DENVER — The Colorado Securities Commission has sued Brian Pebley of Johnstown and Lawrence Lundsford of Texas, alleging securities fraud in the sale of $2.1 million worth of unregistered securities by unlicensed brokers in connection with establishing a professional golf tour.
The state is seeking compensation from Lundsford and Pebley, and their Northern Colorado-based companies on behalf of 43 investors.
Defendants include the Fort Collins-based National Professional Golf Tour LLC, whose last known address was 2614 S. Timberline Road, which is controlled by Lundsford; and C.H.A.M.P. Financial Group, whose last address was 1159 Main St. in Windsor, controlled by Pebley.
According to the complaint filed in Denver District Court Nov. 30, NPGT was formed in 2009 by Lunsford with the intention to produce professional golf events with a network of paying members.
In order to qualify as a golf tour, NPGT needed to raise $250,000 as startup money. Lunsford retained Pebley’s company, C.H.A.M.P, to raise the funds.
The complaint alleges that Pebley and C.H.A.M.P began soliciting funds and issuing promissory notes, primarily from current clients and friends. Some of the victims were elderly and knew Pebley through church or his work at Primerica Financial, which sold life insurance and other investment products, the complaint said.
Pebley told investors that the investments could yield 10 percent to 15 percent returns quarterly, and that they were very “low risk” because the tour was sponsored by professional golf legend Arnold Palmer, who died Sept. 25.
According to the complaint, investors were given conflicting accounts of how the funds would be used and disbursed, but all investors were told that they could expect complete repayment of their principal.
The complaint alleges securities fraud because C.H.A.M.P was not a registered broker-dealer with the Division of Securities.
The state alleges that the defendants made misrepresentations and omissions while soliciting funds for NPGT, namely that the investments were high-yield and low-risk due to sponsorship by Arnold Palmer.
The complaint further alleges that while Palmer’s name was authorized for use by NPGT because NPGT agreed to use a certain number of Arnold Palmer golf courses during the tour, this did not constitute “backing” or “sponsoring” the tour. Finally, the complaint alleges that it was not disclosed to investors that defendant Pebley had filed for Chapter 7 bankruptcy in 2005, or that some of the investment funds were used for personal expenses.
“To investors who were already clients or associates of Mr. Pebley, I’m sure a golf tour backed by a celebrity athlete seemed like a sure bet,” said Gerald Rome, Colorado’s securities commissioner. “However, the first red flag for any investor should be that guarantee of high returns with low risk. At minimum that should prompt a prospective investor to run a free license check with us, which would reveal whether the promoter was properly licensed.”