Protege Financial & Insurance Service, Inc.

Agency: ~Description: The following describes a pending government action that has been formally brought by a government agency but as not yet been resolved. We are providing a summary of the government's allegations which have not yet been proven.~~On September 20 2012 the California Department of Corporations filed a Order Complaint for Preliminary Injunction Permanent Injunction Civil Penalties and Ancillary Relief in Los Angeles County Superior Court charging this company with fraud and allegedly operating a ponzi scheme. ~~According to the complaint since in or about at least November 2006 and continuing thereafter Defendants their agents representatives and affiliates have engaged in and continue to engage in business in the State of California in violation of the Corporate Securities Law. These violations consist of offering and selling unqualified non-exempt securities to members of the public by means of fraud and conducting unlicensed investment adviser activities. ~~Beginning in or about at least November 2006 and continuing thereafter Defendants offered and sold unqualified non-exempt securities in this State in the form of Not Forgotten “operating” agreements; Windsor Pictures “bridge” loans “promissory” notes “Class A Membership” interests and “convertible” debentures; Protege Financial “bridge” loans and “promissory” notes; and Saxe-Coburg “promissory” notes in issuer transactions by means of fraud totaling in excess of $23.2 million in approximately 215 transactions to known investors. ~~Defendants specifically targeted unsophisticated senior investors when offering and selling the above-described securities. In many instances investors entrusted their entire life savings to the Defendants with the hopes of earning substantial returns to protect them during their golden years and to cover necessary expenses such as food housing and medical care. Defendants promised investors high rates of return on the above-described securities ranging from at least 8 to 16 percent per annum. Defendants told investors that they could either opt to “accrue” monthly interest on their investment funds or receive regular monthly interest payments or “preferred” returns. Those investors who opted to accrue periodic interest on their investments received statements of “interest paid on loan” setting forth the purported amount of interest earned and the total value of their investment including the investment principal. ~~In or about August 2011 Defendants abruptly stopped paying investors their regular monthly interest payments or preferred returns. Many investors now face significant financial hardship including an inability to pay for basic necessities such as housing and medical care. In some instances investors are left wholly dependent upon their Social Security benefits to cover day-to-day expenses. At no time herein were any of the Defendants licensed by the Commissioner as investor advisers to conduct business as an investment adviser in this state nor were any of the Defendants exempt from the licensing requirements set forth in the Corporate Securities Law. In offering and selling these securities Defendants represented to potential and actual investors that the money raised by the sale of securities would be used to finance and produce various entertainment projects including the development and production of independent motion pictures such as “Not Forgotten” and a staged musical “Twist! An American Musical.” However the complaint alleges the Defendants instead engaged in a classic Ponzi scheme whereby previous investors were repaid their investment principal using newer investors’ funds. ~~In order to sell the operating agreements bridge loans promissory notes Class A Membership interests and convertible debentures Defendants solicited investors by means of informational seminars and by distributing promotional and offering materials and other communications through the mail and in person without the offerings having being qualified in the State of California. After presentations actual and potential investors were given appointments to meet with representatives at the company’s offices for a private financial consultation. Defendants also agreed to meet with investors at their homes for private one-on-one financial consultations. During the consultations with actual and potential investors the defendants requested copies of the investor’s financial information including any and all insurance policies annuities IRA account statements retirement account statements and stock and bond portfolios/statements and the approximate value of the investor’s home. In some instances the defendants would make copies of the investor’s financial documents and then return the documents at a second meeting along with graphs and/or charts depicting how the investor’s other investments were underperforming. ~ ~During these financial consultations the defendants allegedly advised actual and potential investors as to the advisability of investing in purchasing or selling securities including without limitation operating agreements bridge loans promissory notes Class A Membership interests and convertible debentures. The defendants offered and sold operating agreements bridge loans promissory notes Class A Membership interests and convertible debentures through these financial consultations as well as through other means. ~~According to the complaint the defendants also made numerous material misrepresentations and/or omitted to disclose material facts concerning their offerings including but not limited to: misrepresenting to investors that their investment funds would be used to finance produce distribute and market films and plays when in fact investor monies were used to pay prior investors in a Ponzi scheme. The defendants also allegedly misrepresented to investors that the interest payments or preferred returns would be made with the money generated from profits when in fact payments were made with money invested by new investors in a Ponzi scheme; misrepresented that investors’ investment principal would accrue interest; that investors would receive regular monthly interest payments or preferred returns; and that investors would receive a return of their investment principal at the end of the investment term. ~~The Commissioner had not issued a permit or other form of qualification authorizing the Defendants to offer and sell the securities in the State of California. The offer and sale of the securities were not exempt from the requirement of qualification under California Securities Laws. In offering and selling securities in the State Defendants made untrue statements and/or misrepresentations of material facts to some or all prospective or existing investors. Unless enjoined by the Court the Commissioner believes the Defendants will continue to violate the law.~ ~The complaint also charged the defendants with conducting business as investment advisers without filing an exemption or first applying for and obtaining certificates through the State authorizing them to act in that capacity.~ ~The DOC complaint is seeking preliminary and permanent injunction civil penalties and restitution as well as court costs and expenses. The case is currently pending.~~Date of Action: 9/20/2012~~Agency: California Department of Business Oversight~Description: ~

~ On February 25 2014 the Superior Court of the State of California for the County of Los Angeles on behalf of the Department of Business Oversight ("DBO") entered into a Settlement Agreement with the Defendants. The Settlement Agreement resolves the DBO's civil action alleging the offer and sale of unqualified securities in violation of state law. The Defendants did not admit or deny the allegations in the complaint but agreed to the Court's entry of permanent injunction prohibiting future violations of the law and will repay investors $17.4 million. In its complaint the DBO alleged the Defendants violated state corporate securities law by offering and selling more than $23 million in unqualified non-exempt securities including bridge loans and promissory notes to approximately 200 California senior investors in order to finance a film production.

~ The Superior Court of the State of California for the County of Los Angeles will retain jurisdiction of this Action in order to implement and carry out the terms of all orders and decrees that may be entered herein.

~ On September 10 2015 Michelle Kenen Seward ("Seward") surrendered to authorities and on September 11 2015 Dror Soref ("Soref") was arrested. Seward and Soref were charged with operating a Ponzi scheme allegedly defrauding investors from Los Angeles and Kern Counties out of $21 million dollars in an elaborate movie investment scheme. 

~ The Department of Insurance ("DOI") Valencia Investigation Division conducted the investigation with the Department of Business Oversight ("DBO"). The investigation uncovered evidence that Seward a former licensed insurance agent and CEO of Protege Financial and Insurance Services Inc and Saxe-Coburg Insurance Solutions LLC allegedly convinced her clients to invest their life savings in a film directed by Soref called Not Forgotten which was an unsecured investment. In some cases Seward talked clients into surrendering annuities early and paying large penalties by promising returns of between 10 and 18 percent. Investors that surrendered annuities paid more than $600 000 in penalties and fees for early withdrawal. After the film's completion Seward and Soref formed Windsor Pictures LLC which investors were promised would produce several films. Investors were given promissory notes and told they would again earn between 10 and 18 percent of their investment. 

~ Investigators found evidence that investors' money used to form Windsor Pictures was used to pay investors in the production of Not Forgotten. Additionally Seward and Soref were not licensed to sell securities or provide investment advice. The case is being prosecuted by the Los Angeles County District Attorney's office.