DOB: Fundraising Co-Op Inc. et al. - Consent Order

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IN THE MATTER OF:


FUNDRAISING CO-OP, INC.

BUYER TOPIA, INC.

NICHOLAS C. BURKHOLDER

DUNCAN H. GRAHAM

JOHN WEBER

    (Collectively, "Respondents")



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CONSENT ORDER


DOCKET NO. CRF-13-883-B

I. PRELIMINARY STATEMENT

WHEREAS, the Banking Commissioner (the “Commissioner”) is charged with the administration of Chapter 672c of the General Statutes of Connecticut, the Connecticut Business Opportunity Investment Act (the “Business Opportunity Act”);

WHEREAS, the Commissioner is also charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (the “Securities Act”) and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies promulgated under the Securities Act;

WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking (“Department”), conducted an investigation pursuant to Section 36b-71(a) of the Business Opportunity Act and Section 36b-26(a) of the Securities Act into the activities of Respondents to determine if Respondents have violated, are violating or are about to violate provisions of the Business Opportunity Act, the Securities Act or both (the “Investigation”);

WHEREAS, as a result of the Investigation, the Division alleged that Respondents have violated certain provisions of the Business Opportunity Act and certain provisions of the Securities Act;

WHEREAS, on July 25, 2013, the Commissioner, acting pursuant to Sections 36b-27 and 36b-72 of the General Statutes of Connecticut, issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing against Respondents (collectively “Notice”), which Notice is incorporated by reference herein;

WHEREAS, on July 29, 2013, the Notice was received by Respondents;

WHEREAS, on August 12, 2013, Respondents requested a hearing on the matters alleged in the Notice (“Hearing”);

WHEREAS, on August 13, 2013, the Commissioner issued a Notification of Hearing and Designation of Hearing Officer, in which the Commissioner notified the Respondents that the hearing would take place on September 24, 2013, and designated Department of Banking Attorney Stacey Serrano as the Hearing Officer;

WHEREAS, on September 20, 2013, the hearing was continued to October 24, 2013 in order to afford the Commissioner and Respondents an opportunity to settle this matter;

WHEREAS, Respondents represented to the Department that they have made only one sale of an unregistered business opportunity to persons in Connecticut (“Connecticut Purchaser-Investor”);

WHEREAS, Section 36b-31(a) of the Securities Act provides, in relevant part, that “[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-34, inclusive”;

WHEREAS, Section 36b-31(b) of the Securities Act provides, in relevant part, that “[n]o . . . order may be made . . . unless the commissioner finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of sections 36b-2 to 36b-34, inclusive”;

WHEREAS, Section 36b-27(f) of the Securities Act provides, in relevant part, that “[a]ny time after the issuance of an order or notice provided for in subsection (a), (b) . . . or subdivision (1) of subsection (d) of this section, the commissioner may accept an agreement by any respondent named in such order or notice to enter into a written consent order in lieu of an adjudicative hearing”;

WHEREAS, Section 36b-72(d) of the Business Opportunity Act provides, in relevant part, that “[a]ny time after the issuance of an order or notice provided for in subsection (a) or (b) of this section, the commissioner may accept an agreement by any respondent named in such order or notice to enter into a written consent order in lieu of an adjudicative hearing”;

WHEREAS, an administrative proceeding initiated under Sections 36b-27 and 36b-72 of the General Statutes of Connecticut would constitute a “contested case” within the meaning of Section 4-166(2) of the General Statutes of Connecticut;

WHEREAS, Section 4-177(c) of the General Statutes of Connecticut and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provide that a contested case may be resolved by consent order, unless precluded by law;

WHEREAS, Respondents and the Commissioner now desire to resolve the matters alleged in the Notice without the need for further administrative proceedings;

WHEREAS, the issuance of this Consent Order is necessary or appropriate in the public interest or for the protection of investors and purchaser-investors and consistent with the purposes fairly intended by the policy and provisions of the Business Opportunity Act and the Securities Act;

WHEREAS, Respondents agree that the Notice may be used in construing the terms of this Consent Order, and agree to the language in this Consent Order;

AND WHEREAS, Respondents specifically assure the Commissioner that none of the violations alleged in the Notice shall occur in the future.

II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS

WHEREAS, Respondents, through their execution of this Consent Order, voluntarily waive the following rights:

1. To be afforded notice and an opportunity for a hearing within the meaning of Section 36b-27 of the Securities Act, Sections 36b-72(a) and 36b-72(b) of the Business Opportunity Act and Section 4-177(a) of the General Statutes of Connecticut;
2. To present evidence and argument and to otherwise avail themselves of Section 36b-27 of the Securities Act, Sections 36b-72(a) and 36b-72(b) of the Business Opportunity Act and Section 4-177c(a) of the General Statutes of Connecticut;
3.
To present their position in a hearing in which each is represented by counsel;
4. To have a written record of the hearing made and a written decision issued by a hearing officer; and
5.
To seek judicial review of, or otherwise challenge or contest the matters described herein, including the validity of this Consent Order.

