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Curran Acts Against Two Securities Firms; Accuses Them of $28M Fraud

Attorney General J. Joseph Curran Jr. took action yesterday against two Maryland investment firms, accusing them of violating state securities laws by selling about $28 million in unregistered securities to unwary investors — some promising returns as high as 240 percent in a year.Curran’s office obtained a preliminary injunction against Flowers Investment Group Inc., an investment adviser in Hampstead, and issued a summary cease-and-desist order against Seleta J. Nelson of Mitchellville.“These are examples of ‘if it sounds too good to be true, it is,’” Curran said in an interview. “If only a person inclined to invest would have called us, we could have told [the investor that] the firms were unregistered. Unless you’re dealing with reputable firms, call the securities division [in the attorney general’s office].”Flowers Investment Group and affiliated companies are accused of offering and selling unregistered securities and providing investment advice by use of a fraudulent scheme. The firm’s president, Thomas M. Flowers, formed several hedge funds and allegedly solicited investors by using inflated, unsubstantiated performance figures.“We have routine audits and this was discovered in November 1999,” Curran said. “There are about 75 investors with 120 different accounts, with about $5 million invested.”Flowers did not return a phone call seeking comment. A temporary receiver has been appointed to take control of the companies and their assets, to engage an investment adviser for individual clients, and to engage an auditor to conduct an audit of investors’ funds.Nelson, Curran said, had been in business “for a number of years,” offering payday loans before they were recently banned by the General Assembly. “Nelson has obligations in excess of $23 million and investors were offered unreasonable rates of return,” Curran said of the alleged fraud. “But she was never licensed.”Nelson and the companies she operates — Nelson and Associates, Seleta J. Nelson LLC and Nelson Finance Inc. — have 15 days to answer the allegations and to request a hearing. Efforts to reach Nelson for comment were unsuccessful.Nelson Finance recently raised as much as $800,000 from investors with promises of at least 120 percent in one year. According to the attorney general’s office, Nelson used the money, in part, to provide zero-interest loans to several churches, friends and family, to purchase a house in her own name and to fund a brokerage account in her name.“The scams used to be pickpockets and bank robberies,” Curran added. “Now it’s the Internet and telemarketing. But we have to be especially careful with securities dealers because the markets have gone up so much and people aren’t as cautious.”Investigations of both firms are ongoing.