Source: https://portal.ct.gov/DOB/Enforcement/Securities-Orders-2/Beauchamp-Alfred-et-al--Findings-and-Order
Timestamp: 2019-04-22 20:55:21+00:00

Document:
and the transcript from September 19, 2012, at 2:30 p.m. is designated as Transcript 3.
The above-referenced matter was initiated upon charges brought by the Commissioner to issue a permanent order to cease and desist against Respondents, to issue a permanent order to make restitution against Respondents, and to a impose fine upon each Respondent. On May 29, 2012, the Commissioner issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing against Respondents (“Notice”).
After due notice, a hearing was held at the Department of Banking (“Department”) on September 19, 2012. The hearing was conducted in accordance with Chapter 54 of the Connecticut General Statutes, the “Uniform Administrative Procedure Act”, and the Department’s contested case regulations, Sections 36a-1-19 to 36a-1-57, inclusive, of the Regulations of Connecticut State Agencies.
a. CFDC is a purported Delaware corporation with its principal place of business last known to the Commissioner at 41-C New London Turnpike, Glastonbury, Connecticut 06033.
b. Beauchamp is an individual whose address last known to the Commissioner is 77 Ballard Drive, West Hartford, Connecticut 06119.
c. From at least February 6, 2007 to the present, CFDC has been an issuer of securities in the form of promissory notes (“CFDC Notes”).
d. For all relevant periods, Beauchamp was the sole officer, shareholder and manager of CFDC. CFDC and Beauchamp purported to counsel people who were in financial distress and in danger of losing their homes, and represented that one of their methods of providing assistance was to stop a bank from foreclosing on a home and to sell the home, after obtaining additional time from the bank and the courts.
e. From at least February 6, 2007 to the present, CFDC and Beauchamp offered and sold CFDC Notes in or from Connecticut to at least three investors.
h. In connection with the offer and sale of CFDC Note 1 and CFDC Note 2, Beauchamp alone and on behalf of CFDC told Investor 1 that the money would be used for CFDC’s operating expenses, to buy leads and to purchase a property if one were located.
i. On March 5, 2007, Respondents offered and sold another Connecticut investor (“Investor 2”) a promissory note (“CFDC Note 3”) in the sum of $50,000 for a 3 to 4-month term after which Respondents would pay the entire principal balance plus $10,000.
j. On March 14, 2007, Respondents offered and sold Investor 2 another CFDC Note (“CFDC Note 4”) in the sum of $50,000 for a 3 to 4-month term after which Respondents would pay the entire principal balance plus $10,000.
k. In connection with the offer and sale of CFDC Note 3 and CFDC Note 4, Beauchamp alone and on behalf of CFDC told Investor 2 that he was looking for investors to pool funds for the purpose of purchasing foreclosed homes, fixing and reselling them.
l. On June 17, 2007, Respondents offered and sold another Connecticut investor (“Investor 3”) a promissory note (“CFDC Note 5”) in the sum of $50,000 for a 4-month term for a minimum return of 10%. In connection with the offer and sale of CFDC Note 5, Beauchamp alone and on behalf of CFDC told Investor 3 that CFDC’s business was to help people get out of foreclosure, to save their credit and, if the opportunity arose, to invest in properties that Beauchamp would locate during his interviews with individuals who were in foreclosure. Beauchamp alone and on behalf of CFDC told Investor 3 that he needed Investor 3’s money for this business purpose.
m. The CFDC Notes offered and sold by Respondents were never registered in Connecticut under Section 36b-16 of the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they the subject of a filed exemption claim or claim of covered security status.
n. Respondents used some of the money raised from selling the CFDC Notes to Investor 1, Investor 2 and Investor 3 to pay for the personal and medical expenses of Beauchamp and Beauchamp’s family as well as the business expenses of Beauchamp’s spouse.
o. Respondents failed to pay Investor 1, Investor 2 and Investor 3 all of the money due under the CFDC Notes.
p. Both CFDC and Beauchamp failed to disclose, inter alia, any risk factors related to the investment, any financial information on CFDC or Beauchamp, and/or that Respondents would use part of the investors’ money to pay for the personal, medical and household expenses of Beauchamp and Beauchamp’s family as well as the business expenses of Beauchamp’s spouse. Each of these omitted items was material to investors and prospective investors of the CFDC Notes.