III.  ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS

WHEREAS, Respondents, through their execution of this Consent Order, acknowledge the following allegations of the Commissioner, and do not admit or deny these allegations, but agree that sufficient evidence exists from which the Commissioner could find facts to substantiate the issuance of an order to cease and desist, an order to make restitution, and an order imposing a maximum administrative fine of One Hundred Thousand Dollars ($100,000) per violation of the Business Opportunity Act and/or the Securities Act or any regulation, rule or order adopted or issued under the Business Opportunity Act and/or Securities Act:

1.
Respondents violated Section 36b-67(1) of the Business Opportunity Act through the offer and sale of an unregistered business opportunity to at least one Connecticut Purchaser-Investor;
2. Respondents violated Section 36b-67(2) of the Business Opportunity Act by making unsubstantiated earnings claims;
3. Respondents violated Section 36b-67(6) of the Business Opportunity Act by engaging in fraudulent conduct; and
4. Fundraising Co-Op, Inc. violated Section 36b-16 of the Securities Act through the offer and sale of securities in or from Connecticut to at least one investor, which securities were not registered in Connecticut under the Securities Act, nor were they the subject of an exemption claim or claim of covered security status under Section 36b-21 of the Securities Act;

WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting Respondents an opportunity for a hearing;

AND WHEREAS, Respondents acknowledge the possible consequences of an administrative hearing and voluntarily agree to consent to the entry of the sanctions described below. 

IV.  CONSENT TO ENTRY OF SANCTIONS

WHEREAS, Respondents, through their execution of this Consent Order, consent to the Commissioner’s entry of a Consent Order imposing on them the following sanctions:

1. Respondents shall cease and desist from engaging in conduct constituting or which would constitute a violation of the Business Opportunity Act, the Securities Act or any regulation, rule or order adopted or issued under the Business Opportunity Act and/or Securities Act, either directly or through any person, organization or other device;
  
2. No later than the date this Consent Order is issued by the Commissioner, Fundraising Co-Op, Inc., and/or Buyer Topia, Inc. (together, the “Buyer Topia Entities”) and/or their successors in interest shall jointly and severally remit to the Department of Banking, by cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut”, the sum of Seven Thousand Five Hundred Dollars ($7,500) as an administrative fine;
  
3.
(a)     No later than ten (10) business days after this Consent Order is entered by the Commissioner, the Buyer Topia Entities shall extend in writing, via Certified Mail, Return Receipt Requested, to affected Connecticut Purchaser-Investors an opportunity to rescind their business opportunity contracts and receive from the Buyer Topia Entities the consideration paid by the Connecticut Purchaser-Investors for the business opportunity plus interest at six percent per year from the date of such payment by the Connecticut Purchaser-Investors (the “Rescission Offer”).  The Rescission Offer and its accompanying Acknowledgment and Election Form shall be in the form attached hereto as Exhibit A [omitted online] which is incorporated by reference herein and made a part hereof.  Any unauthorized alteration of Exhibit A by the Buyer Topia Entities shall be deemed a violation of this Consent Order;
  
(b)  No later than five (5) business days after the Buyer Topia Entities mail the Rescission Offer to the Connecticut Purchaser-Investors pursuant to paragraph 3.(a) of this Consent Order, the Buyer Topia Entities shall file with the Division, via electronic mail or paper delivery, documentary evidence that the Rescission Offer has been mailed to the Connecticut Purchaser-Investors and shall include the United States Postal Service tracking number(s);
    
(c)  No later than thirty (30) business days after the Rescission Offer is mailed to the Connecticut Purchaser-Investors, the Buyer Topia Entities shall file with the Division, via electronic mail or in paper format, proof that the Rescission Offer has been delivered to the Connecticut Purchaser-Investors, including the date(s) of delivery, or, if delivery was unsuccessful, documentation of non-delivery.  For each Rescission Offer for which evidence of non-delivery has been submitted to the Division, the Buyer Topia Entities shall exercise all commercially reasonable efforts to ascertain the Connecticut Purchaser-Investor’s current address.  If the Buyer Topia Entities or their successors in interest obtain knowledge of such address within one (1) year following the entry of this Consent Order by the Commissioner, the Buyer Topia Entities shall promptly send a second Rescission Offer to such Connecticut Purchaser-Investor in the manner and form set forth in paragraph 3. of this Consent to Entry of Sanctions, and shall comply with the other related provisions in paragraph 3.;
    
(d)  Connecticut Purchaser-Investors to whom the Rescission Offer was delivered shall have thirty (30) days following their documented receipt of the Rescission Offer to consider and act upon the Rescission Offer.  The Buyer Topia Entities shall furnish the Division with copies of the Connecticut Purchaser-Investors’ executed Acknowledgement and Election Forms within five (5) business days after the Buyer Topia Entities receive the completed forms from the Connecticut Purchaser-Investors.  The executed copies of the Acknowledgement and Election Forms may be e-mailed to the Division;
    
(e)  No later than January 31, 2014, the Buyer Topia Entities shall provide the Division with written proof that the Buyer Topia Entities or their successors in interest have repaid in good funds each Connecticut Purchaser-Investor electing rescission pursuant to the Rescission Offer.  Such payments shall be made via cashier’s check, certified check or money order made payable to each affected Connecticut Purchaser-Investor.  The Buyer Topia Entities or their successors in interest shall include copies of such checks or money orders in their submission to the Division. 

