made within U.S. units in Iraq and Afghanistan, Sers said, while Plowden said complaints are not limited to the Army: Service members of other branches also are affected.
Officials are looking into whether the investments offered by the companies constitute a "Ponzi" or pyramid scheme, in which investors are promised big payoffs. Instead of being invested, the money is siphoned off for other purposes and to pay back earlier investors. Such schemes usually collapse when a sufficient flow of new investors no longer can be found.
Investments generally have been in the $1,000 to $5,000 range, but at least one person in the court document was said to have given the companies more than $50,000.
Fort Benning troops who have invested in these companies should contact their staff judge advocate office immediately at (706) 545-3285 for information about their rights. Elsewhere, service members and family members can call the legal office at their installation, or military investigative agencies.
Plowden encourages anyone with information to call the South Carolina attorney general's office at (803) 734-3970.