SEC v. THE LEONARD VINCENT GROUP; LEONARD VINCENT LOMBARDO; and BRIAN A. HUDLIN, No. 17 Cr. 318 (JA), Eastern District of New York (Jan. 1, 2017) — Complaint

ANDREW M. CALAMARI
REGIONAL DIRECTOR
Attorney for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
New York Regional Office
200 Vesey Street, Suite 400
New York, NY 10281-1022
Tel: (212) 336-0077 (Paul
G. Gizzi, Senior Trial Counsel)
Email: [email protected]
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW
YORK
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
-against-
THE LEONARD VINCENT GROUP,
LEONARD VINCENT LOMBARDO, and
BRIAN A. HUDLIN,
Defendants.
ECFCASE
COMPLAINT
Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint against
defendants The Leonard Vincent Group ("TL VG"), Leonard Vincent Lombardo ("Lombardo")
and Brian A. Hudlin ("Hudlin") ( collectively "Defendants"), alleges as follows:
SUMMARY
1. This case concerns an offering fraud against investors perpetrated by a Long
Island-based recidivist, Leonard Vincent Lombardo ("Lombardo").
2. Lombardo, along with his alter ego, The Leonard Vincent Group ("TL VG"),
managed or controlled numerous affiliated entities including: L VG Holding Company D&L
1200 LLC; L VG Holding 1255 LLC; and LVG Capital Growth Portfolio Inc. ( collectively, "the

L VG Funds"); and an e-cigarette business called Clearette Cigarette Company ("Clearette").
3. Lombardo and those who worked under his direction offered and sold interests in
TL VG and the L VG Funds to over 100 investors between 2011 and 2015, representing to them
that their money would be used to make lucrative investments in distressed real estate and
promising them unrealistically high rates
of return. However, Lombardo invested only a small
fraction
of the investor money in real estate and used the bulk of the remaining investor money
to fund Clearette, to pay prior investors, and to pay personal expenses, like his BMW and
Mercedes Benz car payments, the marina fees on his boat, and visits to tanning salons.
Thereafter, Lombardo used the proceeds
of the L VG Funds and Clearette to start yet another
company selling E-Juice (the solution used in electronic cigarettes), ultimately defrauding not
only the initial investors in TL
VG and the L VG Funds, but also investors who agreed to roll their
investments into Clearette.
4. Lombardo was assisted in this scheme
by Brian Hudlin, TLVG's CFO, who
managed all the monies for the various entities, had signatory authority over the relevant bank
accounts, and executed fund transfers between TL VG, the L VG Funds, Clearette,
LJ Leonard
and Sons and Lombardo's personal accounts without investor consent.
5. Ultimately, Lombardo raised over $7.1 million for TLVG, the LVG funds, and
Clearette.
Of that amount, no more than $1.5 million was invested in real estate. The remainder
was extensively commingled and ended up funding other businesses, perpetuating the fraud by,
among other things, paying individuals to solicit investments, or being used for Lombardo' s
personal expenses. Due to this fraudulent scheme, almost every investor has lost his entire
investment.
2

NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
6. The Commission brings this action pursuant to the authority conferred upon it by
Section 20(b) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77t(b)] and Section
2l(d) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78u(d)].
7. The Commission seeks a final judgment permanently restraining and enjoining
Defendants from violating Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]; and Section
l0(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule l0b-5 [17 C.F.R. §§ 240.lOb-5]
thereunder; ordering TL VG and Lombardo to disgorge their ill-gotten gains together with
prejudgment interest thereon; and ordering Hudlin to pay a civil monetary penalty pursuant to
Section 20(d)
of the Securities Act [15 U.S.C. § 77t(d)] and Section 2l(d)(3) of the Exchange
Act [15 U.S.C.
§ 78u(d)(3)].
JURISDICTION AND VENUE
8. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331, Sections
20(b), 20(d) and 22(a)
of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d) and 77v(a)], and
Sections 21(d), (e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].
9. Venue lies in this district pursuant to 28 U.S.C. § 1391(b)(2), Section 22(a) of the
Securities Act [15 U.S.C. § 77v(a)], and Section 27
of the Exchange Act [15 U.S.C. § 78aa].
Certain
of the acts, practices, transactions, and courses of business alleged in this Complaint
occurred within the Eastern District
of New York and were effected, directly or indirectly, by
making the use of means or instrumentalities of transportation or communication in interstate
commerce, or the mails. For example, TLVG was headquartered in, and Lombardo and Hudlin
resided in, the Eastern District
of New York during the relevant time period of conduct described
herein.
3

DEFENDANTS
10.
TL
VG
is  a private
Delaware
corporation
based
in
Ronkonkoma,
NY
that
was
formed
no
later
than
July
2011.
TLVG
owns
and
operates
numerous
limited
liability
companies
and
other
entities
that
purportedly
invest
in
distressed
real
estate,
such
as
the
LVG
Funds,
provide
unspecified
consulting
services,
and
operate
companies
that
sell
e-cigarette,
or
"vaping,"
products.
Additionally,
TLVG
raised
roughly
$1.1
million
dollars
directly
from
investors
which
it later
placed
into
its
various
investment
fund
accounts.
Lombardo's
wife
is identified
as
the
owner
or
general partner
of
TL
VG
in
various
documents,
and
Hudlin
is identified
as
its
CEO.
However,
Lombardo
was
in
fact
controlling
TLVG,
and
Hudlin
was
in
charge
of
the
company's
finances.
11.
Lombardo,
42,
created
and
controlled
TL
VG,
and
was
a signatory
of
several
of
its
bank
and
securities
accounts.
In
the
1990's,
Lombardo held
Series
7 and
63
brokerage
licenses
and
was
associated
with
at
least
four
registered
broker-dealers,
including
Stratton
Oakmont
Inc.
and
William
Scott
&
Co.,
LLC.
On
June
5,
2001,
the
National
Associate
of
Securities Dealers
("NASD")
found
that
Lombardo
made
material
misrepresentations
to
his
customers
about
the
price
and
performance
of
various
risky
stocks
while
employed
at
a broker­
dealer
and
engaged
in
unauthorized
transactions
in
his
customers'
accounts,
ultimately
causing
tens
of
thousands
of
dollars
in
losses
to
his
customers.
NASD
subsequently barred
him
from
associating
with
any
NASD member.
Presently,
Lombardo
holds
himself
out
as
a consultant
for
LJ
Leonard
&
Sons,
which
purports
to
be
a consulting
service
for
retailers
and
marketers,
but
it
has
never
earned
any
revenues
from
consulting
services
and
ultimately
became
a manufacturer
of
vaping
products.
He
also
purports
to
run
a smoking
cessation
charity
and
a leukemia
charity.
The
United
States
Attorney's
Office
for
the
Eastern
District
of
New
York
filed
an
Information
in
4

United States v. Leonard Vincent Lombardo, Crim No. 17 CR 318 (JA) (E.D.N.Y) (the
"Criminal Proceeding") and Lombardo pied guilty to one count
of wire fraud in violation of 18
U.S.C. § 1343 on June 22, 2017.
12.
Hudlin, 63, is the de facto chief financial officer and controller ofTLVG. He is
identified in press releases as the CEO
of TLVG but did not act in that capacity; rather, he acted
as
CFO and controller, and had signatory access to all bank accounts. Hudlin executed
numerous transactions between
many TL VG related accounts that did not have any economic
purpose and assisted in the use
of investor funds to pay Lombardo's personal expenses.
OTHER RELEVANT ENTITIES
13. LVG Holding Company D&L 1200 LLC is a Delaware limited liability
corporation that offered "units" in the company to investors. The offering documents and
representations made
by Lombardo and other TL VG officials stated that investor money would
be used to buy distressed real estate. Ultimately, much of the over $3.1 million raised by this
entity was either misappropriated
or used to fund other businesses.
14.
L VG Holding 1255 LLC is a Delaware limited liability corporation that offered
"units"
in the company to investors. The offering documents and representations made by
Lombardo and other TL VG officials stated that investor money would be used to buy distressed
real estate. Ultimately, much
of the over $1.6 million raised by this entity was either
misappropriated
or used to fund other businesses.
15.
LVG Capital Growth Portfolio Inc. is a Delaware limited liability corporation
that offered shares in the company to investors. The offering documents and representations
made by Lombardo and other TL VG officials stated that investor money would be used to buy
distressed real estate. Ultimately, much of the over $576,000 raised by this entity was either
5

