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Ponzi scheme charges filed
Paul Egan / The Detroit News
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(September 29, 2009 - Tuesday) - Frank Bluestein sold interests in a scheme perpetrated by Edward May and May's company, E-M Management LLC, the SEC alleged in a complaint filed in U.S. District Court in Detroit. Bluestein raised about $74 million from more than 800 investors between 2002 and 2007, the complaint alleges.
Bluestein, 59, allegedly misrepresented to investors that the investments were low-risk, falsely claimed he had conducted adequate due diligence about the investments and did not tell investors he received at least $2.4 million in commissions in addition to the $1.4 million in disclosed compensation his company received. The investments were related to the installation and servicing of telecommunications equipment in hotels, casinos and truck stops. "As part of his sales strategy, Bluestein specifically targeted retirees and seniors," said the complaint, which alleged civil fraud, sale of unregistered securities and other violations.
David M. Foster, Bluestein's Farmington Hills attorney, said he had not yet seen the SEC complaint and could not comment. However, "it should be pointed out that under (U.S.) Supreme Court rulings going back to 1994, when an individual is accused of aiding and abetting in a securities fraud such as a Ponzi scheme, the SEC has to demonstrate intent to defraud and knowledge of the Ponzi scheme," Foster said. "Mr. Bluestein had neither." Bluestein denied similar allegations in a 2008 class-action lawsuit that is still pending. "Frank J. Bluestein was not responsible for the losses of the investors," he said in a court filing.
In 2007, the SEC obtained a permanent injunction against May and E-M Management, through an earlier lawsuit. That case also is pending. In all, the alleged Ponzi scheme involved about 1,200 investors and $250 million, the SEC says.
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