The Securities and Exchange Commission has filed civil fraud charges against a self-described Beverly Hills, Calif., "global humanitarian organization" and its president, saying they issued a whopping $97 billion in worthless bonds.
In a Los Angeles-filed federal court complaint that reads like a Hollywood treatment for a dark comedy, the SEC charged Pacific Asian Atlantic Foundation (PAAF) and its president, Samuel M. Natt, attempted for three years to peddle huge amounts of the bonds. The feds said there were no takers, even though Natt drafted a formal offering statement, made expansive claims and went to the trouble of obtaining official Committee on Uniform Security Identification Procedures (CUSIP) registration numbers, which are issued to facilitate sale and trading of North American securities.
Without admitting wrongdoing Natt and the foundation have filed court papers agreeing to an injunction against them and also for Natt to pay a $50,000 penalty over the next year.
In a statement issued through his lawyer, Natt said he took "full responsibility" for what he said was a "warranted" SEC investigation that ended in an "amicable manner."
"I am profoundly apologetic for the actions of unscrupulous brokers that promised the world to our organization a couple of years ago," Natt was quoted as saying. "Now, the Pacific Asian Atlantic Foundation may continue, unimpeded, with its goal to help humanity around the world."
The statement did not identify any of the "unscrupulous brokers," nor has the SEC brought charges against any other individuals in this matter. Little is known about Natt. Several databases suggest he turns 55 years old this month. Court records indicate someone with the same name has been the defendant in more than a half-dozen eviction actions in Southern California, dating back to 1993.
PAAF is not registered with charitable regulators in California, nor does it appear to be listed with the Internal Revenue Service as a tax-exempt organization. The SEC says PAAF was incorporated in Nevada in 2002 and has no assets or income. Despite a Beverly Hills address and phone number, the feds say PAAF is actually run out of Natt's home in the Los Angeles suburb of Palos Verdes Estates.
Further efforts to reach Natt and PAAF were unsuccessful. Calls to the Beverly Hills location were answered by a recording saying the voice mailbox was full and would not accept messages. A telephone line in Natt's name at his Palo Verdes Estates home was disconnected. There was no response to messages sent to various PAAF e-mail addresses.
On its still-operating Web site PAAF describes itself as a "global humanitarian organization" striving "to effectuate extraordinary events for global transformation of society." Its stated motto is "Dedicated to Serving Humanity," and the Web site is brimming with photos of ill or starving Third World children.
A page headed "Humanitarian Review" contains a laundry list of projects PAAF says it "invests" in, including road construction, health care, affordable education and agriculture. A "fundraising" page says that PAAF "provides consulting services" for individuals "who seek to secure or liquidate financial instruments in the private international commercial area." A mission statement says PAAF engages in "humanitarian capitalism."
But according to the SEC, fraudulent capitalism was more like it.
Starting in 2006, the SEC says, Natt began offering worthless "oil and gas energy bonds" with a total face value between $3 billion and $21 billion. To help market them, he allegedly issued an offering memorandum that included "false financial statements showing PAAF assets of $5.3 billion."
The bonds promised to pay investors 10% interest, secured by oil and gas reserves, production and an investment portfolio, with no risk, the SEC quoted the documents as saying.
Although not mentioned in the SEC lawsuit, a series of press releases issued nationally around this time said PAAF was in a joint venture with a Las Vegas minerals company to develop a 3,525-acre parcel in Putnam County, Tenn.
Natt unsuccessfully tried to open a brokerage account at First Dunbar Securities in Boston and deposit $1.65 billion in PAAF bonds, the SEC says, and was also rebuffed at offices of
Finally, the SEC says, starting in 2007, PAAF "issued" $97 billion in PAAF bonds to a score of unnamed third parties that were told by Natt to open their own brokerage accounts, deposit the bonds and either sell them or use them as collateral on lines of credit. The agency says Natt promised to "split" any returns obtained from the bonds.
But that, too, failed--even though, Natt said in a 2008 filing with the SEC, PAAF netted $7 billion in "adjusted gross proceeds" (this was not cited in the lawsuit). In its complaint the SEC writes that "no known" financial institution "has accepted the PAAF bonds for deposit from the third parties."
Natt had plenty of warning the SEC was coming after him. A year ago, acting as his own lawyer, he filed a federal court lawsuit seeking to block an SEC subpoena for records at a
Like the Loch Ness monster, those PAAF bonds keep coming up. In 2007 the Maryland Securities Division alleged in an administrative proceeding against a mortgage company that investors seeking their money back were stalled by claims that PAAF "recently guaranteed" an interest "in $3 billion in bonds."
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