The Securities and Exchange Commission has charged We The People, Inc. of the United States (“We The People”), a Massachusetts corporation headquartered in Tallahassee, Florida and two of its employees, with securities fraud. The SEC alleges that We The People, purportedly a charitable organization, and its employees Richard and Susan Olive of Vero Beach, Florida, defrauded investors by making false and misleading statements about an investment product it claimed was a charitable gift annuity (“CGA”).
CGA’s are a type of gift transaction which involves the transfer of assets to a charity in return for a tax benefit and a lifetime annuity. When the annuitant dies, the annuity payments are stopped and the charity retains the remaining funds. In a CGA, the amount of the lifetime payouts is structured so that a large residual amount is expected to remain for the charity after the beneficiary’s death.
The SEC claims that, unlike a legitimate CGA, the CGAs issued by We The People were issued primarily to benefit the Olives – only a small amount of the money raised was actually directed to charitable services.
The SEC’s Complaint asserts that, from June 2008 to April 2012, We The People raised more than $75 million from approximately 400 elderly investors in 30 states, including Florida, Colorado, and Texas. According to the SEC, the Olives received undisclosed commissions totaling several million dollars for the CGA sales.
The SEC alleges that We The People and the Olives misled investors about the value of the CGAs, falsely claimed they were safe investments, and falsely stated that the CGAs were insured against any risk of loss.