misappropriated
or
used
to
fund
other
businesses.
16.
Clearette
is a Delaware
limited
liability
company
started
by
Lombardo
and
TL
VG
to
distribute
e-cigarette
products.
Clearette
offered
"membership
units"
to
investors.
It
raised
approximately
$686,000
from
investors
directly
and
received
at least
$2
million
in
funds
from
investors
in
other
L VG
Funds.
17.
LJ
Leonard
and
Sons
is a Delaware
limited
liability
corporation.
It
began
as
a
purported
retail consultancy,
but
it ultimately
became
a company
that
manufactures
and
sells
e­
juice
for
vaping
products.
Investor
funds
that
were
not
spent
by
Lombardo
on
personal
expenses
or
other
failed
ventures
such
as
Clearette
were
ultimately
used
to
start
this
operation.
FACTS
I.
Lombardo
Used
TL
VG
to
Perpetrate
Several
Fraudulent
Offerings.
18.
Beginning
around
July
2011
and
continuing
through
at least
August
2015,
Lombardo,
working
through
TLVG,
raised
money
from
investors
directly
or
via
the
LVG
Funds.
In
exchange
for
their
investments, investors
received
"units"
or
shares
in
one
of
the
L VG
Funds.
Investors
were
led
to
believe
that
these
investments
were
to
be
pooled
with
money
from
other
investors
and
used
by
TLVG
to
make
investments
in
distressed
real
estate
pursuant
to
the
strategies
laid
out
in
the
LVG
Funds'
Private
Placement
Memoranda
(PPMs).
Investors
expected
to
share
in
the
profits
of
the
LVG
Funds,
and
later
Clearette,
and
expected
TLVG
and
Lombardo
to
manage
the
funds
responsibly.
19.
The
LVG
Funds
were
purportedly
designed
to
buy
distressed
real
estate,
improve
the
properties,
and
then
rent
or
sell
the
properties for
profit.
Neither
Lombardo
nor
TLVG
were
registered
in
any
capacity
with
the
Commission;
nor
were
the
L VG
Funds.
20.
TL
VG,
through
a salesforce
of
contractors,
cold-called
potential
investors
whose
6

names
were
predominantly
gathered
from
purchased
"lead
sheets."
Several
salespeople
hired
by
TLVG
were
previously
associated
with
registered
broker-dealers
on Long
Island.
These
former
registered
representatives
also
called
their
previous
customers.
Utilizing
high-pressure
sales
tactics,
the
salespeople
encouraged
predominantly
elderly
individuals
to
provide
the
LVG
Funds
with
money
purportedly
to
purchase
distressed
properties.
In
total,
TL
VG
and
the
L VG
Funds
raised
over
$6.5
million
for
these
purported
real
estate
investments.
In
fact,
at  most,
only
$1.5
million
of
these
funds
actually
went
toward
purchasing
or
renovating
properties.
21.
In
or
around
2014,
Lombardo
changed
TLVG's
strategy.
Instead
of
focusing
on
real
estate
investments,
Lombardo
or
individuals
acting
on
his
instructions
began
soliciting
both
existing
investors
and
new
investors
for
Clearette
.  At
Lombardo's
instruction,
moneys
were
also
transferred
from
the
LVG
Funds
to
Clearette.
22.
The
majority
of
fund
transfers
into
Clearette
from
the
LVG
Funds,
many
if
not
all
of
which
were
executed
by
Hudlin,
were
not
authorized
by
investors
.
In
some
cases,
however,
Lombardo
was
able
to
convince
existing
investors
to
invest
directly
in
Clearette
or
convince
investors
to
exchange
their
LVG
Fund
investments
for
an
investment
in
Clearette.
He
did
this,
in
part,
by
telling
these
investors
that
the
returns
to
date
had
been
very
strong
and
that
investors
would
make
even
more
money
with
the
Clearette
investment.
These
statements
regarding
the
L VG
Funds'
investment
performance
were
false.
23.
Unbeknownst
to
those
investors,
at  the
time
Lombardo
sought
to
convince
them
to
exchange
their
LVG
Fund
investments
for
Clearette,
Lombardo,
with
Hudlin's
assistance,
had
in
many
cases
already
transferred
their
investments
to
Clearette.
24.
For
example,
Investor
A
invested
a total
of
approximately
$300,000
in
the
LVG
Funds
beginning
on
October
5,
2012
and
ending
on
April
26,
2013.
Sometime
in
late
2014
or
7

early
2015,
Lombardo
contacted
Investor
A
directly
and
offered
him
an
opportunity
to
convert
his
investment
in
the
L VG
Funds
into
an
investment
in
Clearette.
Lombardo
told
Investor
A
that
his
initial
$300,000
investment
in
the
L VG
Funds
was
now
worth
$423,000.
This
was
false
as
the
L
VG
Funds
never
appreciated
in
value.
Further,
Lombardo
told
Investor
A that
by
converting
his
L VG
Fund
investment
into
Clearette,
he
would
receive
another
20%
return
by
receiving
additional
"membership
units"
in
Clearette.
Lombardo
also
convinced
Investor
A
to
invest
an
additional
$100,000
in
Clearette
itself,
in
addition
to
the
transferred
funds.
In
total,
Lombardo
represented
to
Investor
A that his
various
investments
were
now
worth
over
$600,000
dollars.
This
was
false
since
there
was
no
basis
for
these
lofty
valuations
of
either
the
L VG
Funds
or
Clearette.
Furthermore,
only
approximately
$50,000
was
transferred
to
Clearette
the
two
months
following
Investor
A's
agreement
to
transfer
funds.
25.
In
or
around
2015,
Lombardo
changed
TLVG's
strategy
yet
again.
He
shuttered
the
Clearette
electronic
cigarette
business
and
transferred
the
funds
held
by
Clearette
into
another
business,
LJ
Leonard
and Sons.
This
business
made
"E-Juice",
i.e.,
liquid
used
in
vaping
products.
This
business
was
a distinct
legal
entity
from
Clearette
and
the
transfer
of
funds
from
Clearette
into
this
new
business
was
never
disclosed
to
investors.
II.
TLVG's
and
Lombardo's
Misuse
of
Investor
Funds
and
Misrepresentations
to
Investors
and
Potential
Investors.
26.
Lombardo,
as
aided
by
Hudlin,
routinely
misused
investor
funds
for
purposes
other
than
what the
investors
were
promised.
For
example,
over
$1
million
in
investor
funds
were
transferred
to
Clearette
without
permission
and
in
some
cases
despite
express
instructions
to
the
contrary.
27.
Investor
funds
were
also
used
to
pay
investor
refunds
or
returns.
These
Ponzi-like
payments
were
clearly
inconsistent
with
the
disclosures
made
in
the
various
fund
offering
8

documents about how the money raised was to be used. As an example, the PPM for L VG
Holding D&L 1200 LLC dated May
1, 2012 noted that of the investment proceeds collected by
LVG Holding D&L 1200 LLC, 70% would be used for real estate acquisition, 20% would be
used to purchase securities, and 10% would
be used for other unnamed private equity
investments. Nowhere did it say invested money would be directly used to pay back previous
investors or make interest payments to previous investors.
28. For example, on May
8, 2014, Investor B invested $300,000 in one of the LVG
Fund accounts that had an opening balance of$134.50. The next day, Lombardo and Hudlin
transferred $298,000
of that money to a Clearette account, despite express instructions from
Investor B that his money was not to be used to fund Clearette. Those funds were ultimately
funneled through at  least two other accounts controlled
by Lombardo and, besides being used to
fund the Clearette cigarette business, money was also used to pay Lombardo's personal
expenses, to make over $10,000 dollars
of dividend payments back to the investor himself, and
to refund another investor over $26,000 for his investment.
29. In total, only $1.5 million
of the roughly $6.5 million (i.e., approximately only
23%) that TL VG and the LVG Funds raised was invested in real estate despite the fact that the
PPMs provided to investors stated that either 40% or 70%
of investor funds raised would be
invested in real estate. Ultimately, that real estate did not remain under Lombardo's control and
appears to have been sold by Lombardo in order to finance his electronic cigarette ventures. The
proceeds from any real estate sales and the remaining investor funds (that were not used
by
Lombardo for personal expenses) were used to fund other businesses, in contravention of
representations made to investors.
30. Investors were also given PPMs, or in the case
of Clearette operational
9