V.  CONSENT ORDER

NOW THEREFORE, the Commissioner enters the following:

1. The Sanctions set forth above be and are hereby entered;
2. Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against Respondents, their affiliates and/or successors in interest based upon a violation of this Consent Order or the matters underlying its entry if the Commissioner determines that compliance with the terms herein is not being observed or if any representations made by Respondents and reflected herein are subsequently discovered to be untrue, including, without limitation, representations concerning the number of Connecticut purchasers to whom Respondents have sold business opportunities or securities;
3. In the event of nonperformance or violation by Respondents and/or their successors in interest of any term or condition addressed to them as set forth in this Consent Order, Respondents consent to the immediate entry and imposition of a One Hundred Thousand Dollar ($100,000) fine, knowingly, willfully and voluntarily waiving their right to notice and an administrative hearing in conjunction therewith;
4. Nothing in this Consent Order shall be construed as limiting the Commissioner’s ability to take enforcement action against Respondents based upon evidence of which the Division was unaware on the date hereof relating to a violation of the Business Opportunity Act, Securities Act, or any regulation or order under the Business Opportunity Act or the Securities [Act]; and
5. This Consent Order shall become final when entered.

So ordered at Hartford, Connecticut,       ______/s/__________ 
this 13th day of December 2013.   Howard F. Pitkin 
    Banking Commissioner 



CONSENT TO ENTRY OF ORDER

I, Michael Celec, state on behalf of Fundraising Co-Op, Inc., that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Fundraising Co-Op, Inc.; that Fundraising Co-Op, Inc., agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Fundraising Co-Op, Inc., consents to the issuance of this Consent Order.
       

 
By:   _________/s/___________
  Name: Michael Celec
  Title: Operations Manager
       Fundraising Co-Op, Inc.


State of:  Pennsylvania

County of:  Bucks
 
On this the 27th day of November 2013, before me, Madeline Soto, the undersigned officer, personally appeared Michael Celec, who acknowledged himself to be the Operations Manager of Fundraising Co-Op, Inc., a Pennsylvania non-profit cooperative corporation, and that he, as such Operations Manager, being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the Pennsylvania non-profit cooperative corporation by himself as Operations Manager.
 
In witness whereof I hereunto set my hand.
 

_____/s/___________________________
Notary Public
Date Commission Expires:  June 11, 2017


CONSENT TO ENTRY OF ORDER

I, Michael Celec, state on behalf of Buyer Topia, Inc., that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Buyer Topia, Inc.; that Buyer Topia, Inc., agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Buyer Topia, Inc., consents to the issuance of this Consent Order.
       

 
By:   ______/s/______________
  Name: Michael Celec
Title: Operations Manager
Buyer Topia, Inc.


State of:  Pennsylvania

County of:  Bucks
 
On this the 27th day of November 2013, before me, Madeline Soto, the undersigned officer, personally appeared Michael Celec, who acknowledged himself/herself to be the Operations Manager of Buyer Topia, Inc., a Pennsylvania non-profit non-stock corporation, and that he, as such Operations Manager, being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the Pennsylvania non-profit non-stock corporation by himself as Operations Manager.
 
In witness whereof I hereunto set my hand.
 

______/s/___________________________
Notary Public
Date Commission Expires:  June 11, 2017

CONSENT TO ENTRY OF ORDER

I, Nicholas C. Burkholder, state that I have read the foregoing Consent Order; that I know and fully understand its contents; that I agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that I consent to the entry of this Consent Order.     

 
_______/s/__________
Nicholas C. Burkholder


State of:  Pennsylvania
 
County of:  Bucks
 
On this the 27th day of November 2013, before me, Madeline Soto, the undersigned officer, personally appeared Nicholas C. Burkholder, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained.
 
In witness whereof I hereunto set my hand.
 

_____/s/____________________________
Notary Public
Date Commission Expires:  June 11, 2017

CONSENT TO ENTRY OF ORDER

I, Duncan H. Graham, state that I have read the foregoing Consent Order; that I know and fully understand its contents; that I agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that I consent to the entry of this Consent Order.

 
______/s/________
Duncan H. Graham


State of:  Pennsylvania
 
County of:  Bucks
 
On this the 2 day of December 2013, before me, Kathleen Bradfield, the undersigned officer, personally appeared Duncan H. Graham, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained.
 
In witness whereof I hereunto set my hand.
 

_____/s/______________________________
Notary Public
Date Commission Expires:  October 31, 2017

CONSENT TO ENTRY OF ORDER

I, John Weber, state that I have read the foregoing Consent Order; that I know and fully understand its contents; that I agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that I consent to the entry of this Consent Order.       

 
___/s/______
John Weber


State of:  Pennsylvania
 
County of:  Montgomery
 
On this the 2nd day of December 2013, before me, Nicole Hays, the undersigned officer, personally appeared John Weber, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained.
 
In witness whereof I hereunto set my hand.
 

_____/s/___________________________
Notary Public
Date Commission Expires:  July 27, 2017



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