Bentonville Man, Associates Accused of Bilking $350,000

by Gwen Moritz  on Friday, Mar. 18, 2005 4:29 pm  

A Bentonville man, his Alabama-based business partner and four Houston residents bilked more than $350,000 out of 32 unsophisticated investors - most of them Arkansans, the Arkansas Securities Department said on Friday.

In a cease-and-desist order, Securities Commissioner Michael Johnson ordered Leroy Hoback of Bentonville, O. Bruce Mikell of Warrior, Ala., and their company, Fortress Foundation Inc., to stop marketing an unregistered security described as a contract to trade international currencies.

Mikell has been involved with unregistered securities in northwest Arkansas in the past.

The same order also applies to Raymond M. Streig; his mother, Gloria N. Streig; his sister, Ra'Nic Streig Schwerdtfeger; and her husband, William E. Schwerdtfeger. All live in the Houston area and are officers of a company called G.T. Funds Inc.

The 14-page order recounts an adventure that began in the summer of 2003 and continued through January of this year. It also suggests that Hoback and Mikell were simultaneously perpetrators and victims of a get-rich-quick scheme that primarily benefited the Streig-Schwerdtfeger family.

The Securities Department found that:

Hoback and Mikell, who were not registered as securities dealers in Arkansas or anywhere else, formed Fortress Foundation for the purpose of trading in foreign currencies. Mikell was acquainted with Raymond Streig and wrongly believed he had "vast experience in foreign currency trading," so Fortress contracted with G.T. Funds to perform currency trades.

In the fall of 2003, Hoback and Mikell began a series of seminars on foreign currency trading at the AmeriSuites hotel in Rogers. Through these meetings, 32 investors were persuaded to invest a total of $351,800 for a minimum of one year with promises of attractive returns, although the exact amount varied from 3-6 percent a month to 4-8 percent a day.

Investors were also promised a 10 percent commission if they brought other investors into the pool.

Hoback and Mikell forwarded all of the invested funds to G.T. Funds. For almost a year, Hoback and Mikell were satisfied with the verbal reports of investment returns given to them over the phone by Raymond Streig and William Schwerdtfeger. They produced monthly statements for investors based on these undocumented reports.

But in the fall of 2004, Hoback and Mikell became suspicious and demanded an itemized statement from the Houston group. The statement they received was dramatically different from the telephone reports, showing deposits of only $251,500 and a net loss from trading of almost $60,000, but the reliability of that statement is in question.

Hoback and Mikell found another trader and in January opened a new account with approximately $150,000 received from 15 new investors. That investment remained essentially unchanged as of February. New investor money was also used to pay some $15,000 in commissions to investors who brought in new investors.

Neither Hoback, Mikell nor any of the first group of investors received any money back from G.T. Funds. The Securities Department said that was because at least 65 percent of the money was used by the Streigs and Schwerdtfegers "as if it were their own personal property, spending it for personal expenses through writing checks and using bank debit cards" to access the money directly from the company account.

The remainder of the money is unaccounted for, according to the order.

(Viewing the cease-and-desist order requires Adobe Acrobat viewer. Click here for a free copy.)

 

 

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