The organizers of a Labor Day weekend music festival in Irvine may have run afoul of state law with an unusual financing scheme: signing up investors using boiler-room style phone calls.
Billed as a “new music experience in Orange County,” the two-day Playground Festival will gather more than two dozen hip-hop and rock acts at Hidden Valley, a grassy area adjacent to Verizon Amphitheater, on Saturday and Sunday. Rapper the Game and rock bands the Bravery and Panic! are the headliners.Salespeople for Elevated Sound Productions told a Michigan resident he could double his money in just a few weeks by investing in the festival.
ESP hasn’t registered its investments with the state – and it probably should have registered if it is “cold-calling” investors, a spokesman for the state Department of Corporations said.
Steve Blasko, an ESP managing partner, denied that the company made unsolicited calls to investors. He said it only contacted people who had previously expressed interest through the company’s website.
If anyone got an unsolicited call to invest, Blasko said, it was because “wires were crossed somewhere.”
But that’s not what Jake Hurtado, a senior ESP salesman, said during a recorded 16-minute phone call on Aug. 11.
Hurtado was trying to close a $67,137 deal with a man he thought was named Bob. “Bob” was actually Ken Ascher, a licensed private investigator in Ann Arbor, Mich., who was investigating shady oil-and-gas operators and had placed several fake names on their call sheets.
Here’s a partial transcript of that Aug. 11 phone call, recorded by Ascher and made available by him to the Register.
Ascher: “How did you even find out about me?”
Hurtado: “Looks like you – you know, we buy all of our leads from a lead broker. Looks like you had showed some interest in an oil project in the past, for energy, and so we were calling to get you on board here, show you how you could get 2 to 1 on your capital in a quick turnaround.”
http://liarcatchers.com/fraud_investigation.html
A “lead broker” is a person or business that sells lists of people who have purchased a particular product or investment in the past.
Blasko, the ESP managing partner, denied that his company uses lead brokers. He said Hurtado probably just couldn’t find the paperwork explaining how “Bob” came to be on ESP’s call sheet and said the first thing that came into his head.
“If I had heard that discussion (of lead brokers) out there, the seat belt would have come off,” Blasko said. “It would come to a stop.”
Mark Leyes, a spokesman for the California Department of Corporations, said ESP should have registered with the state before selling investments to the public.
“It sounds like they’d have to register with us,” Leyes said, “and as near as I can tell they have not.”
Registration is supposed to ensure that investors aren’t cheated. Generally, businesses that sell securities to the public must register those securities with a state or with the federal Securities and Exchange Commission.
Blasko said ESP is seeking an exemption from federal securities law, which would allow the company to sell securities nationwide.
The SEC exempts private placements from registration. These are sold exclusively to wealthy investors. In recent years a handful of private placements collapsed amid fraud charges, notably Orange County-based Medical Capital Holdings.
ESP salesmen used high-pressure tactics in their two recorded phone calls to Ascher, the Michigan private investigator.
One salesman compared the Playground Festival, ESP’s first event, to the long-established Coachella Festival and the Electric Daisy Carnival in Las Vegas – both of which brought in tens of millions of dollars.
“Wouldn’t you like to have some of that money in your pocket?” a salesman named Charlie asked Ascher in one recorded call.
“We’re looking at maybe 2-to-1 on your money in five weeks. Ticket sales have already begun. We only have two-and-a-half units left, which means there’s not going to be, the opportunity is not going to be available for that much longer. I’m not trying to hard-sell you, but that’s just the reality.”
In another phone call on Aug. 18, when ESP reduced its request from $67,000 to $23,497.95, Hurtado – using Ascher’s real name this time – told him to write a check immediately.
“And I will have FedEx come out and pick up that check along with the paperwork that I’m going to be sending you,” Hurtado said. “It’s really simple, real easy. There’s only a couple pages you need to put pen to paper on. And pick that up, be part of the family, have a fun ride, make some money and be part of something beautiful, Ken.”
Ascher passed. The Aug. 18 call, like the Aug. 11 call, ended with Hurtado hanging up.
