[ by Howard Haykin ] The SEC closed down a $15.7 million Ponzi scheme that operated out of Denver and involved over 120 investors.  The Agency also obtained an emergency court order freezing the assets of the Denver-based company and 2 Colorado residents. Background on Defendants. Bridge Premium Finance, LLC (prior to 2005, f/k/a Berjac of Colorado, LLC) purports to be in the business of pooling investor funds to make insurance premium financing loans.  Michael Turnock, 68, is the firm's sole owner and managing member. BPF.  He refused to testify in the SEC’s investigation, citing his Fifth Amendment privilege against self-incrimination in response to all substantive questions.  William Sullivan II, age 45, served as CFO from February 2011 through July 2011.  From August 2011 through the present, Sullivan has remained the de facto CFO of BPF by virtue of his position as CFO of Delphi Companies, LLC, which functions as an operational holding company for BPF and other entities owned by Turnock.  Sullivan has a criminal record that includes 3 felony convictions - including 1 for forgery and 2 for theft.  Sullivan, too, refused to testify in the SEC’s investigation, citing his Fifth Amendment privilege. SEC Findings and Allegations. Michael Turnock and William Sullivan II allegedly sold promissory notes to investors through Bridge Premium Finance LLC, which purports to be in the business of insurance premium financing. As recently as May 2012, they were still promising investors annual returns of up to 12% and representing that investor funds would be used to make short-term loans to small businesses to enable them to pay their up-front commercial insurance premiums.  Investors were assured the business was performing well and that their funds were "100% Protected" through various forms of collateral on the underlying loans.  They also claimed that Bridge Premium could pay a 12% annual interest rate because it received annual interest rates exceeding 30% from its insurance premium borrowers. According to the SEC’s complaint filed Tuesday in federal court in Denver, Bridge Premium has, since 2002, been paying investor returns with funds from other later investors.  Bridge Premium’s business has been unprofitable and its obligations to noteholders have far exceeded its total assets.  Most investor funds were diverted for Ponzi payments, and any collateral held by the company would only protect a small fraction of its promissory note investors.  Furthermore, Bridge Premium’s promissory note offering was not registered with the SEC as required under the federal securities laws.

"Turnock and Sullivan raised millions from investors by claiming they could pay high interest rates through Bridge Premium's safe and unique business model. They hid the fact that Bridge Premium’s purported business lost money every year for more than a decade and had devolved into a Ponzi scheme long ago." -- Julie Lutz, Associate Director of SEC's Denver Regional Office.

In reality, according to the SEC’s complaint, the company had negative cash flow from operations, and its liabilities to existing noteholders far exceeded its total assets.  In May 2012, after more than a decade of Ponzi payments and operational losses, Bridge Premium owed investors more than $6.2 million, yet its insurance premium loan portfolio totaled less than $250,000 and its assets totaled less than $500,000. Alleged Violations. The SEC charges the following violations:

• Bridge Premium and Turnock violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
• Turnock is liable as a control person under Section 20(a) of the Exchange Act for Bridge Premium’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC’s complaint alleges that Sullivan violated Section 17(a)(1) and (3) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) thereunder, or in the alternative he is liable for aiding and abetting Turnock’s and Bridge Premium’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

For further details, go to:   [SEC PR 12-156, 8/15/12] and [SEC Complaint].