Florida Office of Financial Regulation

Judge Issues Temporary Injunction Against Companies Claiming to Sell CDs

11/27/2013

For Immediate Release                               
Wednesday, November 27, 2013
 
Contact: OFR Office of Communications
(850) 410-9709 or (850) 766-4646

Tallahassee - The Florida Office of Financial Regulation (OFR) announced today that a temporary injunction has been granted by the Circuit Court in Brevard County against First Merchant Capital, LLC, Capstar Industries, LLC, Southeast Mutual Insurance and Investment, Inc., Donald Ray Babb, Ralph V. Ruth and Catherine Ruth (the defendants). The OFR is currently investigating allegations that the defendants sold certificates of deposit (CDs) to Florida investors by falsely claiming the CDs were insured by the Federal Deposit Insurance Corporation (FDIC). The OFR is also investigating allegations that the investors’ proceeds have been misused by the defendants.
 
Through the investigation, the OFR has alleged that the defendants have lured at least 30 customers to invest nearly $3 million in the CD program since August 2011. Sales were primarily made to elderly customers searching for ultra conservative investments with FDIC insurance backing. Advertisements appearing in the Tampa Bay Times and the Jacksonville Times-Union placed by the defendants indicated that the CDs pay the “highest rates in the nation.” The purported rate was better than rates offered by legitimate financial institutions in Florida, typically bettering the rate by .5% to 2%.
 
“The OFR is committed to protecting the citizens of Florida,” said OFR Commissioner Drew J. Breakspear. “We feel it is important to alert Floridians about our investigation into these companies so that they can make informed investing decisions.”
The defendants advertised the sale of brokered CDs, but the OFR’s investigation was unable to confirm that money from investors was going to FDIC insured banks for the purchase of CDs. The judge has appointed Michael Moecker as receiver of the companies while the OFR investigation continues.
 
The OFR encourages all potential investors to research any financial product fully and to take measures to protect themselves:

• Verify the license of the company or individual with whom you plan to do business before investing.
• Seek a second or third party opinion. Inquire with multiple professionals and find one who listens and understands your financial goals.
• Get everything in writing. Ask for brochures or written information that fully explains the product so you can more clearly see the products that are being offered.
• Ask questions on anything you don’t understand. Be sure you fully understand the products being offered before you invest.
• Consider any investment carefully and completely beforehand. Don’t be afraid to “sleep on it” before making a decision. Don’t rush or be rushed. Follow patient due process in making your decisions.
• Be wary of products that sound too good to be true. Keep in mind the old adage, “If it sounds too good to be true, it probably is.”
 
If you have purchased CDs through any of the companies named in the injunction and feel you have been harmed, the OFR encourages you to file a complaint. Consumers can file a complaint online, www.FLOFR.com, or call the OFR at (850) 487-9687.
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