DENVER (CN) — Colorado sued two pro golf promoters, claiming they raised $2 million by falsely claiming affiliation with the late Arnold Palmer, then shut the door on their investors.
Colorado Securities commissioner Gerald Rome sued the National Professional Golf Tour LLC and its founder and director Lawrence Lunsford, and C.H.A.M.P. Financial Group and its “control person” Brian Pebley, in Denver County Court.
Lunsford founded the National Professional Golf Tour in 2009 and asked Pebley to help him raise $250,000 for it, which he did, Colorado says in its Nov. 30 complaint.
They took $2.1 million for promissory notes from 43 investors, many of them elderly, promising 10 to 15 percent returns and quarterly dividends and royalties, the state says.
But they never registered the securities, used an unlicensed broker-dealer and sales rep to sell the notes, and “also engaged in securities fraud” by, among other things, misrepresenting their “use of the Arnold Palmer name,” according to the complaint.
Palmer, who died at 87 on Sept. 25, was revered by golfers worldwide. He had an impeccable reputation and was known among PGA members for riding herd on young players to protect the reputation of the pro tour and cracking down on any misbehavior by its young stars.
The defendants told their investors that “NPGT was ‘backed’ or ‘sponsored’ by Arnold Palmer Management,” the state says in the complaint. That was false. “(T)he use of his name was authorized only because NGPT agreed to use a certain number of Arnold Palmer golf courses when NGPT was on tour,” according to the complaint.
It adds: “All investors only received a partial or no return on their investment, and many investors lost the majority or all of their retirement savings.”
The defendants spent at least $1 million for their own “business and personal expenses,” and “eventually Lunsford and Pebley ceased returning calls or responding to emails from investors entirely,” the state says.
One victim, an 82-year-old woman who knew Pebley from church, invested $25,000, though somehow the defendants got $34,000 from her, “even though she had not authorized that [extra $9,000] investment,” the state says, and she lost it all.
Pebley took another $35,000 from a 70-year-old woman for whom he had worked as a financial adviser, and she received only $1,250 for it before the business shut down, the state says.
It seeks restitution, disgorgement and penalties for securities fraud, sale of unregistered securities, and use of unlicensed sales reps and operating as an unlicensed broker dealer.
Pebley’s “last known address” was in Johnstown, Colo.; Lunsford’s was in El Paso, Texas.
The securities commissioner is represented by Colorado Attorney General Cynthia Coffman, whose officer did not immediately respond to a request for comment.