Pa. regulators order firm to stop selling contracts

May 30, 1993

It sounds like a great deal, but Pennsylvania regulators are not so sure.

The product is sold by a King of Prussia, Pa., company that is not registered to trade securities -- and the state last week ordered a halt.

But Stephen S. Knepp, president of Innovative Concepts, said the product he sells is not a security, and earlier this month, he vowed to defy that order.

"I absolutely have no intention of stopping the sale of this product," he said.

The product in question is an investment contract issued by Premier Benefit Capital Trust, of Tampa, Fla. Innovative Concepts is an independent sales agent.

The contracts sell for $25,000 to $250,000 each. Proceeds are pooled by the Florida company and used to purchase accounts receivable -- uncollected debts owed to various companies.

The accounts are purchased for less than face value, and as the accounts are paid, part of that income, in theory, is used to pay investors, with interest.

Pennsylvania residents have purchased contracts totaling about $4 million -- with about $2 million sold in recent weeks, according Bill Marrero, an attorney and trustee at Premier Benefit Capital Trust. Mr. Knepp, however, would not confirm that figure.

So far, no one in the state has reported losing money in the deals, said Scott A. Lane, an attorney at the Pennsylvania Securities Commission. However, he said, neither Mr. Knepp, his company, nor the Florida firm is licensed by the state to sell the contracts.

The state defines a security broadly: "Any transaction or scheme whereby a person invests money in a common enterprise and is led to expect profits, primarily from the efforts of a promoter or a third party" may be deemed a security. The cease and desist order was based, in part, on that definition, said Mr. Lane.

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