agreements, for the LLCs or companies in which they invested. These documents all contain
materially misleading and false statements. Most significantly, every PPM description
of how
funds were to be used was inaccurate in material respects. For one, neither the PPMs for the
L
VG Funds, of which there are numerous versions, nor the Clearette operational agreements
makes reference to
LJ Leonard and Sons, the entity which was the ultimate destination for some
of the invested funds. Instead, like in a LVG Holding 1255 LLC PPM dated May 1, 2012,
investors were told that funds would be used for "intelligent Real Estate investment."
31. Additionally, the PPMs for LVG Holding Company D&L 1200 LLC, dated June
20, 2012, and LVG Holding 1255 LLC, dated May
1, 2012, state that 70% of the proceeds were
to be used for real estate and another 20% were to
be used for securities purchases. In total,
roughly $4.7 million was invested into these two entities and roughly $1.5 million was invested
in real estate, or 32%. While some funds were initially used for securities, those securities were
ultimately sold and neither
of these entities holds any securities presently.
32. Further, the PPM for LVG Capital Growth, Inc., dated April 23, 2012, claimed
that at least 40%
of the over $570,000 raised for that entity would be used for real estate. In fact,
no properties have been purchased with those funds.
33. Notably, the PPMs for the same entity vary materially at different periods
of time.
For example, a November 2012 PPM for LVG Holding Company D&L 1200 LLC stated that
management's compensation for the first year would not exceed $240,000. The May 2013
version, however, stated that compensation "may not exceed $425,000" for management without
reference to any time period.
34. The PPMS for the L VG Funds state that TL VG salespersons could receive a
commission
of 10% per shares sold of each investment. This commission was not accurately
10

recorded on TLVG's books or paid to Lombardo's sales staff on a regular basis. Instead, any
money that arguably could have been a commission, plus at  least $500,000 more, was
misappropriated
by Lombardo.
35. The PPMs for the LVG Funds and the operational agreement for Clearette often
reference TL VG employees and contractors with non-management jobs as being managers
of the
company. For example, some
of the PPMs for L VG Holding Company D&L 1200 LLC
reference low-level employees who drove trucks or cold-called potential investors as property
managers
or real estate experts. Additionally, the Clearette operational agreement listed low
level employees who built e-cigarette displays as senior officers
of the company. These were all
materially false representations.
36. TLVG sales staff, including Lombardo or those acting at Lombardo's direction or
reading from scripts or talking points provided by Lombardo, also repeatedly made oral, material
misrepresentations, or omitted material facts, to TLVG investors and prospective investors while
selling interests in the LVG Funds
or Clearette.
37. For example, acting at Lombardo's direction, a TLVG salesperson contacted
Investor B, an 88 year old retiree, on
or around October 2012. The salesperson told Investor B
that he was a "fund manager," although he was merely a salesperson, and that he was offering
interests in a REIT that would purchase, renovate, and sell residential properties. In reality, the
salesperson knew that the L VG Funds were not REITs and that Lombardo and others were
already beginning operations on the separate Clearette business at that time. On October 26,
2012, Investor B invested $2,500 in the LVG Funds. By February 2013, the TLVG salesperson
called Investor B and told him his initial $2,500 investment had appreciated by $1,250 or, in
other words,
by 50%. This statement was untrue since no L VG Fund ever appreciated and the
11

salesperson
had
no
basis
to
believe
that
statement
to
be
true
and
had
never
even
seen
any
of
the
financials
for
the
L VG
Funds.
38.
Due
to
the
misrepresentations
made
by
the
TLVG
salesperson
to
Investor
B about
his
investments
performance,
Investor
B was
induced
to
invest
a total
of
over
$1
million
in
the
LVG
Funds
by
May
2014.
Additionally,
Investor
B gave
Lombardo
discretion
over
another
$300,000
in
an
IRA
accountto
invest
in
stocks.
That
$300,000
was
instead
invested
in
the
LVG
Funds
and
Clearette.
39.
Beginning
shortly
after
Investor
B invested
with
the
LVG Funds,
the
TLVG
salesperson
and
Lombardo
himself
repeatedly
asked
Investor
B
if
he
was
interested
in
transferring
his
funds
to
Clearette.
Investor
B refused
and
expressly
stated
he
did
not
want
to
invest
in
any
business
related
to
the
cigarette
industry.
Despite
this
refusal,
as
noted
above,
Investor
B's
money
was
used,
sometimes
immediately,
to
fund
the
Clearette
business.
40.
Two
different
TLVG
salespersons,
acting
at
Lombardo's
direction,
first
contacted
Investor
C in
late
2012.
They
told
Investor
C that
a partner
at his
company
had
previously
invested
with
TL
VG
to
persuade Investor
C that
TL
VG
was
a reputable
enterprise.
This
statement
was
false.
They
further
told
Investor
C that
his
money
would
be
used
to
invest
in
distressed
real
estate
and
that
the
property
that
the
LVG
Funds
had
purchased
to
date
had
already
appreciated
by
30%.
There
is no
evidence
that
any
property
purchased
by
an
L VG
Fund
ever
appreciated
in
value.
Investor
C was
also
told
that
the
investment
was
guaranteed
to
return
30%
after
just
three
years.
Finally,
Investor
C was
told
that
Lombardo
had
over
20
years
of
experience
in
real
estate
investing.
Lombardo
did
not,
in
fact,
have
a track
record
as
a real-estate
investor.
Due
to
these
misrepresentations,
Investor
C ultimately
invested
$83,000
with
the
LVG
Funds,
all
of
which
appears
to
have
been
spent
by
Lombardo
or
used
to
fund
Clearette,
an
12

investment
explicitly
offered
to
Investor
C which
Investor
C rejected.
41.
Lombardo,
or
individuals
acting
on
his
instructions,
made
similar
statements
to
several
other
investors
.  Additionally,
no
TL
VG
representatives
informed investors:
(1)
that
investor
funds
intended
for
real
estate
investment
would
be
used
for
other
purposes
, like
Clearette,
without
the
investors'
consent;
(2)
that
investor
funds
intended
for
the
LVG
Funds
or
Clearette
would
be
used
to
fund
LJ
Leonard
and
Sons;
and
(3)
that
investor
funds
intended
for
real
estate
investment
would
be
used
to
pay
Lombardo's
personal
expenses.
III.
TLVG
and
Lombardo's
Scheme
to
Defraud
Investors.
A.
Lombardo's
Use
of
Investor
Funds
for
Personal
Expenses.
42.
Lombardo
or
his
wife
used
at least
$1.3
million
of
the
money
raised
for
TL
VG,
th e LVG
Funds,
or
Clearette
for
their
personal
expenses.
Hudlin
was
aware
that
this
money
was
being
misappropriated
and
he
facilitated
its
transfer.
These
expenses,
which
were
often
paid
for
directly
out
of
various
business
accounts,
were
not
authorized
by
investors
nor
approved
in
the
various
PPMs
provided
to
investors.
In
fact,
PPMs
provided
to
investors
typically
did
not
mention
Lombardo
by
name
nor
refer
to
him
receiving
any compensation
whatsoever.
These
expenses included:
a.
$
281,000
in
rent
for
Lombardo
' s personal
residence;
b.
$
75
,000
in
BMW
payments
and
$70,000
in
Mercedes
Benz
payments;
c.
$50,000
in
restaurant
payments
and
$35,000
in
supermarket
payments;
d.
$37,000
in
payments
at department
stores
such
as
Bloomingdales;
e.
$30,000
in
payments
at other
clothing
stores;
f.
$30,000
in
payments
for
hotels
and
resorts;
g.
$29,000
in
payments
for
medical
care;
13