[A]ny note . . . bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, . . . investment contract . . . or, in general, any interest or instrument commonly known as a “security” . . . .
The record establishes that during 2007, Respondents sold CFDC Notes to three Connecticut residents. The CFDC Notes constitute securities within the meaning of Section 36b-3(19) of the Act. The definition provided by Section 36b-3(19) is very broad and inclusive of investment vehicles such as the CFDC Notes, including notes and evidences of indebtedness. Moreover, while there is a dearth of Connecticut case law construing this definition, Connecticut courts have repeatedly considered promissory notes to be securities, see, e.g., Lehn v. Dailey, 77 Conn. App. 621 (Conn. App. Ct. 2003), Miller v. Inverness Corp. 2000 Conn. Super. LEXIS 2771 (Conn. Super. Ct. Oct. 18, 2000), and a recent Connecticut decision has held that notes used for investment purposes are securities, considering both “the parties’ motivation in entering the transaction” and the “reasonable expectations of the investing public.” See Desteph v. Commissioner, Connecticut Department of Banking, 2012 Conn. Super LEXIS 585 (Conn. Super.Ct. February 29, 2012) at *9-10. In all five transactions discussed herein, the monies provided to CFDC by Connecticut residents were provided for investment purposes and investors reasonably expected a certain return on the monies within a matter of months.
In addition, the record establishes that the CFDC Notes were not registered in Connecticut under the Act and no evidence has been produced by Respondents supporting a claim of exemption or exclusion. Section 36b-21(g) of the Act provides, in pertinent part, that “the burden of proving an exemption, preemption, exclusion or an exception from a definition is upon the person claiming it.” Accordingly, such conduct by Respondents constitutes a violation of Section 36b-16 of the Act by each Respondent.
No person shall, in connection with the offer, sale or purchase of any security, directly or indirectly: (1) Employ any device, scheme or artifice to defraud; (2) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
“A material fact is a fact that ‘a reasonable investor would have considered significant in making investment decisions.’ Ganino v. Citizens Utilities Co., 228 F.3d 154, 161 (2d Cir. 2000). A fact need not be outcome determinative for it to be material. See id., 161-62; Folger Adam Co. v. PMI Industries, Inc., 938 F.2d 1529, 1533-34 (2d Cir.), cert. denied, 502 U.S. 983, 112 S. Ct. 587, 116 L. Ed. 2d 612 (1991). On the other hand, ‘[a]n omitted fact may be immaterial if the information is trivial . . . or is so basic that any investor could be expected to know it . . . .’ (Citations omitted; internal quotation marks omitted.) Ganino v. Citizens Utilities Co., supra, 162; see also Levitin v. PaineWebber, Inc., 159 F.3d 698, 702 (2d Cir. 1998), cert. denied, 525 U.S. 1144, 119 S. Ct. 1039, 143 L. Ed. 2d 47 (1999).” Lehn v. Dailey, supra, 77 Conn. App. 628-29. . . .
Papic v. Burke, 113 Conn. App. 198, 212 n.9 (Conn. App. Ct. 2009).
Risk factors and financial information repeatedly have been held to be material facts. See, e.g., Connecticut National Bank v. Giacomi, 242 Conn. 17, 50 (Conn. 1997); SEC v. Hasho, 784 F. Supp. 1059, 1109 (S.D.N.Y. 1992). The failure by Respondents to provide such information concerning the CFDC Notes while making statements indicating that the investments were practically guaranteed, constitutes, in connection with the sale of a security, directly or indirectly, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statement made, in the light of the circumstances under which it was made, not misleading, in violation of Section 36b-4(a) of the Act.
Whenever it appears to the commissioner after an investigation that any person has violated, is violating or is about to violate any of the provisions of sections 36b-2 to 36b-34, inclusive, . . . the commissioner may, in the commissioner’s discretion, order (1) the person . . . to cease and desist from the violations . . . . After such an order is issued, the person named in the order may, within fourteen days after receipt of the order, file a written request for a hearing. Any such hearing shall be held in accordance with the provisions of chapter 54.
