THREE CHARGED WITH FRAUD IN ALLEGED CHARITABLE GIFT ANNUITY SCHEME

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

SEC Charges We The People, Inc., of The United States and Three Individuals In Offering Fraud Scheme

On February 4, 2013, the Securities and Exchange Commission filed complaints in the U.S. District Court for the Southern District of Florida in connection with an offering fraud conducted by We The People, Inc. of the United States ("We The People"), a purported charitable organization based in Tallahassee, Florida.

In its complaint against Richard Olive, We The People’s former chief of program services, and Susan Olive, We The People’s former chief of finance and administration, the Commission alleges that the Olives, husband and wife, orchestrated a fraudulent scheme that raised more than $75 million from approximately 450 investors located across the United States, most of whom were senior citizens. Investors were solicited to transfer assets to We The People in exchange for what it called a charitable gift annuity. The Commission alleges that We The People – through the Olives – lured investors by making various false and misleading statements regarding, among other things, the value of the products sold and the safety and security of the investments. The complaint also alleges that the Olives failed to disclose to investors indictments and regulatory sanctions issued against them for fraudulently selling similar products. In addition to the misrepresentations, the Commission alleges that the Olives misappropriated investor funds for personal use.

The complaint alleges that, based on this conduct, Richard and Susan Olive violated, or aided and abetted the violation of, Sections 17(a) of the Securities Act of 1933 ("Securities Act"), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint also claims that the Olives violated Sections 5(a) and 5(c) of the Securities Act, and Section 15(a) of the Exchange Act. The Commission seeks that the Olives be permanently enjoined, and be ordered to pay disgorgement plus pre- and post-judgment interest, and third-tier civil money penalties.

In addition, the Commission filed settled actions against We The People and William Reeves, We The People’s in-house counsel. Without admitting or denying the Commission’s allegations, We The People consented to a final judgment providing injunctive relief under Sections 5(a), 5(c) and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, disgorgement, and the appointment of a receiver to protect the more than $60 million of investor assets still held by We The People.

Without admitting or denying the Commission’s allegations, Reeves consented to a final judgment providing injunctive relief under Sections 5(a), 5(c), 17(a)(2) and 17(a)(3) of the Securities Act, and providing that the Court will determine issues relating to the imposition of a civil money penalty against him at a later date. Reeves also agreed to a suspension from appearing or practicing before the Commission as an attorney, with the right to apply for reinstatement after 5 years. Reeves entered into a cooperation agreement with the Commission, and the terms of his settlement reflect his assistance in the Commission’s investigation and anticipated cooperation in its pending enforcement action.

SEC CHARGES HUSBAND AND WIFE WITH DEFRAUDING SENIOR CITIZENS WITH CHARITY SCHEME

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Feb. 4, 2013 — The Securities and Exchange Commission today charged a husband and wife who raised millions of dollars selling investments for a purported charitable organization in Tallahassee, Fla., while defrauding senior citizens and significantly exaggerating the amount of contributions actually made to charity.

The SEC alleges that after Richard K. Olive and Susan L. Olive were hired at We The People Inc., the organization obtained $75 million from more than 400 investors in Florida, Colorado, and Texas among more than 30 states across the country by selling an investment product they described as a charitable gift annuity (CGA). However, the CGAs issued by We The People differed in several ways from CGAs issued legitimately, namely that they were issued primarily to benefit the Olives and other third-party promoters and consultants. Only a small amount of the money raised was actually directed to charitable services. Meanwhile the Olives received more than $1.1 million in salary and commissions, and they also siphoned away investor funds for their personal use.

The SEC further alleges that the Olives lured elderly investors with limited investing experience into the scheme by making a number of false representations about the purported value and financial benefits of We The People’s CGAs. The Olives also lied about the safety and security of the investments.

"The Olives raised millions from senior citizens by claiming that We The People’s so-called CGAs provided attractive financial benefits and were re-insured and backed by assets held in trust," said Julie Lutz, Associate Director of the SEC’s Denver Regional Office. "Investors were not given the full story about the true value and security of their investments."

According to the SEC’s complaint against the Olives filed in U.S. District Court for the Southern District of Florida, investors were coaxed to transfer assets including stocks, annuities, real estate, and cash to We The People in exchange for a CGA. We The People claimed to operate as a non-profit organization while it was offering the CGAs from June 2008 to April 2012. However, We The People was not operating as a charity but instead for the primary purpose of issuing CGAs and using the proceeds to pay substantial sums to the Olives, third-party promoters, and consultants. On rare occasions when We The People did actually direct money raised toward charitable services, it was insignificant. For instance, the organization made public statements that it donated $21.8 million in relief aid to AIDS orphans in Zambia, but in fact the supplies were donated by others and We The People merely made a small payment to the third party that was shipping the supplies.

The SEC alleges that We The People’s marketing and promotional materials for the CGA offering contained misrepresentations and omissions including:
False statements that the CGAs were worth the "full" accumulated value of the assets transferred by investors to We The People. Investors were not told in advance of transferring their assets that the value of the CGA as calculated by We The People was always substantially less than the "full" accumulated value of those assets because We The People took a significant percentage of the asset’s value and kept it as a purported "charitable gift."

False statements about the safety and security of the CGA program including that We The People held in trust a reserve equal to 110 percent of its liabilities and that it "reinsured" its products through "highly rated" commercial insurance companies. We The People did not in fact have any restricted-access trust accounts let alone maintain a reserve in them, and it did not purchase reinsurance from any insurance company to cover its potential liabilities under the CGAs.
Omissions of the previous indictments and regulatory sanctions against Richard and Susan Olive when they previously sold similar products.
Omissions of the sizable commissions that We The People paid to third-party promoters and the Olives on the sale of the CGAs, hiding from investors that these commissions totaled several million dollars.
The SEC’s complaint charges the Olives with violations, or aiding and abetting violations, of the antifraud provisions of the federal securities laws as well as violations of the securities and broker-dealer registration provisions of the federal securities laws. The SEC is seeking disgorgement of ill-gotten gains plus pre- and post-judgment interest and financial penalties against the Olives.

The SEC also filed separate complaints today against We The People as well as the company’s in-house counsel William G. Reeves. They both agreed to settle the charges without admitting or denying the allegations. The settlements are subject to court approval.

We The People consented to a final judgment that will enable the appointment of a receiver to protect more than $60 million of investor assets still held by the company. The final judgment also provides for disgorgement of ill-gotten gains and provides injunctive relief under the antifraud and registration provisions of the federal securities laws.

Reeves entered into a cooperation agreement with the SEC, and the terms of his settlement reflect his assistance in the SEC’s investigation and anticipated cooperation in its pending action against the Olives. Reeves agreed to be suspended from appearing or practicing before the SEC for at least five years, and consented to a final judgment providing injunctive relief under the provisions of the federal securities laws that he violated. The court will determine at a later date whether a financial penalty should be imposed against Reeves.

The SEC’s investigation was conducted by Michael Cates and Ian Karpel in the Denver Regional Office. The SEC’s litigation against the Olives will be led by Nicholas Heinke and Dugan Bliss.