h.
$20,000
in
payments
to
a pharmacy
and
health
stores;
1.
$19,000
in
student
loan
payments;
J.
$19,000
in
payments
to
a marina
and
boat
supply
store;
k.
$10,000
in
children's
toys
and
clothes;
I.
$5,500
in
tanning
and
beauty
salons;
m.
$4,000
in
jewelry;
and
n.
$2,100
in
pet
services.
43.
Lombardo
' s wife
also
received
roughly
$114,000
in
alleged
compensation
from
TLVG
and
Clearette
despite
never
working
at
any
TLVG
entity.
Furthermore,
these
payments
were
not
paid
out
as
salary;
rather,
they
were
paid
out
of
business
accounts
directly
and
there
was
no
tax
withholding
on
these
payments.
B.
Commingling
of
Funds
Among
the
L VG
Funds,
Clearette,
LJ
Leonard
and
Sons,
and
Lombardo
Family
Personal
Accounts.
44.
Lombardo
or
Hudlin
disguised
their
misconduct
by
continually
transferring
investor
funds
in
and
out
of
multiple
bank
accounts
controlled
by
Lombardo
and
associated
with
several different
entities.
45.
There
was
no
legitimate
business
purpose
for
this
commingling
and
transferring;
instead,
money
was
transferred
on
demand
to
pay
various
undisclosed
personal
or
business
expenses,
and
to
pay
investors
returns.
46.
This commingling
occurred
over
thousands
of
transactions
beginning
as
early
as
the
Summer
of2011
and
continuing
through
at
least
2015
and
included
all
of
the
accounts
for
the
LVG
Funds,
Clearette,
and
LJ
Leonard
and
Sons
as
well
as
Lombardo's
wife's
personal
accounts.
14

C. Concealment of the Scheme.
4 7. At numerous points, TL VG, Lombardo, and Hudlin took actions to conceal their
fraudulent scheme from investors. In addition to using investor funds to pay
off other investors,
Lombardo repeatedly lied to investors about the value of their investments and the timeline for
when they would receive a return on their investment.
48. For example, Investor D emailed Lombardo on July
9, 2015 concerning the
redemption
of units as Investor D needed the money to help finance an operation for his wife.
Instead ofredeeming Investor
D's money, Lombardo said he had been unable to meet with the
managing members and that redemption "is not typical premature
of winding down the
company's real estate assets
.... "  At this time, the LVG Funds were already no longer in the
real estate business; instead, the focus
of Lombardo's efforts was his e-cigarette businesses.
Additionally, only Lombardo, and no other members, managed the L VG Funds. Consequently,
the statements in this email to Investor D were untrue. After several months
of emailing,
Lombardo did finally redeem Investor
D's original investment, without appreciation, in a non­
pro-rata fashion. Other investors, who similarly inquired about the status
of their investments,
asked for redemptions, or, in the case
of Investor B, signed an agreement to be repaid their funds,
were never made whole.
49. Lombardo and Hudlin also transferred the money among numerous accounts in an
effort to conceal Lombardo's theft
of funds and to make it more difficult for creditors and others
to attach assets. Lombardo and Hudlin made thousands
of transfers that had no economic
purpose. At times, some
of these transfers, as well as personal payments to Lombardo and his
wife, were documented as "loans" on
TLVG's books, but they were not in fact loans and no
repayments were made.
15

CLAIMS FOR RELIEF
CLAIM I
Violations
of Section l0(b) of the Exchange Act and Rule lOb-5 thereunder
(Against TLVG and Lombardo)
50. The Commission realleges and incorporates
by reference each and every
allegation contained in paragraphs
1 through 49, as if fully set forth herein.
51.
By engaging in the conduct described above, TLVG and Lombardo have, directly
or indirectly and singly or in concert, acting intentionally, knowingly or recklessly, in connection
with the purchase
or sale of securities, by use of the means or instrumentalities of interstate
commerce
or the mail: (a) employed devices, schemes, or artifices to defraud; (b) made untrue
statements
of material fact or omitted to state material fact(s) necessary to make statements made
not misleading in light
of the circumstances under which they were made; and/or (c) engaged in
transactions, acts, practices,
or courses of business which operated or would have operated as a
fraud
or deceit upon purchasers of securities and upon other persons.
52.
By reason of the foregoing, TL VG and Lombardo, directly or indirectly, have
violated, and unless enjoined will again violate, Section l0(b)
of the Exchange Act [15 U.S.C. §
78j(b)] and Rule 10b-5(b) [17 C.F.R.
§ 240.10b-5(b)] thereunder.
CLAIM II
Violations
of Section 17(a) of the Securities Act
(Against TL
VG and Lombardo)
53. The Commission realleges and incorporates by reference each and every
allegation contained in paragraphs 1 through 52, as
if fully set forth herein.
54. TL VG and Lombardo, with sci enter,
by use of the means and instrumentalities of
interstate commerce or of the mails, in the offer or sale of securities:
a. Employed devices, schemes, or artifices to defraud;
16

b.
Obtained
money
or
property
by
means
of
any
untrue
statement
of
a
material
fact
or
any
omissions
to
state
a material
fact
necessary
in
order
to
make
the statements
made,
in
light
of
the
circumstances
under
which
they
were
made,
not
misleading;
or;
c.
Engaged
in
transactions,
practices,
or
courses
of
business
which
operated
or
would
have
operated
as
a fraud
or
deceit
upon
the
purchase.
55.
By
reason
of
the
foregoing,
TLVG
and
Lombardo,
directly
or
indirectly,
have
violated,
and
unless
enjoined
will
again
violate,
Section
17(a)
of
the
Securities Act
[15
U.S.C.
§
77q(a)].
CLAIM
III
Aiding
and
Abetting
Violations
of
Section
lO(b)
of
the
Exchange
Act
and
Rule
lOb-5
thereunder
(Against
Hudlin)
56.
The
Commission
realleges
and
incorporates
by
reference
each
and
every
allegation
contained
in
paragraphs
1 through
55,
as
if
fully
set
forth
herein.
57.
Hudlin,
directly
or
indirectly,
knowingly
or
recklessly
provided
substantial
assistance
to
TL
VG
and
Lombardo
who
directly
or
indirectly
and
singly
or
in
concert,
acting
intentionally,
knowingly
or
recklessly,
in
connection
with
the
purchase
or
sale
of
securities,
by
use
of
the
means
or
instrumentalities
of
interstate
commerce
or
the
mail:
(
a)
employed
devices,
schemes,
or
artifices
to
defraud;
(b)
made
untrue
statements
of
material
fact
or
omitted
to
state
material
fact(s)
necessary
to
make
statements
made
not
misleading
in
light
of
the
circumstances
under
which
they
were
made;
and/or
(c)
engaged
in
transactions,
acts,
practices,
or
courses
of
business
which
operated
or
would
have
operated
as
a fraud
or
deceit
upon
purchasers
of
securities
and
upon
other
persons.
17

58.
By
reason
of
the
foregoing,
Hudlin
aided
and
abetted,
and
unless
enjoined,
will
again
aid
and
abet
violations
of
Section
lO(b)
of
the
Exchange
Act
[15
U.S.C.
§ 78j(b)]
and
Rule
10b-5(b)
[17
C.F.R.
§
240.lOb-5]
thereunder.
CLAIM
IV
Aiding
and
Abetting
Violations
of
Section
17(a)
of
the
Securities
Act
(Against
Hudlin)
59.
The
Commission
realleges
and
incorporates
by
reference
each
and
every
allegation
contained
in
paragraphs
1 through
58,
as
if
fully
set
forth
herein.
60.
Hudlin,
directly
or
indirectly,
knowingly
or
recklessly
provided
substantial
assistance
to
TL
VG
and
Lombardo,
who
by
use
of
the
means
and
instrumentalities
of
interstate
commerce
or
of
the
mails,
in
the
offer
or
sale
of
securities:
a.
Employed
devices,
schemes,
or
artifices
to
defraud;
b.
Obtained
money
or
property
by
means
of
any
untrue
statement
of
a
material
fact
or
any
omissions
to
state
a material
fact
necessary
in
order
to
make
the
statements
made,
in
light
of
the
circumstances
under
which
they
were
made,
not
misleading;
or;
c.
Engaged
in
transactions,
practices,
or
courses
of
business
which
operated
or
would
have
operated
as
a fraud
or
deceit
upon
the
purchase.
61.
By
reason
of
the
foregoing,
Hudlin
aided
and
abetted,
and
unless
enjoined,
will
again
aid
and
abet
violations
of
Section
17(a)
of
the
Securities Act
[15
U.S.C.
§ 77q(a)].
18

