2014 Pulitzer Prize Winner

Roop accuses Securities Division of “innaccurate and misleading” statements

Published: April 10, 2014, 5:17 pm, by Wayne Heilman

Richard Roop, president of Bottom Line Results Inc., accused the Colorado Division of Securities of using “numerous inaccurate and misleading statements” to win a court order from a Denver judge that he and the company stop selling interests in mortgages on distressed houses.

The division alleged Roop and Bottom Line raised more than $1.6 million from at least 25 investors in what regulators say is a Ponzi scheme. Roop allegedly raised the money to the purchase of at least 61 properties, often convincing investors to transfer the funds from retirement accounts with promises of annual returns of 8 percent to 10 percent, according to a lawsuit filed April 4 by the Colorado Division of Securities in Denver District Court. A hearing on the order is scheduled April 17.
 
“I have a legitimate business buying and selling homes,” Roop said in a press release issued Thursday. “By definition, a Ponzi scheme relies on funds from new investor(s) to generate the returns promised to older investors. In the case of all my private lender transactions, we have backed up their note with a security interest on a property. It should be readily apparent that (what) our operation does is not” a Ponzi scheme.
 
Here is Roop’s entire release:
 

Bottom Line Results, Inc.

PO Box 5050

Woodland Park CO 80866

 

Contact: Richard Roop                                                          FOR IMMEDIATE RLEASE

 REAL ESTATE BUSINESS RESPONDS TO ALLEGED SECURITIES VIOLATIONS

Woodland Park Business Owner Challenges Claims Made in Complaint

 On Wednesday, April 9th the acting Colorado Securities Commissioner Gerald Rome issued a press release entitled “Woodland Park Resident and His Firm Charged With Securities Law Violations” alleging Richard Roop and his company Bottom Line Results, Inc. violated the registration, licensing, and anti-fraud provisions of the Colorado Securities Act.

 The announcement also stated that a temporary restraining order prohibiting Roop and his company from offering or selling securities, was obtained through the Denver District Court. That order expires on April 17th when there a hearing on the matter is held.

 According to Roop, the temporary restraining order was granted based on a request from Rome that included numerous inaccurate and misleading statements regarding Roop’s real estate business, operated since 1996.

 Rome’s main allegation in the civil complaint is that the private loans Roop has taken out on real property his company owes or purchases are considered an offering of securities that require a license or registration with the State. However, Roop’s contention is the private loans backed by a lien on real estate are exempt from licensing or registration requirements per Colorado Revised Statue 11-51-308 (1) (e) which states that exempt transactions include:

 “Any transaction in a bond or other evidence of indebtedness secured by a mortgage, security interest, or deed of trust or by an agreement for the sale of real estate or chattels, if the entire mortgage, security interest, deed of trust, or agreement together with all the bonds or other evidences of indebtedness secured thereby is offered and sold as a unit.”

Most of the alleged securities violations in Rome’s complaint would therefore be invalidated if this exemption applies to Roop’s transactions. That includes the allegation that Roop continued to offer these securities to private investors without informing them that the transactions we unregistered after his license become inactive in 2012.

 In his announcement released to the press, Rome also alleges Roop’s real estate investment strategy “resorts to the classic Ponzi scheme strategy of paying returns to older investors with newer investor funds.” Is that true? According to the Securities and Exchange Commission website, “A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors to create the false appearance that investors are profiting from a legitimate business.”

According to Roop, “I have a legitimate business buying and selling homes. My private lenders receive a real estate note for the amount of the loan secured by a deed of trust on a investment property we own. Their note has a fixed interest rate and is backed by equity in the property. Each note spells out all the terms including which property is securing the note, amount of monthly payments, interest rate and maturity date. Lenders are also provided substantial details about the property being used as their collateral. These properties generate income and are held to be sold later for a profit at which time the lender is paid the remaining balance due to them that they had not already received from monthly principal and interest payments.”

 Roop acknowledges that, “There have been times over the past 13 years when notes have matured and become due, or a lender asks to be paid off early, where we have not yet resold the property. In some of these situations we have refinanced the property with new loans with other private lenders in order to pay off existing lenders. If there is anything wrong with that I’d like to know what it is. By definition, a Ponzi scheme typically relies on funds from new investor to generate the returns promised to older investors. In the case of all my private lender transactions we have backed up their note with a security interest on a property. It should be readily apparent that our operation does is not resort to a Ponzi scheme.”

 Roop also contends, “We have always taken substantial steps to educate and protect our lender’s interests. Since 1996 we have paid many millions of dollars in promised interest payments to our private lenders and none of them have ever lost a dime. We are unaware of any our lenders ever filing a or voicing a complaint to any regulatory or consumer protection agency.”

 “We have always been eager and willing to abide by any rules or laws that would apply to our business of buying and selling real estate. Over the past few years we honored multiple requests from the Division of Securities requesting copies of our business records including accounting books, tax returns, bank statements, property files and client files. They have asked for and received a copy of all of our records. This is in contrast what Rome stated in his filed documents that allege we resisted or failed to fully respond to such requests. This allegation seems to be a misrepresentation of the facts and is one example several untrue or misleading statements used in Rome’s request to get the temporary restraining order until the hearing on April 17th. I’m anxious to learn at this hearing why our private lender transactions would not be exempt per Colorado Revised Statutes or what must do differently in our business to be in compliance with any laws that we are subject to,” Roop stated.

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