Securities charges against Vegas man reinstated

Tuesday, Feb. 19, 2002 | 10:52 a.m.

CARSON CITY -- The Nevada Supreme Court has ordered six counts of securities fraud be reinstated against Robert M. Friend, a founding partner of importing company MEI World Industries Inc. of Las Vegas.

Friend is accused of bilking a couple out of $70,000 by issuing one-year notes that would have an interest rate return of 21 percent to 25 percent.

Donald and Carola Bell, after reading newspaper advertisements in Las Vegas, drew money from their family trust accounts and invested the money in MEI World Industries, which was to use the money to finance the cost of moving goods from China to the United States.

When the Bells went to collect on the one-year note, the offices were vacant. The Bells, after an inquiry, said the money was used for personal and other business expenses.

Friend was charged with six counts of securities violations, plus obtaining money under false pretenses. District Judge Sally Loehrer dismissed the security charges, ruling that the one-year corporate notes could not be considered securities.

The Supreme Court, in this case, said Friday the one-year notes are securities, ordered the charges reinstated against Friend and directed the case go to trial.

The court, quoting from a U.S. Supreme Court decision, said, "If the seller's purpose is to raise money for the general use of a business enterprise or to finance substantial investments and the buyer is interested primarily in the profit the note is expected to generate, the instrument is likely to be a security."

The court said some notes are not considered securities.

These include notes "that are delivered in consumer financing; secured by a mortgage on a home; evidencing a 'character' loan to a bank customer; formalizing an open-account debt incurred in the ordinary course of business; evidencing loans by commercial banks for current operations; short-term notes secured by a lien on a small business or some of its assets or short-term notes secured by an assignment of accounts receivable."