RELIEF
SOUGHT
WHEREFORE,
the Commission
respectfully
requests
that
this
Court
enter
a Final
Judgment:
I.
Permanently
restraining and
enjoining
Defendants,
their
officers,
agents,
servants,
employees,
and
attorneys,
and
those
persons
in
active concert
or
participation
with
them
who
receive
actual
notice
of
the
injunction
by
personal
service
or
otherwise,
and
each
of
them,
from
violating
Section
l0(b)
of
the
Exchange Act
[
15
U.S.C
. § 78j(b)]
and
Rules
l0b-5
[17
C.F.R.
§§
240.1
0b-5]
thereunder
.
II.
Permanently
restraining
and
enjoining
Defendants,
their
officers,
agents,
servants,
employees,
and
attorneys,
and
those
persons
in
active
concert
or
participation
with
them
who
receive
actual
notice
of
the
injunction
by
personal
service
or
otherwise,
and
each
of
them,
from
violating
17(a)
of
the
Securities
Act
(15
U.S.C
§§
77q(a)].
III.
Ordering
TL
VG
and
Lombardo
to
pay
disgorgement
along
with
prejudgment
interest
thereon.
IV.
Ordering
Hudlin
to
pay
civil
monetary
penalties
pursuant
to
Section
20(
d)
of
the
Securities
Act
[15
U.S.C.
§ 77t(d)]
and
Section
21(d)(3)
of
the
Exchange
Act
[15
U.S.C.
§
78u(d)(3)].
19

V.
Granting such other and further relief as this Court may deem just and proper.
Dated:
New York, New York
September 29, 2017
Of Counsel:
Lara S. Mehraban
Sheldon
L. Pollock
Prashant Y erramalli
*
BY:~---
Andrew M. Calamari
SECURITIES
AND EXCHANGE
COMMISSION
Regional Director
Paul G. Gizzi, Senior Trial Counsel
New York Regional Office
200 Vesey Street, Suite 400
New York, NY 10281-1022
(212) 336-0077 (Gizzi)
Email: [email protected]
* Not admitted to the District Court for the Eastern District of New York
20

ANDREW M. CALAMARI 
REGIONAL DIRECTOR 
Attorney for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
New York Regional Office 
200 Vesey Street, Suite 400 
New York, NY 10281-1022 
Tel: (212) 336- 0077 (Paul G. Gizzi, Senior Trial Counsel) 
Email: [email protected] 

UNITED STATES DISTRICT COURT 
EASTERN DISTRICT OF NEW YORK 

SECURITIES AND EXCHANGE COMMISSION, 

Plaintiff, 

-against-

THE LEONARD VINCENT GROUP, 
LEONARD VINCENT LOMBARDO, and 
BRIAN A. HUDLIN, 

Defendants. 

ECFCASE 

COMPLAINT 

Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint against 

defendants The Leonard Vincent Group ("TL VG"), Leonard Vincent Lombardo ("Lombardo") 

and Brian A. Hudlin ("Hudlin") ( collectively "Defendants"), alleges as follows: 

SUMMARY 

1. This case concerns an offering fraud against investors perpetrated by a Long 

Island-based recidivist, Leonard Vincent Lombardo ("Lombardo"). 

2. Lombardo, along with his alter ego, The Leonard Vincent Group ("TL VG"), 

managed or controlled numerous affiliated entities including: L VG Holding Company D&L 

1200 LLC; L VG Holding 1255 LLC; and LVG Capital Growth Portfolio Inc. ( collectively, "the 

Case 2:17-cv-05723 Document 1 Filed 09/29/17 Page 1 of 20 PageID #: 1 



L VG Funds"); and an e-cigarette business called Clearette Cigarette Company ("Clearette"). 

3. Lombardo and those who worked under his direction offered and sold interests in 

TL VG and the L VG Funds to over 100 investors between 2011 and 2015, representing to them 

that their money would be used to make lucrative investments in distressed real estate and 

promising them unrealistically high rates of return. However, Lombardo invested only a small 

fraction of the investor money in real estate and used the bulk of the remaining investor money 

to fund Clearette, to pay prior investors, and to pay personal expenses, like his BMW and 

Mercedes Benz car payments, the marina fees on his boat, and visits to tanning salons. 

Thereafter, Lombardo used the proceeds of the L VG Funds and Clearette to start yet another 

company selling E-Juice (the solution used in electronic cigarettes), ultimately defrauding not 

only the initial investors in TL VG and the L VG Funds, but also investors who agreed to roll their 

investments into Clearette. 

4. Lombardo was assisted in this scheme by Brian Hudlin, TLVG's CFO, who 

managed all the monies for the various entities, had signatory authority over the relevant bank 

accounts, and executed fund transfers between TL VG, the L VG Funds, Clearette, LJ Leonard 

and Sons and Lombardo's personal accounts without investor consent. 

5. Ultimately, Lombardo raised over $7.1 million for TLVG, the LVG funds, and 

Clearette. Of that amount, no more than $1.5 million was invested in real estate. The remainder 

was extensively commingled and ended up funding other businesses, perpetuating the fraud by, 

among other things, paying individuals to solicit investments, or being used for Lombardo' s 

personal expenses. Due to this fraudulent scheme, almost every investor has lost his entire 

investment. 

2 

Case 2:17-cv-05723 Document 1 Filed 09/29/17 Page 2 of 20 PageID #: 2 



NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 

6. The Commission brings this action pursuant to the authority conferred upon it by 

Section 20(b) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77t(b)] and Section 

2l(d) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78u(d)]. 

7. The Commission seeks a final judgment permanently restraining and enjoining 

Defendants from violating Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]; and Section 

l0(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule l0b-5 [17 C.F.R. §§ 240.lOb-5] 

thereunder; ordering TL VG and Lombardo to disgorge their ill-gotten gains together with 

prejudgment interest thereon; and ordering Hudlin to pay a civil monetary penalty pursuant to 

Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 2l(d)(3) of the Exchange 

Act [15 U.S.C. § 78u(d)(3)]. 

JURISDICTION AND VENUE 

8. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331, Sections 

20(b), 20(d) and 22(a) of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d) and 77v(a)], and 

Sections 21(d), (e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa]. 

9. Venue lies in this district pursuant to 28 U.S.C. § 1391(b)(2), Section 22(a) of the 

Securities Act [15 U.S.C. § 77v(a)], and Section 27 of the Exchange Act [15 U.S.C. § 78aa]. 

Certain of the acts, practices, transactions, and courses of business alleged in this Complaint 

occurred within the Eastern District of New York and were effected, directly or indirectly, by 

making the use of means or instrumentalities of transportation or communication in interstate 

commerce, or the mails. For example, TLVG was headquartered in, and Lombardo and Hudlin 

resided in, the Eastern District of New York during the relevant time period of conduct described 

herein. 

3 

Case 2:17-cv-05723 Document 1 Filed 09/29/17 Page 3 of 20 PageID #: 3 



DEFENDANTS 

10. TL VG is a private Delaware corporation based in Ronkonkoma, NY that was 

formed no later than July 2011. TLVG owns and operates numerous limited liability companies 

and other entities that purportedly invest in distressed real estate, such as the LVG Funds, 

provide unspecified consulting services, and operate companies that sell e-cigarette, or "vaping," 

products. Additionally, TLVG raised roughly $1.1 million dollars directly from investors which 

it later placed into its various investment fund accounts. Lombardo's wife is identified as the 

owner or general partner of TL VG in various documents, and Hudlin is identified as its CEO. 

However, Lombardo was in fact controlling TLVG, and Hudlin was in charge of the company's 

finances. 

