The Securities and Exchange Commission this week charged five people – including a Villages resident – and four companies for unlawfully selling securities of Woodbridge Group of Companies LLC to retail investors.
Woodbridge collapsed into bankruptcy in December 2017 and the SEC previously charged the company, its owner and others with operating a massive $1.2 billion Ponzi scheme.
Among the five Florida-based defendants named in the SEC’s complaint is Lynette M. Robbins, a cosmetologist who owns a home along with Theodore F. Leutz at 731 Evans Way in the Village of Bridgeport at Lake Sumter. Her company, Knowles Systems Inc., was among Woodbridge’s top revenue producers. In May, the Wall Street Journal reported that Knowles Systems Inc. and Robbins, its chief executive and owner, was the highest-earning external agent for Woodbridge. A SEC filing said she received at least $8.1 million in commissions.
The other Florida-based defendants named in the SEC’s complaints are Barry M. Kornfeld, Ferne Kornfeld, Andrew G. Costa and Albert D. Klager. Along with Robbins, they were among Woodbridge’s top revenue producers, selling more than $243 million of its unregistered securities to more than 1,600 retail investors.
The SEC complaints allege that the five defendants reaped millions of dollars in commissions on their sales of Woodbridge securities, even though they were not registered as broker-dealers and were not permitted to sell securities.
“The broker-dealer and securities registration provisions are vital protections for retail investors,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “Our actions allege the defendants, while not registered as broker-dealers, pocketed millions of dollars in unlawful commissions from their widespread sales of unregistered Woodbridge securities.”
According to the SEC’s complaints, the defendants touted Woodbridge as a “safe and secure” investment. The SEC alleges that Robbins used radio, television and internet marketing to solicit investors. The Kornfelds allegedly solicited investors at seminars and a “conservative retirement and income planning class” they taught at a Florida university. Klager pitched Woodbridge investments in newspaper ads and Costa recommended them during a radio program he hosted, the SEC claims.
Once Woodbridge filed for chapter 11 bankruptcy protection, investors stopped receiving monthly interest payments and have not received a return of their investment principal. Woodbridge has since agreed to settle the liability portion of the SEC’s charges without admitting or denying the allegations and reached a resolution with the SEC and creditors in a bankruptcy action regarding the ongoing control and management of the company. The SEC’s monetary claims against Woodbridge are pending.
In its latest actions, the SEC filed charges seeking court-ordered injunctions, return of allegedly ill-gotten gains with interest and financial penalties against the Kornfelds, Costa, Klager and their companies. Robbins and her company agreed to settle the SEC’s charges in a separate action without admitting or denying the allegations and return more than $1 million of allegedly ill-gotten gains plus interest. Robbins also agreed to pay a $100,000 civil penalty, according to the SEC.
Knowles Systems also filed for Chapter 11 bankruptcy, saying it lost two-thirds of its revenue when Woodbridge collapsed, the Wall Street Journal article states, adding that Knowles “denies it was negligent in providing leads to Woodbridge” in a court filing.
Records at the Sumter County property appraiser’s office show that the Evans Way home owned by Leutz and Robbins is valued at $559,770. It was built in 2005 and they purchased it in March 2017 for $730,000. The 2,774-square-foot, three-bedroom home has a heated salt-water pool with an outside kitchen covered by a caged enclosure, according to realtor.com.
In May, Sumter County property appraiser records showed that Leutz and Robbins also owned a second home in The Villages, located at 873 Bancroft Place in the Village of Virginia Trace. At the time, they were believed to be running Knowles Systems Inc. and Knowles Systems Foundation out of that 2,000-square-foot Designer Home that is within walking distance of Lake Sumter Landing. That three-bedroom, two-bath home sold for $361,500 on June 29, according to Zillow.com.
A Ponzi scheme typically is a financial scam where early investors are paid returns with money from later investors rather than legitimate investment activities. The most well-known Ponzi scheme involved New York financier Bernard Madoff, who in 2009 pleaded guilty to masterminding a decades-long, $65 billion swindle. The Ponzi scheme is named for Charles Ponzi, who in 1920 bilked thousands of people out of close to $10 million before he was caught.