on legislative fast track
By Andy Brack
SC Statehouse Report
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APRIL 13, 2003 - - Terry Moore's story isn't pretty. He's sure
he's lost his life savings - - $70,000 - - because he trusted a
hometown institution that wasn't federally insured.
The retired Easley police officer is one of 8,000 people, mostly
from the northwestern part of the state, who put money in Carolina
Investors, a hometown fixture that sold unsecured securities to
the public and gave proceeds to a mortgage business operated by
its parent company.
On March 24, many were surprised when Carolina Investors closed
doors to its four offices and said it didn't have money to operate.
People around Pickens, Easley and Anderson thought the tens of millions
they had stored in the institution were safe. Sure, they knew it
wasn't a bank and their investment had more risk than a low-interest
certificate of deposit. But for them, Carolina Investors had been
around for 40 years and offered a greater return than alternatives.
When the wholly-owned subsidiary of HomeGold Financial Inc., closed
its doors, investors had no access to their accounts. Since then,
500 investors joined a class-action lawsuit that alleges fraud,
civil conspiracy, deception and more. This week, Carolina Investors
filed for bankruptcy protection. It said it had assets of $50,000
or less and debts of more than $100 million. In bankruptcy papers
filed last week by the parent company, HomeGold said it owed more
than $275 million to Carolina Investors.
In short, it's a big financial mess and a lot of people are facing
"About everything I had saved now is down the drain,"
said Moore, who joined a class-action lawsuit to try to recover
some of his money. "$70,000 - - that hits you hard. There needs
to be some legislation (because) we have been misrepresented to
On April 3, S.C. Sen. Larry Martin, a Pickens Republican, filed
a bill that sought to redress grievances of people like Moore.
"The day they closed their doors is the day this thing got
my attention," said Martin, who heard from more than 100 people
about what they had in Carolina Investors.
While Martin said South Carolina generally has good securities
laws, he said his bill will make it tougher for companies to take
advantage of trusting investors. The bill, which is on the fast
track and is expected to get final approval by the Senate in the
coming week, calls for three new provisions:
- To allow the State Grand Jury to investigate securities fraud
- To make anyone who "knowingly and substantially assists"
someone to commit securities fraud become liable for their acts.
- To extend the statute of limitations for cases involving securities
Attorney General Henry McMaster said allowing the State Grand Jury
to probe securities allegations would give his office "the
most powerful investigatory tool possible" to help sort out
allegations of white-collar wrongdoing.
"It should give some comfort [to small investors in Carolina
Investors] that if this becomes law, the state authority would have
the tools to get the answers to every question," McMaster said.
Clemson lawyer Chris Olson, one of the attorneys handling the class
action suit, said involvement of the State Grand Jury in the process
would be a great help in protecting unwitting victims of securities
"The state can come up with information that we might not
otherwise have gotten," he said. In turn, that could help victims
get more information to help any civil cases that seek to recover
monies lost by folks like Moore.
While the proposal to toughen securities laws appears headed for
passage, one thing is for sure: the loss of millions of dollars
from the pockets of retirees and others throughout Oconee, Anderson
and Pickens counties will have a devastating long-term impact.
"It will dramatically affect this part of the Upstate in a
very, very negative way," Olson said.
In spite of the financial misery, Moore sounded a hopeful note:
"Maybe this new legislation will keep this from happening to