Local car dealer accused in Ponzi scheme (Florida)

DAYTONA BEACH -- A federal judge has issued an injunction against a Daytona Beach automobile dealer as the Securities and Exchange Commission pursues claims he swindled $21 million from about 200 investors nationwide in a Ponzi scheme.

U.S. District Court Judge Anne C. Conway directed Michael R. Bretzel and two of his investment companies to stop violating Securities Act provisions against investment fraud. However, she refused to issue a similar order against Lawrence D. Ford II, Bretzel's business associate, and to freeze both men's assets.

In a civil lawsuit filed April 12 in Orlando by the Securities and Exchange Commission, regulators challenged the way Bretzel, 41, Ormond Beach and Ford, 48, Daytona Beach, ran two investment funds, the Real Estate Fund and Heritage Funding Group.

The suit alleged Heritage, founded by Bretzel and headed by Ford, has collected $13 million from 146 investors since 2003 to buy installment loans on used cars. The investments were supposed to pay interest of 15 percent for terms of one to five years.

However, $3.6 million in investor money ended up being loaned to Liberty Automotive Group, Dealer Lot Management Inc. and other Daytona Beach businesses owned by Bretzel. In 2005 and 2006, Heritage used money coming in from new investors to pay interest owed to earlier backers, the suit charged. The company filed for Chapter 11 bankruptcy protection in February.

The Real Estate Fund, which solicited $7.6 million from 70 investors, loaned $1.38 million of that to Bretzel, Ford and their companies, including Coastal Properties of Daytona Beach. With some of its money being used to pay returns to earlier investors, the fund has defaulted on at least five of its mortgages and is trying to sell off its holdings, the lawsuit states.

The judge denied the SEC's request for a court-appointed receiver to take control of the Real Estate Fund and preserve its assets for investors. She also refused to issue an order requiring the submission of financial records.

No trial date has been set for the lawsuit.

Bretzel said he was gratified the judge ruled there was no emergency requiring a receivership. "We're cooperating fully," he said.

He blamed the investment losses on "the bottom falling out of the local real estate market," coupled with rising taxes and insurance costs.

An SEC representative declined to comment about the case.

posted by steve_o @ 5/09/2007 04:41:00 PM