SEC Charges Grocery Trading Company Bilked Millions From Investors
MIAMI (AP) _ A federal judge froze Premium Sales Corp.’s assets Wednesday amid charges the grocery trading company, which promised 60 percent annual returns, was a giant scam that may have cost investors $426 million.
Documents filed by the Securities and Exchange Commission ″paint a picture of a gigantic Ponzi scheme,″ in which old investors were paid with new money, according to James Beasley, an attorney for the investors.
Skittish investors filed a motion Tuesday to force the company into involuntary bankruptcy. The SEC followed Wednesday with a request to place the company in receivership, which was approved by U.S. District Judge Federico Moreno.
The 4-year-old Miami company was the subject of a Forbes magazine article last month on ″diverting,″ in which huge quantities of wholesale groceries are bought in one part of the country for quick resale at a profit elsewhere.
Previous companies run by Premium Sales President Kenneth Thenen and partner Daniel Morris failed, the magazine reported, and Thenen paid money last year to settle bribery and fraud charges.
Premium Sales had planned to raise $100 million through a new offering, which fell through after the revelations in Forbes.
Premium Sales attracted investors to limited partnerships with a minimum entry price of $50,000, said Beasley, who estimated the total amount taken in by the company at $500 million.
The SEC estimates that $515 million was invested but can account for only $89 million, the agency said in its receivership request.
The government moved in quickly because of reports that people were leaving Premium Sales’ office Tuesday with documents and bags of shredded materials, SEC spokesman Charles Harper said.
Partners received regular updates on the company’s bulk grocery trades, but an SEC spot check revealed that most were sham or overstated transactions.
″Out of $6 million in transactions that we checked, all but one transaction in the amount of $17,000 were fictitious,″ Harper said.
Premium Sales was not informed of the receivership hearing before Judge Moreno, but company attorney Paul Singerman said Thenen is cooperating with the SEC.
Premium Sales’ trading partners included Plaza Trading Inc., Windsor Wholesale Inc., Bam Industries Inc. and Blue Ridge Trading Co., according to an affidavit accompanying the SEC filing.
Investor groups included Sazant, Premium S.H., Premium Southeast, Expo Associates and Bilmar Sales Inc., the affidavit said.