Invest Maryland Corp., the Annapolis-based venture that promises to build a chain of buffaloburger fast food restaurants, a stock brokerage and a life insurance company, has agreed to stop selling stock while the state investigates charges the company violated Maryland securities laws.
The company voluntarily entered into the agreement with the state's Securities Division, former Gov. Marvin Mandel, the company's attorney, said yesterday.
Mr. Mandel also said the company has agreed to turn over information sought by the state, although he declined to specify what it is the Securities Division has requested.
Dennis K. McLaughlin, chairman of the 5-year-old company that has sold more than $3 million worth of stock to 1,200 Marylanders, did not return telephone calls asking for comment.
Despite the investigation, the company appeared to be making progress on its plan to create a chain of "Buffalo Bill's" restaurants, however.
Invest Maryland held a symbolic groundbreaking for the first restaurant -- complete with a live buffalo -- at a lot in Glen Burnie on June 20.
Melanie Senter Lubin, deputy commissioner of the Securities Division, said the state attorney general's office is reviewing the company's stock offering.
Ms. Lubin declined to give specifics about the probe, saying only that the state is investigating civil charges that, upon conviction, carry maximum fines of $5,000 per violation.
State investigators, Invest Maryland stockholders and members of the company's board of directors said yesterday that the state has had auditors examine the company's finances.
The state is also investigating links between Invest Maryland and Invest Louisiana Corp., Mr. McLaughlin's similar and troubled venture in Louisiana.
And Maryland is also examining the way in which company executives refunded some investors' money last month, people close to the company say.
On April 23, The Sun reported that Invest Maryland salesmen were seeking another 13,000 investors willing to buy $12 million in remaining stock. At the time, the public wasn't informed that most investors in Mr. McLaughlin's previous ventures had lost money, or that Louisiana's insurance commissioner had taken over supervision of his insurance company because of concerns that it was technically insolvent and that its agents sometimes misled customers.
Within a few weeks, scores of stockholders visited the company's Annapolis office demanding their money back. Although the first few visitors received their full investment back, later investors received only 83 percent of their money back.
Jeffrey Eichler of Queenstown, who invested $1,000, said he was given a refund, although the company withheld $170 to cover commissions and administration related to the stock sale. He accepted less than a full refund, Mr. Eichler said, because "It was better than nothing."
Carole Magee Turner, a member of the company's board of directors, said yesterday that state auditors visited the company's offices several times in June. "They looked at all kinds of financial records, they looked at how we are running our business," she said.
The board voted to stop all refunds after learning the company had returned about $500,000 worth of investments and that the state had queried the company about the refunds, Ms. Turner said. There is now a list of stockholders who have asked for, but have been denied, a refund, she said.