A defunct Tampa, Fla., financial service firm has been charged with bilking investors out of $1.7 million, which it allegedly used to make loans to a plastics recycling company.
A lawsuit filed Sept. 4 by the Securities and Exchange Commission in U.S. District Court in Tampa accuses 56-year-old Charles F. Morgan, president of Tampa-based Morgan Financial Services Inc., with misusing investments provided to him or his firm over nearly a 10-year period.
The complaint alleges that the funds from the 17 investors - described as mostly retirees - were routed to now-bankrupt Tampa-based Consource Plastic Recycling Corp.
Morgan's lawyer denies that his client cheated investors and said Morgan also was a victim of Consource's failure.
Miriam Lefkowitz, senior counsel with the Southeast Regional Office of the SEC in Miami, said the Florida Department of Banking and Finance brought the matter to the commission's attention.
In a Sept. 6 telephone interview, Lefkowitz said Morgan raised about $2.4 million from the investors. He paid back some of the funds through monthly installments or other arrangements. But $1.7 million is outstanding, she said.
``Mr. Morgan took certain funds from his clients without disclosing what he would do with them,'' Lefkowitz said. ``What he did with them was purchase some shares of stock in Consource and also loaned money to Consource.
``At the time he made the investments in Consource, he had reason to believe that Consource was not so much of a viable entity.''
Morgan was a major stockholder and former officer with Consource, according to the suit. But Morgan's lawyer in Tampa, Edwin Kagan, said Morgan was a financial advisor for Consource but was never involved in managing or operating the company.
``The people that ran Consource have disappeared,'' Kagan said. ``My client's moneys were only a portion of what went to Consource. Consource was always raising money.
``My client unfortunately believed in the concept and therefore foolishly invested and/or loaned money to this company.''
Another Tampa recycler, President Ben Benvenuti of Commercial Plastics Recycling Inc., said he bought a few items from Consource at an auction last month. He was not surprised that Consource needed $2.4 million from Morgan's group - if not more.
Benvenuti said Consource approached him to buy the company, but the company's $7 million debt turned him off.
Benvenuti said Consource started off with a noble idea - to recycle all types of post-consumer plastics for products like plastic lumber and safety barricades. Consource first opened its 80,000-square-foot facility in 1994, with the promise to process about 60 million pounds of post-consumer plastic per year.
The company first ran into financial problems in 1998, Benvenuti said. ``Every time they revived it, they went out and tried to attract more investors. They were in awful financial shape,'' he said.
The SEC suit does not seek relief from Consource, Lefkowitz said. Since Morgan has no assets or income, the commission is seeking to ban him from any dealings in securities or any related activities. Morgan already has agreed to a judgment which would enjoin him from future violations, provided that SEC waives any attempt to recover the investors' funds, Lefkowitz said.