Office of Maryland Attorney General J. Joseph Curran, Jr.

June 1, 2000 Media Inquiries: Sean Caine 410-576-6357


Baltimore - Attorney General J. Joseph Curran, Jr., announced today that his Securities Division is participating in a national crackdown on sellers of promissory notes, which promise investors high returns and low risk. The notes, often sold by insurance agents, are in fact very risky and often fraudulent. Promissory note fraud cases account for the majority of the cases handled by the Securities Division in the past two years and have cost Marylanders at least ten million dollars to-date. Many victims are elderly. Responding to complaints about promissory notes, securities regulators in 37 states and the District of Columbia formed a task force in May 1999.

Attorney General Curran announced 16 cases against issuers, marketing companies, and individual sales agents that his Securities Division has investigated over the past several months in Maryland. The cases against issuers alleged the offer and sale of unregistered promissory notes in violation of securities anti-fraud provisions. Cases against the marketing companies and individual sales agents vary from case-to-case in their alleged violations of securities laws. While some cases are still pending, others have resulted in restitution awards as high as $2.1 million to Maryland investors.

Victims' Stories:

  • An elderly Baltimore man invested $10,000 in South Mountain Resort & Spa, Inc., through an agent in Harford County. He is out his full investment.

  • A Cecil County woman invested approximately $125,000 in AmeriTech. Part of it was her retirement money. She got back all of her money through the efforts of the Attorney General's Securities Division.

  • An elderly Silver Spring woman invested approximately $442,000 in AmeriTech. Her husband invested $32,000 in World Vision Entertainment, Inc. He hasn't gotten any money back. His wife, however, got back her full investment in AmeriTech.

"Investors are attracted to this type of investment because it has an aura of safety with a higher rate of return," Attorney General Curran said. "They sometimes fail to remember that the higher the reward the greater the risk. In today's market there's no such thing as a ‘guaranteed' 10% or 15% return."

Cases against Issuers:

McDonald/Lubin v. AmeriTech Petroleum, Inc. and Brent Wagman (9/98)
In the Matter of World Vision Entertainment, Inc. and Jamie Piromalli (9/99)
In the Matter of Canko Environmental Technologies, Inc. and Heinz Lueders (3/00)
In the Matter of South Mountain Resort & Spa, Inc. and Thaddeus Williams (5/00)
In the Matter of Tee to Green Golf Parks, Inc. and Steven D. Blumhagen (5/00)
In the Matter of Capital Communities Corp., Michael G. Todd and Raymond G. Baptista (1/00)

Cases against Marketing Companies:

In the Matter of R&D Marketing and Russell Jones (7/98)
In the Matter of New England International Surety, Inc., Henrik & Richard Rienstra (4/00)
In the Matter of Global Insurance Co, Inc., Ltd. (7/99)

Cases against Individual Sales Agents:

In the Matter of Paul G. Hauf d/b/a Paul G. Hauf & Associates, Inc. (2/99)
In the Matter of Percival Financial Partners and Adam Smolen (10/98)
In the Matter of Terry M. Hillegas (1999)
In the Matter of Mark Kyle d/b/a Kyle Financial Services (1999)
In the Matter of Brian L. Schutsky d/b/a BLS Insurance Services (1999)
In the Matter of Bradford B. Dyer (1999)
In the Matter of Candace Bloodsworth and William Guy (1999)

Attorney General Curran warned that promissory notes are often sold by independent life insurance agents - lured by high commissions - who may know nothing about the promoters of the investment beyond what they're told. The agents may not realize that they must be licensed as securities brokers with state securities regulators to sell securities. Some notes are issued on behalf of companies that don't even exist. Investors often get official-looking promissory note certificates complete with legal-sounding language and gold embossed seals. Many of these notes were purportedly bonded or guaranteed by non-licensed insurance companies located offshore.

Curran's Tips to Protect Yourself and Your Money:

  • Before investing in any promissory note, investors should always check with the AG's Securities Division to confirm that their notes are properly registered or legally exempt from registration.

  • Agents selling these "notes" usually are required to be licensed by the state. To find out if the agents are registered or have a disciplinary history, call the Securities Division at 410-576-6494.

  • Be suspicious if the notes have an above-market interest rate with a maturity of less than a year. With a one-year FDIC-insured bank certificate of deposit yielding a little over 6%, you should be very skeptical when someone offers you a nine-month note from an obscure firm promising 12 percent.

Contact Sean Caine at (410) 576-6357 to arrange an interview with Attorney General Curran and/or to speak to a Maryland "victim" of promissory note fraud.