Florida Fraud Drill-Down

February 1, 2021 | New York & Florida

The SEC says “Dr. Cash” lied to line his pockets.

His real name was Terance Chalk. According to the SEC, he was the founder, chairman, and chief executive officer of the investment firm he called Greenlight Consulting.

“Dr. Cash” called himself a “financial coach.” The SEC Says he was a fraud.

But according to a federal indictment, Chalk’s advertising and promotional information was a lie: He does not hold a doctorate from any university and he had no license to sell securities.

He did not tell his victims that he wasn’t a licensed broker. In not disclosing this information, the complaint argues that he concealed it. This case offers a great illustration of the issue of “disclosure.”

Fraud is profiting from deceit. In fraud cases, fraudsters will often say that they obtained the “consent” or even “written permission” from their victims to do what they did. They would even show signed contracts and legal documents.

This is likely what happened in the “Dr. Cash” case in Orlando: His victims met him, knew him, read his written materials and believed what “Dr. Cash” told them.

But it’s not what the victims were shown that is important. It is what is missing or concealed from them that is the key to the fraud.

The core of the “consent” claim rests in “disclosure.” What was the victim told by the fraudster? Was the “consent” that was given based on a thorough disclosure of the facts and the context of the situation? Were investors given accurate facts?

Deceits in fraud can be lies of commission like inflating profits and expenses.They can also be lies of omission, where important or “material” facts are omitted or concealed from the people involved with the transaction or relationship.

“Disclosures” is a fancy name for things we do often in life: When we apply for a job we “disclose” our work history and qualifications for a job. A resume is a form of disclosure.

A car dealership requires that you disclose your income and credit history to them before they will finance your car. Most people who have purchased a home know that a bank requires financial and work history “disclosures” before they will lend money to purchase a home.

Context is important. Taken in isolation, each claim or piece of information that is presented may be accurate, but if all those detailed facts conceal an important piece of the “bigger picture” it may be fraud. So context is critical.

One example of “context” is in the selling a house.

A buyer reviews the listing of a home and it appears accurate: The size of the house, the date it was built, the survey of the land and the photos on the listing are all verified. But if there is a freeway planned to run through the back yard of the house, and that fact is not disclosed by the seller, it would (in most places) be considered a failure to disclose a “material” issue relative to the sale of the house.

In a similar way, one might find a 2020 Mercedes Benz listed for half price on the web. The buyer does research and finds that the VIN is accurate, the title is accurate and there is no lien on the car and it has less than 3,000 on the odometer. But if the seller has concealed the fact that the car had been underwater during a hurricane, it would typically be called a “material misrepresentation” of the facts about the car.

Often, fraudsters will tell their victims many facts that can be verified by outside sources. So even a diligent person who might independently verify the claims would find that the information they’ve been given “checks out.”

But it’s not what victims are told, it’s what has been concealed from them that is important.

In the Chalk case, the SEC says that he did not give his victims full disclosure. While some of the details about his past and his business practices were accurate, many parts were concealed from his victims.

According the federal filing, Chalk concealed problems in his business history: “After his businesses suffered financial difficulties, Chalk sought to obtain funds by repeatedly submitting applications for loans, lines of credit, and credit cards in the names of the various business entities he controlled. These applications contained false representations that certain of Chalk’s employees and clients were guarantors and/or were owners and officers of Chalk’s various business entities, and included the employees’ or clients’ personal identification information without their knowledge or permission. Chalk even sought a loan using the name and personal information of a dead relative.”

In October 2006, Chalk was arrested and criminally charged for this misconduct by the U.S. Attorney’s Office for the Southern District of New York.

Most of his victims had no idea of Chalk’s criminal history.

This case is a good picture of how important it is to get full disclosure and do background checks on the people with whom they are doing business. Had the investors called the SEC or other state or federal supervising agency, they might have been able to know the truth of Mr. Chalk before losing their money to him.

Don’t let others get rich at your expense! Work with your financial and legal team to do verified background checks on the people who handle your finances.

About Edmund Burke 101 Articles
Volunteers working to help people spot, stop and recover from fraud and corruption in probate, trusts, estates & guardianships.