Greenleaf prohibited from selling securities in Missouri

Missouri Securities Commissioner Matt Kitzi on Tuesday signed an order prohibiting Springfield-based Greenleaf Cos. LLC and its owners from selling securities in the Show-Me State.

Kitzi's decision was in response to a petition filed Dec. 8 by Assistant Securities Commissioner Mary Hosmer alleging that Greenleaf and sister company The Real Estate Co. violated state laws governing the sale of securities. That same day, Greene County Circuit Judge Calvin Holden authorized a search warrant for Greenleaf's offices in Kickapoo Corners shopping center on South Campbell Avenue.

On Dec. 9, state and local authorities served the warrant and seized more than 80 boxes containing financial records, real estate documents and credit applications as well as cell phones, compact discs and DVDs from the office.

According to Kitzi's cease and desist order, the Securities Division was alerted about Greenleaf's investment activities by the Missouri Real Estate Commission in February 2007. Division officials made contact with the company in March 2007, at which time they requested any claims exempting Greenleaf from state laws governing the sale of securities. After 21 months of correspondence with the company and follow-up interviews, Hosmer filed her petition for the cease and desist order.

"We have to get documentation from them, talk to investors, talk to other people who had experiences with the company to gather facts for the investigation and the subsequent petition and cease and desist order that might come out of it," said Secretary of State spokesman Ryan Hobart.

Greenleaf solicits investors with good credit in Missouri and other states to purchase new homes in southwest Missouri and northwest Arkansas. The Real Estate Co. then markets the homes to third-party buyers with tarnished credit who sign a contract for deed, which requires them to make monthly payments to Greenleaf and eventually obtain a conventional loan to purchase the home after three years. Springfield Business Journal first reported on the company's program - and those critical of it - in May 2007.

According to Hosmer's petition, Greenleaf officials were not registered to offer or sell securities in Missouri. The company did, however, obtain exemptions from the Securities and Exchange Commission in June 2007 that allow it to enter into "private placement memorandums" with "unaccredited" investors. Greenleaf has been recruiting investors in Missouri since at least 2003.

Securities officials have alleged that Greenleaf officials omitted numerous "material facts" when soliciting Missouri investors, including the company's financial condition, its relationships with third parties, risks associated with the investments and how the purchase prices for properties were determined.

Kitzi's order stopped short of assessing civil penalties of up to $10,000 per violation against Greenleaf owners Scott Dasal and Eric Gagnepain. Hobart said Greenleaf officials may request a hearing before Kitzi to argue against the imposition of penalties.

In a news release issued in response to the cease and desist order, Greenleaf officials stated that they met with representatives from the Missouri Attorney General's Office today regarding the alleged violations and will remain in business.

"Many of the changes requested of the companies were minor with respect to the companies' current operations; therefore, an agreement was easily reached," the company said in the release. "... This agreement will be filed as a matter of the court's record."

Greenleaf stated that it has always followed the advice of its outside legal counsel regarding securities practices.