Oct. 19. The U.S. District Court for the Western District of North Carolina entered partial consent judgments against defendants Dana J. Bradley, Marlin S. Hershey, D. Bradley, Inc., Bryant Boys, LLC, Distressed Lending Fund, LLC, Erdnit LLC, Hershey Enterprises, Inc., MW Enterprises, LLC, Performance Holdings, Inc., and Performance Retire on Rentals, LLC for their involvement in an offering fraud scheme and related unregistered broker activity.

Both Bradley and Hershey are Cornelius residents; their principal offices are in Kenton Place in Huntersville.

According to the SEC’s complaint, filed Sept. 30, 2019, Bradley and Hershey, along with entities under their control, told investors they would use investor funds to make loans to real estate developers who would then use the money to acquire and rehabilitate homes in Charlotte, North Carolina and other areas of the country.

The complaint alleged that Bradley and Hershey used a large portion of the funds to pay themselves more than $1 million in commissions and repay principal and interest due to other investors. The complaint further alleged that Bradley and Hershey oversaw three securities offerings for a third-party real estate developer in Florida and, in connection with those offerings, operated as unregistered brokers and received approximately $2.1 million in commissions.

Without admitting or denying the SEC’s allegations, Bradley, Hershey, Performance Retire and Distressed Lending Fund consented to the entry of a final judgment enjoining them from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

Without admitting or denying the SEC’s allegations, Bradley, Hershey, Bryant Boys, Bradley Inc., Erndit, Hershey Enterprises, MW Enterprises and Performance Holdings consented to the entry of a final judgment enjoining them from violating the broker-dealer registration provisions of Section 15(a) of the Exchange Act.

Civil penalties

The judgment orders Bradley to pay $19,849 in disgorgement and prejudgment interest and a $192,768 civil penalty and Hershey to pay $19,869 in disgorgement and prejudgment interest and a $192,768 civil penalty for the antifraud violations.

The judgment reserves the issue of disgorgement related to the broker-dealer registration violations for further determination by the court upon a motion of the SEC.

Developer charged

Meanwhile, in a separate case, the SEC has charged a Florida-based real estate developer with fraud in connection with the sale of promissory notes of two entities he controlled.

The Commission’s complaint alleges that between 2013 and 2018, James M. Rudnick, through his entities Southeast Lot Acquisitions, LLC and Mary A II, LLC, sold approximately $16.7 million in promissory notes to more than 80 investors.

SEC says Bradley, Hershey prepared offering documents

According to the SEC, Bradley and Hershey prepared the offering documents and conducted the offerings.

Rudnick allegedly failed to adequately review the offering materials, which stated that no commissions would be paid to employees or unregistered broker-dealers, when,  the SEC alleges  “Rudnick, Southeast Lot, and Mary A paid Hershey and Bradley—both of whom were listed as employees and neither of whom was a registered broker-dealer—and affiliated entities approximately $2.1 million in commissions.”

The Commission previously charged Bradley and Hershey with conducting several other offering frauds and operating as unregistered brokers with respect to those offerings and with respect to Rudnick’s offering.

The SEC’s complaint, filed in the U.S. District Court for the Western District of North Carolina, charges Rudnick with violating the antifraud provisions of Sections 17(a)(2) and (3) of the Securities Act of 1933.

Without admitting or denying the SEC’s allegations, Rudnick agreed to be permanently enjoined from violating the charged provisions and to pay an $80,000 civil penalty. The settlement is subject to court approval.