For the second time in three years, the Washington state Department of Financial Institutions has launched securities-related disciplinary proceedings against Spokane-based direct-mail publishing company Northwest Best Direct Inc. and its owners, Vince and Emily Bozzi.
The agencys securities division filed notice late last month of its intent to impose more than $60,000 in fines and costs and to impose other sanctions against the Bozzis and their company. It accuses them of selling unregistered, non-exempt securitiesmeaning securities that arent entitled to certain exemptions from state registration requirementsin violation of an earlier order. It also alleges they knowingly violated anti-fraud provisions of the states securities act by failing to disclose to an investor information about the earlier securities-related violations.
The agency said it intends to impose new fines totaling $35,000, to re-impose an earlier suspended $20,000 fine, and to recover investigation-related costs that totaled about $7,000 as of mid-December.
Vince Bozzi, president of Northwest Best Direct, says he and his wife plan to request an administrative hearing, as state law provides, to respond to the agencys charges.
Of the fines and fees, though, he says, Theyve already told us theyre planning to waive all of that, because of his and his wifes cooperation in the matter and the fact they have begun paying back the investor, longtime Spokane entrepreneur Luke Williams, on whom the states case focuses. They have told me they have to go through these motions, of filing public documents spelling out the charges and intended disciplinary action, but the matter basically is a non-story, Bozzi asserts.
Anthony W. Carter, a state securities-division examiner familiar with the case, says, though, that its too early to say whether the fines will be waived, and, contrary to Bozzis assertions, the filing of the documents is not a formality.
We need to do this to ensure we get customer restitution. If he (Bozzi) were to complete restitution payments as counsel for the victim has agreed, then it is probable we would do what we did with the earlier order, which is suspend the fines, Carter says.
Regardless of what happens with the fines, he says he expects the state will permanently prohibit Northwest Best Direct and the Bozzis from using certain allowed exemptions to sell unregistered securities in the state.
Our primary goal is to ensure this doesnt happen again, he says.
Bozzi denies he and his wife knowingly violated securities laws, and contends the state has blown it all out of proportion. He adds, There are true crooks out there they need to focus on. This is just a case of someone wanting to help out our company, and they decided to come down heavy-handed.
Northwest Best Direct, which the Bozzis founded here about eight years ago, publishes Best Book direct-mail advertising booklets that are distributed widely throughout the Spokane-Coeur dAlene area. It also publishes a glossy magazine called Spokane-Coeur dAlene Living. The Bozzis have struggled financially, though, filing a Chapter 7 bankruptcy petition here in October 2002.
The state Department of Financial Institutions first took action against them and their company in November 2001. It accused them of violating state law by offering unregistered securities that promised high returns with little risk through an advertisement in a magazine they were publishing at that time called Northwest Business & Technology.
Bozzi said he placed the ad because he was seeking capital to expand the company. The state said, though, that he and his wife werent registered to sell securities. Also, it said, their offering documents failed to disclose key information about them and their business and made representations about returns and liquidity of the securities with no reasonable basis in fact. The agency imposed a $20,000 fine that it later suspended, but a final order issued later that year nevertheless revoked the Bozzis ability to use exemptions from securities registration for five years.
The state claims they violated that stipulation last year in their dealings with Williams, who co-founded American Sign & Indicator Corp. here in 1951 and later started other businesses. The agencys publicly released documents on the case dont identify Williams, referring to him only by the initials LW to protect his privacy, but Williams confirmed in an interview with the Journal in March 2003 that he had invested in and agreed to serve as an adviser to Northwest Best Direct.
State documents say Bozzi contacted Williams in January 2003, wanting to publish a feature story about Williams in his Spokane-Coeur dAlene Living magazine, and learned during a subsequent meeting with Williams that Williams previously had helped finance a similar magazine here.
In need of financing for Northwest Best Direct, Bozzi took the opportunity to solicit Williams for a business loan, the documents say. They say Williams agreed to provide $30,000, but after further discussions, instead of structuring the financing as a loan, Bozzi set it up as a stock purchase agreement.
The agreement called for Williams to receive 497 shares of stock in Northwest Best Direct for the $30,000, and another 497 shares for helping the Bozzis raise another $150,000 in investment capital, the documents say. In an interview with the Journal shortly thereafter, Vince Bozzi falsely said that he had added Williams to the companys board of directors, they say.
Without identifying Williams, Carter says the investor whom the Bozzis had solicited has since filed a complaint with the state agency.
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