11. Lombardo, 42, created and controlled TL VG, and was a signatory of several of 

its bank and securities accounts. In the 1990's, Lombardo held Series 7 and 63 brokerage 

licenses and was associated with at least four registered broker-dealers, including Stratton 

Oakmont Inc. and William Scott & Co., LLC. On June 5, 2001, the National Associate of 

Securities Dealers ("NASD") found that Lombardo made material misrepresentations to his 

customers about the price and performance of various risky stocks while employed at a broker­

dealer and engaged in unauthorized transactions in his customers' accounts, ultimately causing 

tens of thousands of dollars in losses to his customers. NASD subsequently barred him from 

associating with any NASD member. Presently, Lombardo holds himself out as a consultant for 

LJ Leonard & Sons, which purports to be a consulting service for retailers and marketers, but it 

has never earned any revenues from consulting services and ultimately became a manufacturer of 

vaping products. He also purports to run a smoking cessation charity and a leukemia charity. 

The United States Attorney's Office for the Eastern District of New York filed an Information in 

4 

Case 2:17-cv-05723 Document 1 Filed 09/29/17 Page 4 of 20 PageID #: 4 



United States v. Leonard Vincent Lombardo, Crim No. 17 CR 318 (JA) (E.D.N.Y) (the 

"Criminal Proceeding") and Lombardo pied guilty to one count of wire fraud in violation of 18 

U.S.C. § 1343 on June 22, 2017. 

12. Hudlin, 63, is the de facto chief financial officer and controller ofTLVG. He is 

identified in press releases as the CEO of TLVG but did not act in that capacity; rather, he acted 

as CFO and controller, and had signatory access to all bank accounts. Hudlin executed 

numerous transactions between many TL VG related accounts that did not have any economic 

purpose and assisted in the use of investor funds to pay Lombardo's personal expenses. 

OTHER RELEVANT ENTITIES 

13. LVG Holding Company D&L 1200 LLC is a Delaware limited liability 

corporation that offered "units" in the company to investors. The offering documents and 

representations made by Lombardo and other TL VG officials stated that investor money would 

be used to buy distressed real estate. Ultimately, much of the over $3.1 million raised by this 

entity was either misappropriated or used to fund other businesses. 

14. L VG Holding 1255 LLC is a Delaware limited liability corporation that offered 

"units" in the company to investors. The offering documents and representations made by 

Lombardo and other TL VG officials stated that investor money would be used to buy distressed 

real estate. Ultimately, much of the over $1.6 million raised by this entity was either 

misappropriated or used to fund other businesses. 

15. LVG Capital Growth Portfolio Inc. is a Delaware limited liability corporation 

that offered shares in the company to investors. The offering documents and representations 

made by Lombardo and other TL VG officials stated that investor money would be used to buy 

distressed real estate. Ultimately, much of the over $576,000 raised by this entity was either 

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misappropriated or used to fund other businesses. 

16. Clearette is a Delaware limited liability company started by Lombardo and 

TL VG to distribute e-cigarette products. Clearette offered "membership units" to investors. It 

raised approximately $686,000 from investors directly and received at least $2 million in funds 

from investors in other L VG Funds. 

17. LJ Leonard and Sons is a Delaware limited liability corporation. It began as a 

purported retail consultancy, but it ultimately became a company that manufactures and sells e­

juice for vaping products. Investor funds that were not spent by Lombardo on personal expenses 

or other failed ventures such as Clearette were ultimately used to start this operation. 

FACTS 

I. Lombardo Used TL VG to Perpetrate Several Fraudulent Offerings. 

18. Beginning around July 2011 and continuing through at least August 2015, 

Lombardo, working through TLVG, raised money from investors directly or via the LVG Funds. 

In exchange for their investments, investors received "units" or shares in one of the L VG Funds. 

Investors were led to believe that these investments were to be pooled with money from other 

investors and used by TLVG to make investments in distressed real estate pursuant to the 

strategies laid out in the LVG Funds' Private Placement Memoranda (PPMs). Investors expected 

to share in the profits of the LVG Funds, and later Clearette, and expected TLVG and Lombardo 

to manage the funds responsibly. 

19. The LVG Funds were purportedly designed to buy distressed real estate, improve 

the properties, and then rent or sell the properties for profit. Neither Lombardo nor TLVG were 

registered in any capacity with the Commission; nor were the L VG Funds. 

20. TL VG, through a salesforce of contractors, cold-called potential investors whose 

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names were predominantly gathered from purchased "lead sheets." Several salespeople hired by 

TLVG were previously associated with registered broker-dealers on Long Island. These former 

registered representatives also called their previous customers. Utilizing high-pressure sales 

tactics, the salespeople encouraged predominantly elderly individuals to provide the LVG Funds 

with money purportedly to purchase distressed properties. In total, TL VG and the L VG Funds 

raised over $6.5 million for these purported real estate investments. In fact, at most, only $1.5 

million of these funds actually went toward purchasing or renovating properties. 

21. In or around 2014, Lombardo changed TLVG's strategy. Instead of focusing on 

real estate investments, Lombardo or individuals acting on his instructions began soliciting both 

existing investors and new investors for Clearette. At Lombardo's instruction, moneys were also 

transferred from the LVG Funds to Clearette. 

22. The majority of fund transfers into Clearette from the LVG Funds, many if not all 

of which were executed by Hudlin, were not authorized by investors. In some cases, however, 

Lombardo was able to convince existing investors to invest directly in Clearette or convince 

investors to exchange their LVG Fund investments for an investment in Clearette. He did this, in 

part, by telling these investors that the returns to date had been very strong and that investors 

would make even more money with the Clearette investment. These statements regarding the 

L VG Funds' investment performance were false. 

23. Unbeknownst to those investors, at the time Lombardo sought to convince them 

to exchange their LVG Fund investments for Clearette, Lombardo, with Hudlin's assistance, had 

in many cases already transferred their investments to Clearette. 

24. For example, Investor A invested a total of approximately $300,000 in the LVG 

Funds beginning on October 5, 2012 and ending on April 26, 2013. Sometime in late 2014 or 

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early 2015, Lombardo contacted Investor A directly and offered him an opportunity to convert 

his investment in the L VG Funds into an investment in Clearette. Lombardo told Investor A that 

his initial $300,000 investment in the L VG Funds was now worth $423,000. This was false as 

the L VG Funds never appreciated in value. Further, Lombardo told Investor A that by 

converting his L VG Fund investment into Clearette, he would receive another 20% return by 

receiving additional "membership units" in Clearette. Lombardo also convinced Investor A to 

invest an additional $100,000 in Clearette itself, in addition to the transferred funds. In total, 

Lombardo represented to Investor A that his various investments were now worth over $600,000 

dollars. This was false since there was no basis for these lofty valuations of either the L VG 

Funds or Clearette. Furthermore, only approximately $50,000 was transferred to Clearette the 

two months following Investor A's agreement to transfer funds. 

25. In or around 2015, Lombardo changed TLVG's strategy yet again. He shuttered 

the Clearette electronic cigarette business and transferred the funds held by Clearette into another 

business, LJ Leonard and Sons. This business made "E-Juice", i.e., liquid used in vaping 

products. This business was a distinct legal entity from Clearette and the transfer of funds from 

Clearette into this new business was never disclosed to investors. 

II. TLVG's and Lombardo's Misuse of Investor Funds and Misrepresentations to 
Investors and Potential Investors. 

26. Lombardo, as aided by Hudlin, routinely misused investor funds for purposes 

other than what the investors were promised. For example, over $1 million in investor funds 

were transferred to Clearette without permission and in some cases despite express instructions 

to the contrary. 

27. Investor funds were also used to pay investor refunds or returns. These Ponzi-like 

payments were clearly inconsistent with the disclosures made in the various fund offering 

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documents about how the money raised was to be used. As an example, the PPM for L VG 

Holding D&L 1200 LLC dated May 1, 2012 noted that of the investment proceeds collected by 

LVG Holding D&L 1200 LLC, 70% would be used for real estate acquisition, 20% would be 

used to purchase securities, and 10% would be used for other unnamed private equity 

investments. Nowhere did it say invested money would be directly used to pay back previous 

investors or make interest payments to previous investors. 

