A trucking company is looking for capital. It needs trailers and trucks. You give the company money to buy the truck on your behalf and the trucking company leases it back to you. The truck company will arrange the purchase and financing. It will find a driver. It will take care of licensing, registration, insurance, and maintenance. Is the trucking company selling you a security?
That leads back to some derivation of the Howey case to determine if there is an investment contract, and look at whether there is
- an investment of money,
- a common enterprise,
- a reasonable expectation of profits, and
- a reliance on the entrepreneurial or managerial efforts of others.
If the investor has some right to end the lease and do something else with the truck, then this might be a leasing(ish) transaction and not a securities transaction.
This all comes back to the Securities and Exchange action against Ricardi Celicourt and Brisly Guillaume, and their company, Royal Bengal Logistics, Inc.. They raised raised approximately $112 million from 1,500 investors to finance their trucking company.
One investment option was RBL”s Trailer Sponsorship Program. The Trailer Program was a six-month program that offered investors the opportunity to sponsor the building and purchase of a tractor-trailer on behalf of RBL. Funds were supposed be used to build trailers in India, which were then disassembled and shipped to the United States. The trailers would be reassembled in the US and added to RBL’s fleet or sold for a profit. At the end of the period, RBL was obligated to repay investors their principal investment plus 30% interest.
A second investment option was RBL’s Equipment Management Investment Program that offered the highest returns. The Truck Program required a minimum investment of $55,000 that RBL was supposed to use for the purchase of a semi-truck on behalf of the investor. RBL would take all steps to purchase and operate the truck on behalf of the investor, including identifying and purchasing the truck, arranging financing for the investor to purchase the truck, assigning a driver, obtaining licensing, registration and insurance, and maintaining the truck. Investors were required to make the investment through a new or existing corporation or limited liability company created by the investor, which RBL claimed would be the legal owner of the truck. The investor agreed to lease the truck to RBL for a five-year term. RBL paid the investor monthly lease payments in the amount of $3,000, beginning on the third month for 58 months. At the end of the five-year term, an investor in the Truck Program would have received $174,000 in lease payments alone, representing at least a 216% return on investment. The investor also purportedly owned the truck outright, which the investor could keep, sell to RBL, or sell to a third party.
The scheme also had two note sale programs that were clearly securities offerings. From a quick look at the docket, Celicourt and Guillaume did not spend time arguing the securities point. It will stay academic for now.
Sources:
- SEC Charges Two Sales Agents for Role in $112 Million Ponzi Scheme that Targeted Haitian-American Community
- SEC Complaint
- SEC charges 2 executives in $112M trucking Ponzi scheme by Clarissa Hawes
- Coral Springs Man Charged with Operating $158 Million Ponzi Scheme Through His Trucking Company, Sentenced to 23 Years in Prison