Whenever it appears to the commissioner, after an investigation, that any person has violated any of the provisions of sections 36b-2 to 36b-34, inclusive, . . . the commissioner may, in addition to any other remedy under this section, order the person to (1) make restitution of any sums shown to have been obtained in violation of any of the provisions of said sections . . . plus interest at the legal rate set forth in section 37-1 . . . . After such an order is issued, the person named in the order may, not later than fourteen days after receipt of the order, file a written request for a hearing. Any such hearing shall be held in accordance with the provisions of chapter 54.
(1) Whenever the commissioner finds as the result of an investigation that any person has violated any of the provisions of sections 36b-2 to 36b-34, inclusive, . . . the commissioner may send a notice to (A) such person . . . . The notice shall be deemed received by the person on the earlier of the date of actual receipt or the date seven days after the date on which such notice was mailed or sent. Any such notice shall include: (i) A reference to the title, chapter, regulation, rule or order alleged to have been violated; (ii) a short and plain statement of the matter asserted or charged; (iii) the maximum fine that may be imposed for such violation; (iv) a statement indicating that such person may file a written request for a hearing on the matters asserted not later than fourteen days after receipt of the notice; and (v) the time and place for the hearing.
(2) If a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the charges made unless such person fails to appear at the hearing. Any such hearing shall be held in accordance with the provisions of chapter 54. After the hearing if the commissioner finds that the person has violated, caused a violation or materially aided in the violation of any of the provisions of sections 36b-2 to 36b-34, inclusive, . . . the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by said sections, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person. If such person fails to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person. The commissioner shall send a copy of any order issued pursuant to this subsection by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt, to any person named in such order.
The record establishes that Respondents have violated Sections 36b-16 and 36b-4(a) of the Act and have obtained monies from Connecticut residents as a result of such violations, necessary to order Respondents to cease and desist pursuant to Section 36b-27(a) of the Act, to make restitution pursuant to Section 36b-27(b) of the Act and to impose a fine pursuant to Section 36b-27(d) of the Act. However, I will not impose a fine as a result of the financial hardship that has been demonstrated by Beauchamp, the fact that CFDC is no longer in business, and the desire to direct any monies available to Respondents towards making restitution to the harmed Connecticut investors.
The Notice issued by the Commissioner complied with the Sections 36b-27(a), 36b-27(b) and 36b- 27(d) of the Act and Section 4-177 of the Connecticut General Statutes.
Section 36b-31(b) of the Act requires that the Commissioner find that an order 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 33b-34, inclusive. In this case, Respondents’ actions in violation of the Act involved failing to register a security in violation of Section 36b-16 of the Act, and in connection with the sale of such unregistered security, directly or indirectly, making an untrue statement of material fact or omitting to state a material fact necessary in order to make the statement made, in light of the circumstances under which it was made, not misleading, in violation of Section 36b-4(a) of the Act. Future harm to Connecticut residents will be deterred through the issuance of an order to cease and desist against Respondents and, for those Connecticut residents who have already suffered financial loss as a result of Respondents’ conduct, an order to make restitution will serve to lessen such losses.
I conclude that the issuance of an order to cease and desist and an order to make restitution are necessary and appropriate in the public interest and 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, of the Act.
(c) Connecticut Foreclosure Division Corp. and Alfred R. Beauchamp shall repay Investor 2 the sum of $60,000, to be paid in sixty (60) equal monthly installments of One Thousand Dollars ($1,000) due the first day of each month, commencing on April 1, 2013. Such payments shall be made by cashier’s check, certified check or money order, sent by certified mail, to Investor 2 at such investor’s last known address. No later than the tenth day of each month commencing in April 2013, and continuing for a period of fifty-nine (59) months thereafter, a copy of each check or money order and certified mailing made to Investor 2 shall be provided to the Director of the Securities and Business Investments Division of the Department of Banking.
4. This Order shall become effective when mailed.
18 Camp Street, Basement Apt.

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