Peter C. Harvey, Attorney General
Division of Consumer Affairs
Reni Erdos, Director
For Further Information Contact:
Genene Morris, Jeff Lamm
TRENTON - The Attorney General's Office, through the Bureau of Securities, filed suit today against an Ocean County man who stole in excess of $350,000 from more than 200 people who invested in a product he invented to protect large, personal items such as cars and boats from wind damage, Attorney General Peter. C. Harvey, Consumer Affairs Director Reni Erdos and Bureau of Securities Chief Franklin L. Widmann announced today.
The State, which worked cooperatively with the U.S. Attorney's Office, District of New Jersey, filed its lawsuit seeking restitution and penalties on the same day that the defendant, Brick resident George F. Gaffney, pleaded guilty to a federal charge of mail fraud in connection with the scam.
The State's complaint, filed by Consumer Affairs' Bureau of Securities in Essex County Superior Court, states that between 1999 and 2001, Gaffney enticed investors into purchasing securities in the form of ownership interests in his companies Hurricane Products, Inc."New Jersey; Hurricane Products, Inc."Delaware; and Hurricane Protection Services, LLC. The companies, which were also named as defendants, were supposed to develop and market Gaffney's patented invention, a system of straps hitched to anchors in the ground designed to tie down portable structures, large personal items and even roofs of larger structures for protection against storms. Instead of using the money invested for the further development of his product, Gaffney diverted it to support himself and his family, according to the complaint.
Today's filing, which comes during National Consumer Protection Week, was announced at a press conference in Trenton attended by Director Erdos, Bureau Chief Widmann and Deputy U.S. Attorney Lee Solomon of the U.S. Attorney's Office, District of New Jersey.
"Mr. Gaffney used a series of lies and deceptions to carry out his crooked scheme," Attorney General Harvey said. "He promised large returns to trusting investors, then illegally diverted their investments to bankroll his luxury cars, vacations and other personal expenses. We'll work with our federal partners to secure restitution for these investors."
The complaint states that Gaffney represented to investors that their investments would be used to develop, promote and market the product and promised a 10 percent return on their money. He further represented to investors that they could get a full refund of their money at any time, provided they put the request in writing and gave 30 days notice. In addition, Gaffney promised investors he would take his company public within a year of their investments.
To date, Gaffney has not made good on any of his promises. In fact, the complaint states, Gaffney, who had no other significant source of income between 1999 and 2001, raided his business accounts and used investor funds to cover his and his family's living expenses and to pay for such luxury items as classic and high-end automobiles, boats and vacations.
Furthermore, the securities he sold to investors were not registered for sale in New Jersey, as required by law, nor was Gaffney registered to sell any form of securities in the State.
Gaffney went to extraordinary measures to keep his scam going and the money flowing into his personal bank accounts. For example, in order to induce investors to keep their money with the company and not ask for a refund, the complaint states, Gaffney periodically sent letters to investors informing them that a large group of investors was interested in buying the company. The pattern continued with the next letter, in which Gaffney would state that the deal with the first buyers fell through, but that he found another potential purchaser.
It appears that there never were any prospective buyers and that the letters were sent as a ruse to conceal the fact that he spent the investors' money for his personal use, the complaint states.
"Most people get up each morning and go to at least one job in order to earn a living and support their families," Director Erdos said. "Not Mr. Gaffney. We allege that he found another lucrative way of paying his bills and that was on the backs of hard-working, unsuspecting investors."
"Mr. Gaffney allowed greed to guide his activities," Bureau Chief Widmann said. "We allege that Mr. Gaffney took investors' money and pocketed almost all of it for his own selfish gain. In fact, we allege, Mr. Gaffney often spent investors' money within days of receiving their investment."
For example, the complaint states, on Sept. 20, 2000, Gaffney made a deposit into the account of Hurricane Protection Services, LLC, in the amount of $11,000. The deposit consisted of checks from seven different investors. On each of the following two days, Sept. 21 and 22, Gaffney moved the money out of the account. He transferred $10,000 to his personal account and took $1,000 out in cash. As a result, none of the investors' money deposited on Sept. 20, was invested in the company; rather it was used by Gaffney for his own personal gain.
"We have filed this action to ensure that Mr. Gaffney will be held responsible for returning his ill-gotten gains to the investors he bilked," Widmann added.
Deputy Attorney General Anna Lascurain of the Division of Law is handling this matter for the State. State Investigator Steven Cash is handling the Bureau's investigation.
Today's announcement comes as New Jersey marks National Consumer Protection Week. This year's theme, "Financial Literacy: Earning a Lifetime of Dividends," focuses on the skills consumers need to make smart decisions in the marketplace and ensure a solid financial future.
To avoid becoming the victims of securities fraud, investors should:
* Call the Bureau of Securities at 973-504-6300 to find out if the person who is selling you securities is registered by the New Jersey Bureau of Securities and if the investment opportunity is registered for sale in New Jersey. If the person is registered, the Bureau can tell you if that person has a history of discipline by state or federal regulators.
* Keep notes concerning phone conversations and meetings. Write down the date and time of each conversation and where meetings occurred.
* Keep greed in check. If the return on an investment sounds too good to be true, it probably is.
For more tips on how to avoid securities fraud, log onto www.njconsumeraffairs.org/bos.htm.