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OFFICE OF SECURITIES
121 STATE HOUSE STATION
AUGUSTA, ME 04333
CONSENT ORDER TO CEASE
AND DESIST AND IMPOSING
A CIVIL PENALTY
CPFS, Inc. (“CPFS”) was incorporated pursuant to the
Pinnacle Support Systems, Inc. (“Pinnacle”) was
incorporated in September 2000 pursuant to the laws of
Larry C. Nelson (“L. Nelson”) has been at all relevant
times an officer and director of CPFS and the president of Pinnacle. His last known address is
Thomas Greene (“Greene”) has been at all relevant times
a director of CPFS and Pinnacle. His
last known address is
Donna T. Nelson (“D. Nelson”) has been at all relevant
times an officer of CPFS and the treasurer
of Pinnacle. Her last known address is
Craig N. Saloman (“Saloman”) has been at all relevant
times an officer and the registered agent of CPFS, as well as the secretary of
Pinnacle. His last known business address
Sales of unregistered securities by unlicensed entities
7. CPFS marketed itself as a personal development company which, through its representatives, would provide ongoing support to individuals to enhance their personal and professional lives. According to CPFS’s literature, on-going support would be provided through on-line chat rooms, teleconferencing and interaction with authors, coaches and company leaders, and multi-media seminars.
8. In or
about July 1999, L. Nelson and Greene hosted a seminar at the Embassy Suites
9. According to CPFS’s Agreement and Deposit
Receipt, proceeds from the sales of these support units would be used as
“working capital in connection with the establishment of a company providing personal
development training.” If CPFS were to commence
business on or before
(a) Home study course: $10 each;
(b) Three day seminar: $20 each;
(c) Seven day seminar $100 each.
10. According to records obtained by the Maine Office of Securities (the “Office”) from L. Nelson and Greene, 24 individuals invested in CPFS support units in 1999 and 2000.
11. According to records that the Office obtained from L. Nelson and Greene, after these investors invested in CPFS, at least some received “Support Unit Holder Monthly Reports” through June 2000 indicating that CPFS had paid them small “royalties” for sales of Pinnacle products. However, to the extent that any such “royalties” were paid, the amounts that investors received were less than the amounts indicated in the monthly reports. In any event, the royalties that CPFS claims to have paid investors are a very small fraction of the overall investments.
12. In or about late 2000, investors received a Subscription Agreement and Letter of Investment Intent (the “Subscription Agreement”) from Saloman. The Subscription Agreement gave investors the option to exchange their positions as unit holders in CPFS for the purchase of Pinnacle shares of restricted common stock at the price of $.50 per share. The Subscription Agreement referred to the shares as “securities” and represented that Pinnacle had complied with “applicable securities laws” and did not need to register these securities based on unstated “exemptions.”
13. According to the documents received from L. Nelson and Greene, all but one of the investors exercised the option to purchase Pinnacle shares.
14. The Agreement and Deposit Receipts and the CPFS support units are investment contracts and/or “evidence of indebtedness” and are thus securities under § 10501(18) of the Revised Maine Securities Act, 32 M.S.R.A, §§ 10101 – 10713 (the “Act”).
15. Pursuant to
§ 10401 of the Act, a person
may not offer or sell a security in
to the Office’s records, CPFS support units, Pinnacle shares, and other investments
offered by these companies were not registered under the Act for offer and sale
17. Pursuant to § 10301 of the Act, it is unlawful for any person to transact business in this State as a broker-dealer or a sales representative unless licensed to do so under the Act.
18. The Office
has no record that CPFS or Pinnacle has been licensed as a broker-dealer in
19. Pursuant to § 10602(3) of the Act, as control persons of both CPFS and Pinnacle, the individual respondents are equally liable for the securities law violations of CPFS and Pinnacle.
Offers and sales of unregistered business opportunities
20. In or about late 1999 and 2000, CPFS began soliciting and selling a business opportunity. According to CPFS’s “Pre-pre Launch Information Package”:
CPFS, Inc. will also offer an opportunity for carefully selected, responsible individuals to confidently and profitably market its products with a minimum overhead by phone, fax and internet. Targeted professionals and entrepreneurs will view it as a bona fide chance to ‘regain’ passion for their life’s work, balance their family and recreational lives, while being remunerated commensurate with their talents and contribution.
21. In or about 2000 and 2001, CPFS placed advertisements in publications such as The Libertarian Party News, Life Insurance Selling, The American Spectator, and The Advocate. The advertisements included the following:
Pinnacle Support Systems, the world’s first third generation personal empowerment program, offers you the chance to change minds, lives and the world we live in for a profit! If this appeals to you: earning a potential six to seven figure annual income from home connecting people to a perpetual support system that empowers them through acceptance of responsibility and that explicitly explains to them the connection of political freedom to their empowerment on a global level, read further…
You may enjoy…profits up to $17,500 and more per sale from your first sale.
