Phoenix Aviation Inc.'s founder and president, Paul McShane, has consented to a permanent injunction requested by the Securities and Exchange Commission, which alleges in a federal complaint that the Logan firm defrauded investors.
The complaint, filed in U.S. District Court for Utah, asks that McShane be enjoined from violating federal securities laws, including selling unregistered securities. Also named in the complaint is company board member Allen Asker, but he has yet to consent to the order.SEC accuses Phoenix Aviation, which markets and builds aircraft, of making untrue and misleading statements and omitting information in a scheme to defraud investors.
Among the numerous alleged misrepresentations listed in the complaint:
- Receiving orders for hundreds of planes, when the company actually had received not more than three orders.
- Failing to disclose it had only produced one plane, which hadn't been fully tested.
- Telling investors that their money would go toward production and that sales would repay the investment, when the money actually went to general expenses and developing a prototype.
- Telling investors their investment was risk free and they would double their money in six months, when the company's financial condition and production capacity made that type of return unlikely.
The company raised $427,000 through the sale of notes to investors who had requested payment in cash after the first repayment was made in stock, the complaint said, but Phoenix Aviation never repaid most who had requested payment in cash.
The SEC also accuses the company of offering and selling unregistered notes and common stock.
According to the complaint, Phoenix Aviation allegedly filed false and misleading statements about its financial condition with the National Quotation Bureau and made false and misleading statements to the media.