SEC halts fraudulent Vegas casino scheme

Tuesday, Feb. 3, 2004 | 10:54 a.m.

SUN STAFF AND WIRE REPORTS

A California man has agreed to settle Securities and Exchange Commission claims that he defrauded investors in a bogus celebrity-themed Las Vegas resort and casino.

The SEC on Monday issued a cease-and-desist order against Thomas H. Ludeman, 63, of Los Angeles, who is believed to have raised nearly $350,000 from about 28 investors through cold calls and a mid-2003 advertisement in the Wall Street Journal to build a celebrity-themed resort.

"We caught him when we saw the Wall Street Journal advertisement," said John Stark, head of the SEC's office of Internet enforcement. In addition to trolling the Internet, Stark said regulators routinely check newspaper classified ads for suspicious-sounding investments.

Investors didn't get any payments and much of the money went to pay Ludeman's own hotel bills, regulators alleged. The SEC waived an order requiring Ludeman to repay investors, citing his sworn statements that he doesn't have sufficient funds to do so. Ludeman declined to comment.

Ludeman is listed as the president, secretary and treasurer of Celebrity Resorts & Casinos Inc., Las Vegas, according to incorporation records in the Nevada secretary of state's office.

Ludeman's company, which was incorporated in Nevada in September 2002, is in good standing with its incorporating agent, Incorp Services Inc., Las Vegas, a spokesman for that company said Monday.

According to the SEC filing, Ludeman and Celebrity Resorts & Casinos conducted an offering to raise money to build a resort in Las Vegas. Individuals who showed a willingness to invest were given documents offering "convertible notes carrying an interest rate of 5 percent over the Wall Street Journal first of the month prime rate, accrued monthly from date until maturity."

The SEC said it had received no registration statement on the offering. The regulators said Ludeman's offering claimed that a portion of the funds raised would be used to acquire a gaming license, that the company had a strategic relationship with Marriott Vacation Club International and that the casino would generate revenue in excess of $700 million in its first year of operation.

The SEC accusation also said that a national securities law firm was the legal counsel for Ludeman's company and that the casino, once built, would provide guests an opportunity to mingle with "world-renowned motion picture, television, modeling, sports celebrities and public figures."

The SEC said all those representations were false and that Ludeman had no relationship with Marriott, no hotel management experience, his company had virtually no assets and he had not discussed his plan with a single celebrity.