Saturday, April 11, 2015

SEC Gives Fortenberry $900,000 Penalty & Permanent Bar

The Securities and Exchange Commission reached a final decision in its case against John Fortenberrry of San Angelo.  Fortenberry defrauded two investors of hundreds of thousands in selling equity in Premier Investment Fund, then using most of the proceeds for his personal needs. 


1)  Stanley Jonathan Fortenberry shall cease and desist from committing or causing any violations or future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and Section 206(1), (2), and (4) of the Advisers Act, and Rule 206(4)-8 thereunder; b) pursuant to Section 203(f) of the Advisers Act

2)  Stanley Jonathan Fortenberry is barred from associating with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization; c) pursuant to Section 9(b) of the Investment Company Act of 1940,

3)  Stanley Jonathan Fortenberry is permanently prohibited from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter; d) pursuant to Section 8A(g) of the Securities Act, Section 21B of the Exchange Act, and Section 203(i) of the Advisers Act

4)  Stanley Jonathan Fortenberry shall pay a civil money penalty in the amount of $900,000; and e) pursuant to Section 8A(e) of the Securities Act, Section 21C(e) of the Exchange Act, and Section 203(j) and (k)(5) of the Advisers Act, Stanley Jonathan Fortenberry shall disgorge $146,500, plus prejudgment interest.

The initial decision describes a con artist extraordinaire.  Consider the following conclusions from a three day hearing held October 2014 in Dallas:

Fortenberry stated "We handle transactions ranging from one million up to twenty-five million."  As it turned out, the emphasized language was false. Fortenberry had never raised $1 million, let alone $25 million.

Fortenberry never intended to do the things he committed to doing in the subscription agreement. He had no idea what it meant to use GAAP (accounting standards) and no idea what a capital account is.

He also never prepared profit and loss statements or tax information for investors.  In fact, when asked whether Premier kept a balance sheet or an income statement, Fortenberry said that he kept neither because doing so would not have been “typical of that type of organization at that stage.”  Indeed, Fortenberry boldly announced that Premier kept no records other than bank account statements.

In his view, a bank statement was sufficient because “you could easily have an accountant within a few days prepare those statements or plug [the bank account information] into a piece of software and have a statement within a matter of minutes.”  According to Fortenberry “[i]n today’s world you plug in a piece of software like Quicken, and in about 20 minutes you have a statement that would have rivaled an accounting office of 20 men just 15 years ago.”

 Fortenberry was not credible. Indeed, the record is replete with his outright false statements, many of which he attempted to explain through imaginative use of the English language seemingly inspired by Humpty Dumpty.

When he was questioned about his use of the term “showcase” in light of the fact that Premier had never invested with Mr. Bongiovi, Fortenberry said, “[w]ell, that’s why we referred to it as our showcase. It is a showcase. It is not something that’s invested in yet, according to my terminology, but it is something yet to be invested in. A showcase is an example.” But saying that something is a company’s “showcase” investment means that one is saying that the investment is perhaps the most important venture in which the company is currently investing. It would not convey the impression the venture is merely an example of a venture in which the company might invest in the future.

Fortenberry’s demeanor also suggested that he was not being truthful. He often resorted to the words “obviously” or “clearly” as if through bluster he hoped to cause the listener not to notice what had actually occurred, much like the Wizard of Oz when standing behind an opened curtain. 

Fortenberry sometimes adopted a lecturing tone as if trying to convey the impression that he was so experienced in matters of finance and securities that the Division’s attorneys were simply not intelligent enough to understand his business. He thus hoped to make his unlikely statements believable.

The report is worth the read.  It remains to be seen if criminal fraud charges will be brought against Fortenberry.   This isn't his first ripoff rodeo.

Update 8-11-16:  And it wasn't his last either.  Fortenberry was arrested today by federal officials for defrauding investors in an oil drilling scheme.  He perpetrated this scheme while being investigated and prosecuted for conning investors via Premier.

Update 3-4-17:  Fortenberry received six and a half years in prison for his financial crimes.

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