Daniel Ruettiger, the legendary Notre Dame football underdog who inspired the 1993 movie "Rudy," couldn't do an end run around the U.S. Securities and Exchange Commission.
The SEC on Friday charged Ruettiger and 12 others with running a stock scam associated with Rudy Nutrition - a company Ruettiger founded to try to compete against Gatorade in the sports drink market.
The company sold modest amounts of the sports drink "Rudy" with the tagline "Dream Big! Never Quit!", but the company was primarily a pump-and-dump stock scheme that created more than $11 million in illicit profits, the SEC said.
The SEC said Rudy Nutrition, which is no longer in business, provided false and misleading statements to investors.
For example, the company said that "Rudy outsold Gatorade 2 to 1!" in a major U.S. Southwest test, and boasted that the drink outperformed Gatorade and Powerade by 2 to 1 in a blind taste test, the SEC said. Both claims were false, it said.
Ruettiger agreed to pay $382,866 to settle the case, without admitting or denying the charges.
"Investors were lured into the scheme by Mr. Ruettiger's well-known, feel-good story but found themselves in a situation that did not have a happy ending," SEC enforcement lawyer Scott Friestad said in a statement.
Ruettiger was an undersized walk-on football player for Notre Dame who in 1975 was called off the bench during his last chance to play for Notre Dame at home. In a dramatic turn for the underdog, he recorded a sack, and was carried off the field by his teammates.
An attorney for Ruettiger could not immediately be reached for comment.
The SEC said Ruettiger ran the company with a college friend out of South Bend, Indiana, until October 2007 when Rocky Brandonisio became the company's president and moved the company's operations to Las Vegas.
As the company struggled financially, Ruettiger and Brandonisio recruited Ruettiger's neighbor in Las Vegas, an experienced penny stock promoter, to orchestrate a public distribution of the company stock in late 2007, the SEC said.
The promoter, Stephen DeCesare, identified a shell corporation quoted on the Pink Sheets that Rudy could merge with in order to become a public firm.
The company hired a business consultant who was a disbarred California lawyer, Kevin Quinn, to execute the deal.
It began trading in February 2008 under the ticker symbol
Through false or misleading statements about the company, the team pumped up its stock price from 25 cents to $1.05 per share, the SEC said.
The agency said the scheme ended when the SEC issued a trading suspension against Rudy Nutrition on September 12, 2008, for delinquent regulatory filings.
Lawyers for Brandonisio and DeCesare did not immediately respond to a request for comment. A lawyer for Quinn had no immediate comment.
(Reporting By Aruna Viswanatha; Editing by Karey Wutkowski, Gerald E. McCormick and Richard Chang)