Skateboarding is known for its bad boys, but it was more than an image with Hugh A. Jeffreys, chief executive of Costa Mesa-based Earthboard Sports USA Inc., regulators said Thursday.
The Securities and Exchange Commission sued Jeffreys and two former securities brokers for fraud, alleging that the trio sold $5.1 million in unregistered stock to 66 investors -- including a couple that considered Jeffreys their "adopted son."
Instead of using the proceeds to make skateboards as they had promised investors, the money went to Jeffreys and two securities salesmen, Timothy F. Bell of Leesburg, Va., and Tracy A. Edwards of San Diego, the suit said.
Jeffreys, who got the bulk of the cash, used it to buy a waterfront home in Newport Beach and a house for his girlfriend, among other items, according to the suit filed in U.S. District Court in Washington.
Jeffreys' attorney, Richard Mamaro, declined to comment. Edwards did not return calls and Bell could not be reached.
The suit said Jeffreys recruited Bell and Edwards in 1998 to solicit investors for privately held Earthboard. Using fabricated stories -- including claiming that footwear company Vans Inc. was about to buy Earthboard -- they raised $2.4 million in just three years.
When investors started getting edgy about the ever-pending Vans merger, Jeffreys drafted a news release claiming that the company had penned a partnership with Chrysler's Jeep division -- and, later, with Wal-Mart Stores Inc. according to the SEC, which said both news releases were false.
The suit also said Bell and Edwards persuaded an elderly couple, who considered Jeffreys their adopted son, to invest all their savings in the company.