SEC charges 26 with fraud preying on elderly

WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission said on Wednesday it charged 26 defendants in an alleged $428 million scheme that victimized thousands of seniors and other investors.

The SEC said the gang duped thousands of U.S. investors from 1999 until 2005 into using retirement savings to buy securities in the form of "universal leases."

The investments were structured as time-shares in several hotels in Cancun, Mexico, coupled with a rental agreement that promised a high, fixed rate of return, the SEC said.

The agency said Michael Kelly, 57, a former Indiana resident, created and operated the scheme from Cancun through a number of Panamanian and Mexican companies, including Yucatan Resorts, Resort Holdings International and Panorama Communities.

Kelly is currently incarcerated in Chicago where he is being held on a criminal fraud complaint, the SEC said.

An attorney for Kelly could not immediately be reached for comment.

The commission said it is seeking disgorgement of ill-gotten gains and civil penalties against the defendants.

The SEC's action is part of its crackdown on financial fraud against senior citizens, a topic the agency is scheduled to address on Wednesday before a U.S. Senate committee.

The agency said Kelly's operation attracted investors by telling them that the universal leases would generate guaranteed income through the leasing of investor time-shares by a large, independent leasing agent.

But the organization actually used new investor funds raised in the scheme to make illusory "rental income" payments to universal lease investors, the SEC said.