Commingled Funds and Company-to-Company Shuffles
The complaint details a pattern of fund misuse that violated the defendants’ own written agreements with investors. Although offering documents specified that proceeds raised for each portfolio company would be used solely for that company’s operations, the reality was far messier.
Lopez, Mehr, and Burkenroad maintained signatory authority over all REV and portfolio company bank accounts. Weekly spreadsheets prepared by REV’s head bookkeeper tracked cash balances, expenses, and investor payment obligations across all entities. Burkenroad would share these reports with Lopez and Mehr, and the trio would collectively decide which accounts to tap to cover shortfalls elsewhere.
According to the complaint, the mechanics of the shell game were simple but effective. On February 4, 2022, for example, the defendants transferred $1.41 million from RadioShack’s bank account to REV’s main account. That same day, REV distributed just over $1 million across five other portfolio companies: $615,000 to Pier 1, $185,000 to Modell’s, $225,000 to Dress Barn, $16,000 to Franklin Mint, and $10,000 to Linens ‘N Things.
At other times, money moved directly between portfolio companies. In November 2020, $1.7 million in RadioShack investor proceeds was transferred straight into Stein Mart’s bank account. In total, the SEC alleges the defendants shifted at least $5.9 million in investor funds directly between portfolio companies—all contrary to representations made in offering documents.
