PHOENIX – The Arizona Corporation Commission held its monthly Open Meeting on January 11 and 12, 2022 to discuss and vote on various utilities and securities items. Below are the highlights from the meeting:
Arizona Public Service Company Time-Of-Use Rates to Change in September 2022
Commissioners approved a requested delay by Arizona Public Service Company (APS) to allow the utility until September 2022 to implement new on-peak Time-Of-Use (TOU) rate plans for residential and commercial customers.
During the January Open Meeting, Commissioner Jim O’Connor offered an amendment which would have given the company until September 2022 to implement new TOU rate plans. After further discussion Commissioners unanimously approved an amendment from Chairwoman Márquez Peterson which incorporated Commissioner O’Connor’s September 2022 deadline, while placing several additional requirements on the utility. Beginning this month, APS is required to file bi-weekly progress reports to the Commission outlining the progress made on implementation along with data on customers who may be over or under billed due to the new TOU plans not being in place yet. APS must also prepare its software and make any additional changes necessary for potential refunds to customers before the March 2022 Open Meeting. At the March Open Meeting Commissioners will evaluate the customer data to determine a minimum threshold for customer overpayment that could be subject to future refunds. Finally, APS is required to communicate with its customers via bill inserts and any other communication channel that the Commission is tracking any overpayment and that they may receive a refund.
At its November Open Meeting, the Arizona Corporation Commission approved APS’s rate case on a 3-2 vote following nearly two years of evidentiary hearings and public comment sessions. During that meeting, Chairwoman Lea Márquez Peterson had two amendments adopted relating to on-peak TOU rates, shortening the TOU on-peak period from 5 to 3 hours, changing from 3 p.m. to 8 p.m. to 4 p.m. to 7 p.m. During the meeting APS stated it would take the company 10 months to implement that change due to various IT related issues.
Commission Sanctions Serial Securities Violator of Investment in Real Estate and Luxury Auto Rentals, Orders $733,606 in Restitution for Investors
The Arizona Corporation Commission ordered respondents Michael Barry Eckerman of Paradise Valley, Luxury Management Group and MTE 2013 Trust to pay restitution and administrative penalties for defrauding investors with an investment involving real estate and luxury automobile rentals.
The Commission ordered the respondents to pay $733,606 in restitution. The Commission ordered Eckerman to pay an administrative penalty of $100,000 and Luxury Management Group to pay a $70,000 penalty.
The Commission found Luxury Management Group, LLC was a short-term real estate and automobile rental company that sold unregistered promissory notes to three investors, two of whom also were sold future options in company stock and one of whom was also sold investment contracts. One investor placed her life’s savings with respondents.
The Commission found the respondents titled their contracts as “commercial paper loans” when they were actually securities subject to the Commission’s jurisdiction. None of the respondents were authorized to offer or sell securities in Arizona.
The Commission found Michael Eckerman was the subject of prior temporary cease and desist orders filed by the Corporation Commission, Michael Eckerman’s prior companies failed to pay investors and Luxury Management Group’s house rentals were threatened by injunction litigation initiated by a Paradise Valley homeowner’s association.
Commission Revokes Licenses of Investment Adviser and its Representative for Non-Compliance, Levies Penalty
The Arizona Corporation Commission revoked the licenses of investment adviser MSM Financial, LLC and its representative, Sean Michael Murphy of Phoenix, ordering them to pay a $1,000 administrative penalty for their dishonest and unethical practices in the securities industry.
In its default order, the Commission found MSM Financial, LLC and Murphy failed to produce important information requested by the Commission’s Securities Division after two years.
In its 2019 letter to the respondents, the Commission’s Securities Division requested a signed written advisory agreement for each of their clients or a notarized written narrative regarding their use and execution of each client's advisory agreement. Also, the letter noted at least two elements of MSM Financial LLC’s disclosure filings were incomplete, inaccurate, or misleading and needed to be corrected by amendment.
The Commission found the Securities Division discovered the deficiencies after conducting an on-site examination of the books and records of respondent MSM Financial, LLC.
The Commission found Murphy eventually contacted Securities Division staff and said he had corrected some of the deficiencies, but he did not provide written advisory agreements or an affidavit about the agreements. After additional correspondence, the Securities Division issued a subpoena for Murphy to appear for testimony, but Murphy failed to appear as required by the subpoena.
Commission Penalizes Sellers of Unlawful Multimillion-Dollar Investment in Social Media Business
The Arizona Corporation Commission ordered respondents Voice of Guo Media, Inc. (VGM) and Lihong Wei Lafrenz of Tucson to pay a $100,000 administrative penalty for defrauding investors in connection with a social media business.
The Commission found Lafrenz, also known as Sara Wei, offered and sold securities issued by GTV Media Group, Inc. (GTV), an entity controlled by Guo Wengui, also known as Miles Kwok or Miles Guo. Investors were told they would receive a return related to GTV's social media business. However, Lafrenz and Voice of Guo Media, Inc. were not registered to offer or sell securities in Arizona.
The Commission found the respondents sold approximately $114 million in GTV stock to more than 4,500 investors from 39 countries, including U.S. investors from at least 37 states.
The Commission found the respondents promoted the stock offering in online chatrooms and through emails to investors, some of whom were accredited and non-accredited. There was no minimum investment amount to invest in the stock offering through VGM and investment amounts were generally in the amount of $100 or more.
The U.S. Securities and Exchange Commission (SEC) also filed an action against Voice of Guo Media, Inc. and Lihong Wei Lafrenz, and has already ordered VGM to pay disgorgement to the SEC in its action.
Commission Orders Payment of $774,158 in Restitution for Investors from Sellers of Nationwide Ponzi Scheme
The Arizona Corporation Commission ordered respondents Tony Spooner of Glendale, First Federal Security, Inc., and Rokay Unlimited, LLC to pay $774,158 in restitution and a $50,000 administrative penalty for defrauding investors.
The Commission found the respondents offered and sold unregistered securities and notes issued by companies controlled by EquiAlt, LLC to at least 47 investors, the majority of whom were senior citizens investing a significant portion of their life savings. However, the respondents were not registered to offer or sell securities in Arizona.
The Commission found the respondents, during the offer or sale of EquiAlt securities, made material misrepresentations and omissions to the investors regarding the securities’ risk and liquidity.
The Corporation Commission found Spooner and his affiliated companies represented to investors that EquiAlt, LLC was raising capital to purchase, improve, lease, and dispose of distressed real property. In actuality, EquiAlt, LLC was operating as a nationwide Ponzi scheme.