April 9, 2014 Updated: April 10, 2014 at 3:34 pm
A Woodland Park man and his company have been ordered by a Denver District Court judge to stop selling interests in mortgages on distressed houses amid allegations that he has raised more than $1.6 million from at least 25 investors in what regulators say is a Ponzi scheme.
Richard Roop, president of Bottom Line Results Inc. allegedly raised the money to fund the purchase of at least 61 properties, often convincing investors to transfer the funds from retirement accounts with promises of annual returns of 8 percent to 10 percent, according to a lawsuit filed Friday by the Colorado Division of Securities in Denver.
Judge Michael Martinez ordered Roop and the company to not offer or sell securities in Colorado or violate state securities laws. A hearing on the order is scheduled for April 17.
The suit alleges that both Roop and Bottom Line Results violated state securities laws by selling unregistered investments without a state license.
The suit also alleges that Roop and his company committed securities fraud by failing to disclose to investors that they were not licensed by the state; that he and the company had been successfully sued in the past; that they used investor money to buy real estate for their own benefit; and that they used money from new investors to make payments to existing investors, which the suit describes as a "classic Ponzi scheme strategy."
The division disclosed the lawsuit and resulting order in a press release Wednesday.
Roop said Wednesday he is not violating state securities laws because the investments are structured as loans on properties he and his company have acquired, and such transactions are exempt from the securities law's registration and licensing requirements. He said investors who made the loans to him and Bottom Line Results are repaid when the properties are sold or refinanced with other investors, typically within two or three years. He also said he pays investors interest on the loan during that period.
"I followed all the rules I was aware of and never tried to break any of them. I have never had anyone providing these loans lose any money or make a complaint against me or my company to any regulatory agency," Roop said. "If I need money on a deal, I use private lenders to raise the funds needed to buy and hold the property and they are given a deed of trust (mortgage) against the property.
"We continue to engage in transactions," he said, adding that the transactions are exempt from the state's securities regulations.
The Securities Division revoked Roop's securities license and the broker-dealer license of Bottom Line Results in 2012 for failing to comply with the division's requests for certain documents and information on people who had invested with the company. Both Roop and Bottom Line Results "have repeatedly resisted efforts by the Division to obtain complete responses" to subpoenas and other requests for records, according to the division's motion for the order that Martinez granted.
Roop said he supplied all the documents the division requested and was never told that he didn't provide everything they wanted. He said the division contacted many of his investors after he provided the records, which "created a lot of fear" among them.
He said Bottom Line Results was successfully sued by the seller of a property it bought because it was late on mortgage payments -which he attributed to a bookkeeper embezzling company funds .
"I asked the seller's attorney if we could work this out and sent off a proposal. I never heard back and there was a hearing on the lawsuit later that I did not hear about. As a result, I had a default judgment against me but I never had a chance to defend myself," Roop said.