Two Richmond-area businessmen ordered to stop selling securities for 120 days

Virginia regulators ordered two Richmond-area businessmen and to stop selling securities for 120 days while determining whether to permanently ban them from that business.

The State Corporation Commission order yesterday came at the request of its securities investigators, who allege that Julius Everett Johnson and Walter Ray Reinhardt were selling illegal promissory notes to investors.

Reinhardt said the freeze is meant to give SCC officials time to review the information he and Johnson and the companies had been giving investors, as well as their compliance with what Reinhardt described as extensive and complex regulations governing securities sales.

"It's just meant to give the commission time for a review; if they thought people were at imminent risk, they'd issue a cease and desist order," Reinhardt said.

Reinhardt, who is subject to 1999 and 2007 cease and desist orders from North Carolina state securities regulators, said the commission wants to review the documents investors received and to determine if the companies that issued the notes, which are a kind of IOU, are solvent.

He said the companies are paying interest on the notes.

Reinhardt said the order does not affect certificates of deposit or annuities that he and two of the companies sell.

In an affidavit, SCC senior investigator Tom Bayley said North Carolina regulators had inquired this summer about four of the companies, which have issued more than $2.9 million of notes to 52 North Carolina investors.

While looking into the companies, Bayley received a complaint from a Virginia woman who responded to a newspaper ad from one of the companies offering certificates of deposit at roughly twice the market rate.

After signing the paperwork for what she thought was a CD, she found she had in fact purchased an unsecured promissory note. She asked for, and got her money back, Bayley said.

Bayley said Johnson and Reinhardt told him in September that they had sold $1.7 million of notes to 38 Virginians, and the notes were private offerings that complied with federal regulations.

The state investigator said some of the notes' documents say Johnson guaranteed $3.2 million of the companies' notes, but added that Johnson did not know the outstanding balance on the notes and that there were no audited financial statements from any of the companies.

The companies involved are:

--Benefit Contract Administrators Inc.;

--MHC Linen Services LLC;

--River City Cleaners LLC;

--Roberts Awning Restoration and Renewal LLC (formerly known as Roberts Awnings LLC);

--First Fidelity Financial of Richmond LLC;

--Capital Investor Group;

--Commonwealth Assurity LLC;

--Mid Atlantic Insurance Agencies Inc.

--FIC Financial Group Inc.;

--Livingwell Healthcare of Virginia LLC

Everett Awnings Inc.