28. For example, on May 8, 2014, Investor B invested $300,000 in one of the LVG 

Fund accounts that had an opening balance of$134.50. The next day, Lombardo and Hudlin 

transferred $298,000 of that money to a Clearette account, despite express instructions from 

Investor B that his money was not to be used to fund Clearette. Those funds were ultimately 

funneled through at least two other accounts controlled by Lombardo and, besides being used to 

fund the Clearette cigarette business, money was also used to pay Lombardo's personal 

expenses, to make over $10,000 dollars of dividend payments back to the investor himself, and 

to refund another investor over $26,000 for his investment. 

29. In total, only $1.5 million of the roughly $6.5 million (i.e., approximately only 

23%) that TL VG and the LVG Funds raised was invested in real estate despite the fact that the 

PPMs provided to investors stated that either 40% or 70% of investor funds raised would be 

invested in real estate. Ultimately, that real estate did not remain under Lombardo's control and 

appears to have been sold by Lombardo in order to finance his electronic cigarette ventures. The 

proceeds from any real estate sales and the remaining investor funds (that were not used by 

Lombardo for personal expenses) were used to fund other businesses, in contravention of 

representations made to investors. 

30. Investors were also given PPMs, or in the case of Clearette operational 

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agreements, for the LLCs or companies in which they invested. These documents all contain 

materially misleading and false statements. Most significantly, every PPM description of how 

funds were to be used was inaccurate in material respects. For one, neither the PPMs for the 

L VG Funds, of which there are numerous versions, nor the Clearette operational agreements 

makes reference to LJ Leonard and Sons, the entity which was the ultimate destination for some 

of the invested funds. Instead, like in a LVG Holding 1255 LLC PPM dated May 1, 2012, 

investors were told that funds would be used for "intelligent Real Estate investment." 

31. Additionally, the PPMs for LVG Holding Company D&L 1200 LLC, dated June 

20, 2012, and LVG Holding 1255 LLC, dated May 1, 2012, state that 70% of the proceeds were 

to be used for real estate and another 20% were to be used for securities purchases. In total, 

roughly $4.7 million was invested into these two entities and roughly $1.5 million was invested 

in real estate, or 32%. While some funds were initially used for securities, those securities were 

ultimately sold and neither of these entities holds any securities presently. 

32. Further, the PPM for LVG Capital Growth, Inc., dated April 23, 2012, claimed 

that at least 40% of the over $570,000 raised for that entity would be used for real estate. In fact, 

no properties have been purchased with those funds. 

33. Notably, the PPMs for the same entity vary materially at different periods of time. 

For example, a November 2012 PPM for LVG Holding Company D&L 1200 LLC stated that 

management's compensation for the first year would not exceed $240,000. The May 2013 

version, however, stated that compensation "may not exceed $425,000" for management without 

reference to any time period. 

34. The PPMS for the L VG Funds state that TL VG salespersons could receive a 

commission of 10% per shares sold of each investment. This commission was not accurately 

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recorded on TLVG's books or paid to Lombardo's sales staff on a regular basis. Instead, any 

money that arguably could have been a commission, plus at least $500,000 more, was 

misappropriated by Lombardo. 

35. The PPMs for the LVG Funds and the operational agreement for Clearette often 

reference TL VG employees and contractors with non-management jobs as being managers of the 

company. For example, some of the PPMs for L VG Holding Company D&L 1200 LLC 

reference low-level employees who drove trucks or cold-called potential investors as property 

managers or real estate experts. Additionally, the Clearette operational agreement listed low 

level employees who built e-cigarette displays as senior officers of the company. These were all 

materially false representations. 

36. TLVG sales staff, including Lombardo or those acting at Lombardo's direction or 

reading from scripts or talking points provided by Lombardo, also repeatedly made oral, material 

misrepresentations, or omitted material facts, to TLVG investors and prospective investors while 

selling interests in the LVG Funds or Clearette. 

37. For example, acting at Lombardo's direction, a TLVG salesperson contacted 

Investor B, an 88 year old retiree, on or around October 2012. The salesperson told Investor B 

that he was a "fund manager," although he was merely a salesperson, and that he was offering 

interests in a REIT that would purchase, renovate, and sell residential properties. In reality, the 

salesperson knew that the L VG Funds were not REITs and that Lombardo and others were 

already beginning operations on the separate Clearette business at that time. On October 26, 

2012, Investor B invested $2,500 in the LVG Funds. By February 2013, the TLVG salesperson 

called Investor B and told him his initial $2,500 investment had appreciated by $1,250 or, in 

other words, by 50%. This statement was untrue since no L VG Fund ever appreciated and the 

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salesperson had no basis to believe that statement to be true and had never even seen any of the 

financials for the L VG Funds. 

38. Due to the misrepresentations made by the TLVG salesperson to Investor B about 

his investments performance, Investor B was induced to invest a total of over $1 million in the 

LVG Funds by May 2014. Additionally, Investor B gave Lombardo discretion over another 

$300,000 in an IRA accountto invest in stocks. That $300,000 was instead invested in the LVG 

Funds and Clearette. 

39. Beginning shortly after Investor B invested with the LVG Funds, the TLVG 

salesperson and Lombardo himself repeatedly asked Investor B if he was interested in 

transferring his funds to Clearette. Investor B refused and expressly stated he did not want to 

invest in any business related to the cigarette industry. Despite this refusal, as noted above, 

Investor B's money was used, sometimes immediately, to fund the Clearette business. 

40. Two different TLVG salespersons, acting at Lombardo's direction, first contacted 

Investor C in late 2012. They told Investor C that a partner at his company had previously 

invested with TL VG to persuade Investor C that TL VG was a reputable enterprise. This 

statement was false. They further told Investor C that his money would be used to invest in 

distressed real estate and that the property that the LVG Funds had purchased to date had already 

appreciated by 30%. There is no evidence that any property purchased by an L VG Fund ever 

appreciated in value. Investor C was also told that the investment was guaranteed to return 30% 

after just three years. Finally, Investor C was told that Lombardo had over 20 years of 

experience in real estate investing. Lombardo did not, in fact, have a track record as a real-estate 

investor. Due to these misrepresentations, Investor C ultimately invested $83,000 with the LVG 

Funds, all of which appears to have been spent by Lombardo or used to fund Clearette, an 

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investment explicitly offered to Investor C which Investor C rejected. 

41. Lombardo, or individuals acting on his instructions, made similar statements to 

several other investors. Additionally, no TL VG representatives informed investors: (1) that 

investor funds intended for real estate investment would be used for other purposes, like 

Clearette, without the investors' consent; (2) that investor funds intended for the LVG Funds or 

Clearette would be used to fund LJ Leonard and Sons; and (3) that investor funds intended for 

real estate investment would be used to pay Lombardo's personal expenses. 

III. TLVG and Lombardo's Scheme to Defraud Investors. 

A. Lombardo's Use of Investor Funds for Personal Expenses. 

42. Lombardo or his wife used at least $1.3 million of the money raised for TL VG, 

the LVG Funds, or Clearette for their personal expenses. Hudlin was aware that this money was 

being misappropriated and he facilitated its transfer. These expenses, which were often paid for 

directly out of various business accounts, were not authorized by investors nor approved in the 

various PPMs provided to investors. In fact, PPMs provided to investors typically did not 

mention Lombardo by name nor refer to him receiving any compensation whatsoever. These 

expenses included: 

a. $281,000 in rent for Lombardo 's personal residence; 

b. $75,000 in BMW payments and $70,000 in Mercedes Benz payments; 

c. $50,000 in restaurant payments and $35,000 in supermarket payments; 

d. $37,000 in payments at department stores such as Bloomingdales; 

e. $30,000 in payments at other clothing stores; 

f. $30,000 in payments for hotels and resorts; 

g. $29,000 in payments for medical care; 

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h. $20,000 in payments to a pharmacy and health stores; 

1. $19,000 in student loan payments; 

J. $19,000 in payments to a marina and boat supply store; 

k. $10,000 in children's toys and clothes; 

I. $5,500 in tanning and beauty salons; 

m. $4,000 in jewelry; and 

n. $2,100 in pet services. 

43. Lombardo' s wife also received roughly $114,000 in alleged compensation from 

TLVG and Clearette despite never working at any TLVG entity. Furthermore, these payments 

were not paid out as salary; rather, they were paid out of business accounts directly and there was 

no tax withholding on these payments. 

