Securities Commissioner files complaint alleging $2.1 million securities fraud in connection with professional golf tour
DENVER — Colorado Securities Commissioner Gerald Rome filed a civil complaint in Denver District Court on Wednesday, Nov. 30, 2016 alleging securities fraud in the sale of $2.1 million in unregistered securities by unlicensed individuals and entities in connection with establishing a professional golf tour. Defendants include the National Professional Golf Tour, LLC (NPGT), which is controlled by Texas resident Lawrence Lunsford, and C.H.A.M.P. Financial Group (CHAMP), a Colorado company controlled by Johnstown resident Brian Pebley.
According to the complaint, NPGT was formed in 2009 by Lunsford with the intention to produce professional golf events with a network of paying members. In order to qualify as a golf tour, NPGT needed to raise at least $250,000 as start-up money. Lunsford retained Pebley’s company, C.H.A.M.P, to raise the funds.
The complaint alleges that Pebley and C.H.A.M.P began soliciting funds and issuing promissory notes, primarily from current clients and friends, representing that the investments could yield 10 to 15 percent returns quarterly, and that they were very “low risk” because the tour was sponsored by professional golf legend Arnold Palmer. The complaint also alleges that investors were given conflicting accounts of how the funds would be used and disbursed, but all investors were told that they could expect complete repayment of their principal.
The complaint alleges securities fraud in connection with the solicitation and issuance of the promissory notes for multiple reasons. First, at no time during the pursuit of these transactions was C.H.A.M.P a registered broker-dealer firm with the Division of Securities, which is part of the Department of Regulatory Agencies (DORA). Pebley operated as an unlicensed sales representative, and it is alleged that the defendants made multiple misrepresentations and omissions while soliciting funds for NPGT, namely that the investments were high yield and low risk due to sponsorship by Arnold Palmer.
The complaint further alleges that while Mr. Palmer’s name was authorized for use by NPGT because NPGT agreed to use a certain number of Arnold Palmer golf courses during the tour, this did not constitute “backing” or “sponsoring” the tour. Finally, the complaint alleges that it was not disclosed to investors that defendant Pebley had filed for Chapter 7 bankruptcy in 2005, or that some of the investment funds were used for personal expenses.
"A critical priority for DORA and the Division of Securities is combating predatory financial practices, and I commend the Commissioner and division for their efforts in identifying such practices and pursuing enforcement action for victims," said Joe Neguse, DORA Executive Director.
“To investors who were already clients or associates of Mr. Pebley, I’m sure a golf tour backed by a celebrity athlete seemed like a sure bet,” stated Commissioner Rome. “However, the first red flag for any investor should be that guarantee of high returns with low risk. At minimum, that should prompt a prospective investor to run a free license check with us, which would reveal whether the promoter was properly licensed.”
The Commissioner’s complaint seeks injunctive relief and restitution on behalf of more than 43 known investors in the NPGT enterprise, alleging securities fraud, unregistered securities, and unlicensed broker-dealer and sales representative activity.
The case was investigated by the Division of Securities.