SEC Charges Entertainment Promoters with $300M Fraud - SEC charges rock promoter in 300 Million Ponzi

SEC Charges Entertainment Promoters with $300M Fraud

By Aaron Seward
April 24, 2006
Last week, the SEC charged Jack Utsick, a Florida-based pop music promoter, and two conspirators for scheming to rob investors in a fraudulent offering scheme. According to the Commission, 3,300 investors nationwide were relieved of over $300 million—money that Utsick either lost or used to fund his lavish lifestyle.
The SEC’s complaint alleges that between 1998 and late 2005, Utsick and his partners, Robert and Donna Yeager, ran four companies, Worldwide Entertainment, Inc., Entertainment Group Fund, Inc., American Enterprises, Inc. and Entertainment Funds, Inc., to sell unregistered securities. These securities consisted of loan agreements in limited liability companies whose purpose was to raise funds for a variety of entertainment ventures produced or promoted by Utsick.
According to Bilboard Magazine, Utsick is the World’s third largest independent entertainment promoter. The SEC said he used his name and reputation, along with the names of the artists he promoted, to sell the questionable securities. Over the years, Utsick and his cohorts raised money for dozens of projects, including theatrical productions and concerts for well-known artists and groups such as Shania Twain, Elton John, Santana, The Pretenders and Aerosmith.
Utsick and his conspirators lured prospective investors with promised annual returns ranging from 15% to 25% and, in some in instances, an additional 3% of the profits generated by the entertainment ventures. The investments were usually for a term of one year, and many investors rolled over their principle and purported "profits" from project to project.
In reality, most of the entertainment projects lost money and at least one never took place. As a result, Utsick and his companies paid earlier investors with funds raised from new investors and the scheme quickly devolved into a glitzy Ponzi scheme.
The SEC claims that Utsick and Co. made material misrepresentations and omissions to investors about the profitability of their investments, the use of proceeds and the payment of commissions.
His promises of annual returns of 15% to 25% were completely baseless, the SEC charges. While the offering materials for each venture identified the particular concert or event for which funds would be used, Utsick commingled all of the funds received for the projects in two operating accounts (Worldwide or Entertainment Group), from which he paid all business and personal expenses. Because he failed to maintain separate accounts or books and records for each project, it was impossible for him to determine the profitability of any event.
Also, while investor documents stated that no commissions would be paid in connection with the offering, Utsick paid over $7 million in undisclosed commissions to the Yeagers and others.
As if he couldn’t get rid of his investors’ money fast enough, Utsick also opened an options trading account for Entertainment Group through which he traded, and lost nearly $17 million. He also used investor funds to purchase two multimillion-dollar condominiums in Miami Beach, Florida.
In addition, Utsick and his friends obscured from investors the existence of state disciplinary actions against them and their companies from Missouri, Michigan and Wisconsin.
The Commission’s complaint was filed in the United States District Court for the Southern District of Florida. Without admitting or denying the allegations of the complaint, Utsick and the Yeagers consented to the entry of a permanent injunction, an asset freeze, repatriation order, repayment of amounts they received, and penalties.