Before you spend up to $60-100K or more on a franchise, check this: you can have a six/seven figure first year income potential from home working from phone, fax and internet!
Six/Seven figure annual potential in libertarian home-based business. $10K start-up. Optional lead generation. Not MLM.
22. According to records obtained by the Office from L. Nelson and Greene, 48 individuals and the Libertarian Party of Minnesota signed Independent Distributor Applications, agreeing to become distributors of Pinnacle products.
to information that the Office received from L. Nelson and Greene, Pinnacle,
through its distributors, sold various types of business opportunity products
to individuals. These products included the
“Living Learning System” (a book and CDs), a “2-Day Seminar,” a “3-Day Seminar
Ascension,” the “
24. According to records that the Office received from L. Nelson and Greene, 49 individuals purchased products offered as part of Pinnacle’s business opportunity from December 1999 though 2001.
25. CPFS and
Pinnacle have offered and sold a business opportunity in the State of Maine in
violation of the provisions of the Regulations of the Sale of Business
Opportunities, 32 M.R.S.A §§ 4691 – 4700-B (the “Regulations”).
Specifically, CPFS and Pinnacle did not register as sellers of business
opportunities in the State of
Statutory authority, understandings, and agreements
26. With respect to alleged violations of the Act, the Securities Administrator may, after notice and opportunity for a hearing, issue a cease and desist order if the Securities Administrator determines that the public interest or the protection of investors so requires, pursuant to § 10602(1)(A) of the Act.
27. Pursuant to § 10602(1) of the Act, the administrator may issue an order imposing a civil penalty that may not exceed $1,500 for a single violation if he reasonably believes that any person has engaged, is engaging or is about to engage in any act or practice constituting a violation of any provision of the Act.
28. Effective December 31, 2005, the Maine Uniform Securities Act, Title 32, Chapter 135 superseded the Act and governs conduct occurring after December 31, 2005.
28. Pursuant to § 4700(5) of the Regulations, the Securities Administrator may issue an order directing a person to cease and desist whenever it appears to the Securities Administrator that the person has engaged in or is about to engage in any act or practice constituting a violation of the Regulations.
29. The Office has agreed to enter into this Consent Order based upon information provided by the respondents in response to an investigation by the Office regarding their conduct and financial condition. If this information is later determined to have been materially inaccurate, the Securities Administrator, at his sole and unreviewable discretion, may declare this Consent Order to be null and void.
30. All parties desire an expeditious resolution to this matter.
31. Without trial or adjudication of any issue of fact or law, and without admitting or denying the allegations herein or that their conduct violated the Act or the Regulations, the respondents waive their right to a hearing and consent to the entry of this order.
NOW, THEREFORE, it is ORDERED that:
1. The respondents permanently CEASE AND DESIST from violating any provisions of the Maine Uniform Securities Act, including the prohibitions against offering and selling securities that are neither registered nor exempt from registration, and against transacting business in Maine as broker-dealers and sales representatives unless licensed or exempt from licensing.
2. The respondents permanently CEASE AND DESIST from violating any provisions of the Business Opportunity Regulations, including failing to conduct business without first becoming registered, failing to provide a disclosure statement to Maine purchasers, and failing to obtain a surety bond or establish an escrow account.
The respondents shall pay a civil penalty of $7,000 pursuant
to § 10602(1)(E) of the Act. The payment
shall be made by check payable to “Treasurer, State of
The respondents hereby waive their right to a hearing and to judicial review and consent to the entry of the order set forth above.
Date: February 26, 2006 CPFS, Inc.,
By: /s/ Thomas Greene
Thomas Greene, President
Date: February 24, 2006 Pinnacle Support Systems, Inc.,
By:/s/ Larry C. Nelson
Larry C. Nelson, President
Date: February 24, 2006 /s/ Larry C. Nelson
Larry C. Nelson
Date: February 24, 2006 /s/ Donna T. Nelson
Donna T. Nelson
Date: [undated] /s/ Craig N. Salomon
Craig N. Salomon
Date: February 26, 2006 /s/ Thomas Greene
Date: March 2, 2006 /s/ Michael J. Colleran
Michael J. Colleran
Date: March 2, 2006 /s/ Bonnie E. Russell
Bonnie E. Russell
Assistant Securities Administrator
Date: March 2, 2006 /s/ Christian D. Van Dyck
Christian D. Van Dyck