FORT WORTH (CN) – The owner of Safety Sentry, who claimed his product could prevent theft of trailers, was charged with running a $1 million investment fraud that ripped off 50 investors, in a criminal complaint and information.
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Karl G. Pratt, of Granbury, was charged with wire fraud.
Prosecutors say he lied to investors that he had produced and patented a safety device that prevented a trailer hitch from slipping off the trailer ball of a recreational trailer. They say he offered investors “master distributor” rights for the product for $12,000 each, but failed to disclose that his patent applications had been rejected twice.
“Investors were told they would receive approximately 270 devices per MD [master distributor] to sell to distributors and retailers,” the criminal information states. “For every MD owned, investors would receive 20 cents for every device sold within SSI [Safety Sentry Inc.”
Prosecutors claim that Pratt ” would and did falsely represent to investors that he was finalizing negotiations with major companies, such as Hertz, U-Haul and Ryder, that would result in large purchases of SSI’s devices. These companies, according to Pratt, were to buy 60,000 to 250,000 devices from SSI. … Investors were led to believe that their investment would almost immediately double. These promises were untrue. Pratt never had serious negotiations with any of the above-stated companies.”
Pratt solicited investors from at least 16 states, including Texas, according to the information.
In the criminal complaint, FBI agent Johnathan R. Schmidt says Pratt told him he had closed a deal with Hertz in 2009 and was given a $1 million check, but he had to refuse because he could not fulfill such a large order.
Schmidt says he contacted a Hertz vice president of procurement, who denied ever having communicated with Pratt or issuing such a large check for anything without receiving the products first.
“I have personally interviewed seven of Pratt’s victims and received signed affidavits from 15 more of Pratt’s victims,” Schmidt said. “All stated they invested with SSI because Pratt claimed that he was closing large sales deals with major companies, and that they would receive a commission if they invested before the deal was closed.”