Invest Maryland sued by state Suit alleges company misled investors

refunds are sought

September 19, 1995|By Kim Clark | Kim Clark,SUN STAFF

The state's top securities regulator yesterday sued Invest Maryland Corp., charging that the Annapolis-based company misled investors who put up seed money to start a combined life insurer, stock brokerage and buffalo burger fast-food chain.

In a 29-page civil complaint, Securities Commissioner Robert N. McDonald asked the Anne Arundel County Circuit Court to appoint a receiver to manage the company and to order Invest Maryland to offer refunds to investors.

In a separate action, the commissioner yesterday also gave Invest Maryland Chairman Dennis K. McLaughlin 15 days to show cause why he shouldn't be barred from engaging in securities or investment activities in Maryland.

Mr. McDonald said in the administrative order that he took the actions because he had "determined that [Mr. McLaughlin] engaged in dishonest or unethical practices in the securities business by offering and selling securities in violation" of the state securities law.

Attorneys for Invest Maryland executives didn't return messages asking for comment last night.

Specifically, the lawsuit alleged that Mr. McLaughlin and Invest Maryland stock salespeople falsely assured investors that Mr. McLaughlin had put $250,000 of his own money into the enterprise. Actually, the commissioner said, Mr. McLaughlin had raised the $250,000 from investors in Louisiana, where he had started a similar company in the 1980s.

In addition, the state's lawsuit alleged that the 5-year-old company had not started any of its promised businesses: It hadn't started an insurance agency, hadn't applied for a securities brokers' license and hadn't begun construction on its planned "Buffalo Bill's" restaurant.

The suit also charged -- as first disclosed in The Sun -- that Invest Maryland executives and salespeople failed to tell investors of .. the executives' past legal and financial troubles.

On April 23, The Sun reported that Invest Maryland had sold more than $3 million worth of stock to about 1,200 Marylanders -- and was looking to raise another $12 million -- in part by citing Mr. McLaughlin's experience running a "thriving" insurance company in Louisiana.

But the securities commissioner alleged that Mr. McLaughlin hadn't told Maryland regulators or investors that the Louisiana insurance commissioner had placed his Cajun National Life Insurance Co. under administrative supervision because of charges that it was technically insolvent, and that its agents had misled customers.

Carole Magee Turner, a member of Invest Maryland's board, said she was glad the state had filed the suit and wished only that it had acted sooner.

She said Invest Maryland executives already have spent more than half the $3 million they had raised, so investors probably could get only a fraction of their money back.

Shortly after the publication of the first newspaper article disclosing the Invest Maryland executives' past, there was a rush of investors demanding refunds. The company at first gave full refunds, then started returning only 83 percent of investors' money. After paying out almost $600,000, it stopped refunding altogether.

"This is like closing the door after the cows are out of the barn. And in this case, it is a very fat cow," said Ms. Turner, who invested $19,000 on friends' recommendations.

Ms. Turner of Gaylesville is part of a dissident group of investors that has filed a lawsuit in U.S. District Court in Baltimore charging that the company had misled investors.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.