B. Commingling of Funds Among the L VG Funds, Clearette, LJ Leonard and 
Sons, and Lombardo Family Personal Accounts. 

44. Lombardo or Hudlin disguised their misconduct by continually transferring 

investor funds in and out of multiple bank accounts controlled by Lombardo and associated with 

several different entities. 

45. There was no legitimate business purpose for this commingling and transferring; 

instead, money was transferred on demand to pay various undisclosed personal or business 

expenses, and to pay investors returns. 

46. This commingling occurred over thousands of transactions beginning as early as 

the Summer of2011 and continuing through at least 2015 and included all of the accounts for the 

LVG Funds, Clearette, and LJ Leonard and Sons as well as Lombardo's wife's personal 

accounts. 

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C. Concealment of the Scheme. 

4 7. At numerous points, TL VG, Lombardo, and Hudlin took actions to conceal their 

fraudulent scheme from investors. In addition to using investor funds to pay off other investors, 

Lombardo repeatedly lied to investors about the value of their investments and the timeline for 

when they would receive a return on their investment. 

48. For example, Investor D emailed Lombardo on July 9, 2015 concerning the 

redemption of units as Investor D needed the money to help finance an operation for his wife. 

Instead ofredeeming Investor D's money, Lombardo said he had been unable to meet with the 

managing members and that redemption "is not typical premature of winding down the 

company's real estate assets .... " At this time, the LVG Funds were already no longer in the 

real estate business; instead, the focus of Lombardo's efforts was his e-cigarette businesses. 

Additionally, only Lombardo, and no other members, managed the L VG Funds. Consequently, 

the statements in this email to Investor D were untrue. After several months of emailing, 

Lombardo did finally redeem Investor D's original investment, without appreciation, in a non­

pro-rata fashion. Other investors, who similarly inquired about the status of their investments, 

asked for redemptions, or, in the case of Investor B, signed an agreement to be repaid their funds, 

were never made whole. 

49. Lombardo and Hudlin also transferred the money among numerous accounts in an 

effort to conceal Lombardo's theft of funds and to make it more difficult for creditors and others 

to attach assets. Lombardo and Hudlin made thousands of transfers that had no economic 

purpose. At times, some of these transfers, as well as personal payments to Lombardo and his 

wife, were documented as "loans" on TLVG's books, but they were not in fact loans and no 

repayments were made. 

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CLAIMS FOR RELIEF 

CLAIM I 
Violations of Section l0(b) of the Exchange Act and Rule lOb-5 thereunder 

(Against TLVG and Lombardo) 

50. The Commission realleges and incorporates by reference each and every 

allegation contained in paragraphs 1 through 49, as if fully set forth herein. 

51. By engaging in the conduct described above, TLVG and Lombardo have, directly 

or indirectly and singly or in concert, acting intentionally, knowingly or recklessly, in connection 

with the purchase or sale of securities, by use of the means or instrumentalities of interstate 

commerce or the mail: (a) employed devices, schemes, or artifices to defraud; (b) made untrue 

statements of material fact or omitted to state material fact(s) necessary to make statements made 

not misleading in light of the circumstances under which they were made; and/or (c) engaged in 

transactions, acts, practices, or courses of business which operated or would have operated as a 

fraud or deceit upon purchasers of securities and upon other persons. 

52. By reason of the foregoing, TL VG and Lombardo, directly or indirectly, have 

violated, and unless enjoined will again violate, Section l0(b) of the Exchange Act [15 U.S.C. § 

78j(b)] and Rule 10b-5(b) [17 C.F.R. § 240.10b-5(b)] thereunder. 

CLAIM II 
Violations of Section 17(a) of the Securities Act 

(Against TL VG and Lombardo) 

53. The Commission realleges and incorporates by reference each and every 

allegation contained in paragraphs 1 through 52, as if fully set forth herein. 

54. TL VG and Lombardo, with sci enter, by use of the means and instrumentalities of 

interstate commerce or of the mails, in the offer or sale of securities: 

a. Employed devices, schemes, or artifices to defraud; 

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b. Obtained money or property by means of any untrue statement of a 

material fact or any omissions to state a material fact necessary in order to 

make the statements made, in light of the circumstances under which they 

were made, not misleading; or; 

c. Engaged in transactions, practices, or courses of business which operated 

or would have operated as a fraud or deceit upon the purchase. 

55. By reason of the foregoing, TLVG and Lombardo, directly or indirectly, have 

violated, and unless enjoined will again violate, Section 17(a) of the Securities Act [15 U.S.C. § 

77q(a)]. 

CLAIM III 
Aiding and Abetting Violations of Section lO(b) of the Exchange Act and 

Rule lOb-5 thereunder 
(Against Hudlin) 

56. The Commission realleges and incorporates by reference each and every 

allegation contained in paragraphs 1 through 55, as if fully set forth herein. 

57. Hudlin, directly or indirectly, knowingly or recklessly provided substantial 

assistance to TL VG and Lombardo who directly or indirectly and singly or in concert, acting 

intentionally, knowingly or recklessly, in connection with the purchase or sale of securities, by 

use of the means or instrumentalities of interstate commerce or the mail: ( a) employed devices, 

schemes, or artifices to defraud; (b) made untrue statements of material fact or omitted to state 

material fact(s) necessary to make statements made not misleading in light of the circumstances 

under which they were made; and/or (c) engaged in transactions, acts, practices, or courses of 

business which operated or would have operated as a fraud or deceit upon purchasers of 

securities and upon other persons. 

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58. By reason of the foregoing, Hudlin aided and abetted, and unless enjoined, will 

again aid and abet violations of Section lO(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 

10b-5(b) [17 C.F.R. § 240.lOb-5] thereunder. 

CLAIM IV 
Aiding and Abetting Violations of Section 17(a) of the Securities Act 

(Against Hudlin) 

59. The Commission realleges and incorporates by reference each and every 

allegation contained in paragraphs 1 through 58, as if fully set forth herein. 

60. Hudlin, directly or indirectly, knowingly or recklessly provided substantial 

assistance to TL VG and Lombardo, who by use of the means and instrumentalities of interstate 

commerce or of the mails, in the offer or sale of securities: 

a. Employed devices, schemes, or artifices to defraud; 

b. Obtained money or property by means of any untrue statement of a 

material fact or any omissions to state a material fact necessary in order to 

make the statements made, in light of the circumstances under which they 

were made, not misleading; or; 

c. Engaged in transactions, practices, or courses of business which operated 

or would have operated as a fraud or deceit upon the purchase. 

61. By reason of the foregoing, Hudlin aided and abetted, and unless enjoined, will 

again aid and abet violations of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. 

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RELIEF SOUGHT 

WHEREFORE, the Commission respectfully requests that this Court enter a Final 

Judgment: 

I. 

Permanently restraining and enjoining Defendants, their officers, agents, servants, 

employees, and attorneys, and those persons in active concert or participation with them who 

receive actual notice of the injunction by personal service or otherwise, and each of them, from 

violating Section l0(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules l0b-5 [17 C.F.R. §§ 

240.1 0b-5] thereunder. 

II. 

Permanently restraining and enjoining Defendants, their officers, agents, servants, 

employees, and attorneys, and those persons in active concert or participation with them who 

receive actual notice of the injunction by personal service or otherwise, and each of them, from 

violating 17(a) of the Securities Act (15 U.S.C §§ 77q(a)]. 

III. 

Ordering TL VG and Lombardo to pay disgorgement along with prejudgment interest 

thereon. 

IV. 

Ordering Hudlin to pay civil monetary penalties pursuant to Section 20( d) of the 

Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 

78u(d)(3)]. 

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V. 

Granting such other and further relief as this Court may deem just and proper. 

Dated: New York, New York 
September 29, 2017 

Of Counsel: 
Lara S. Mehraban 
Sheldon L. Pollock 
Prashant Y erramalli * 

BY: ~ ---
Andrew M. Calamari 
SECURITIES AND EXCHANGE 
COMMISSION 
Regional Director 
Paul G. Gizzi, Senior Trial Counsel 
New York Regional Office 
200 Vesey Street, Suite 400 
New York, NY 10281-1022 
(212) 336-0077 (Gizzi) 
Email: [email protected] 

* Not admitted to the District Court for the Eastern District of New York 

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