By: Ryan Boldrey
The Securities and Exchange Commission announced fraud charges and an emergency asset freeze against William P. Sullivan II of Highlands Ranch and Michael Turnock of Denver for allegedly perpetrating a Ponzi scheme.
The two, who operate Bridge Premium Finance LLC, are alleged to have raised at least $15.7 million from more than 120 promissory-note investors nationwide by promising annual returns of up to 12 percent.
According to the SEC complaint filed Aug. 14 in federal court in Denver, Sullivan and Turnock told investors that Bridge Premium was performing well and that investor funds were “100 percent” protected through various forms of collateral on underlying loans. The SEC said the two claimed that investor funds would be used to make loans to small businesses to allow them to pay upfront, commercial insurance premiums.
According to the SEC, since at least as far back as 2002, Bridge Premium has allegedly paid investor returns with funds from other investors because Bridge Premium’s business has been unprofitable and its obligations to note holders have far exceeded its total assets. The SEC said the company has lost more than $3 million per year during the last five years and in May 2012 owed its investors more than $6.2 million, yet its loan portfolio totaled less than $250,000 and its assets less than $500,000.
“Turnock and Sullivan raised millions from investors by claiming they could pay high interest rates through Bridge Premium’s safe and unique business model,” said Julie Lutz, associate director of the SEC’s Denver office, in a statement. “They hid the fact that Bridge Premium’s purported business lost money every year for more than a decade and had devolved into a Ponzi scheme long ago.”
If the allegations are true, because most funds were diverted for Ponzi payments, any collateral available on Bridge Premium’s underlying loan portfolio will only protect a small fraction of its promissory-note investors.
Additionally, according to the SEC, Bridge Premium was not registered with the SEC as required under federal securities laws.