3 men are charged in lip-gloss fraud

PROVO — Three men are accused in court documents of sweet-talking elderly investors into sinking money into a lip gloss company.

Jory C. Allen, Frank J. Gillen and Chad B. Wright were charged in 4th District Court in early April with three counts of security fraud and one count of abuse or exploitation of a vulnerable adult, all second-degree felonies.

From January 2004 through February 2005, the men allegedly convinced four different people, two of whom are older than 65, to invest $454,000 in City Lips, LLC.

The firm's product was marketed to have "night time collagen-peptide lip plumping treatment," according to a court document.

Promising large and quick returns, the men said the money was to be used to build up the company, buy more product and help the company go public, according to the document.

However, the men never provided any financial documents for the company nor provided any of the promised returns. Only token interest payments were made, said state investigators.

"The time came for (the investors) to get the money back and the promoters gave excuses," said Wayne Klein, director of the Utah Division of Securities, a part of Utah's Department of Commerce. "Finally, months go by; phones are disconnected."

Attempts to contact the three men for comment were unsuccessful.

Klein said this situation had several warning signs he wants people to recognize.

First, if someone approaches with an investment idea, call the securities division to ask if they're licensed. If they're not, that's a sign of a scam, Klein said. However, just because someone is licensed doesn't automatically give them a stamp of approval.

"Mr. Gillen did at one time have a securities license, so on one hand that makes him more credible as a sales person, but on the other hand, we hold him to a higher standard," Klein said. "He certainly knows what the law is."

Gillen's license was sanctioned after he failed to update his securities-license status to reflect an investigation on him by the Securities and Exchange Commission. When he failed to pay the sanction's fine, his license was revoked, Klein said.

Next, ask the division if the company's investment is registered. Have they qualified their stock for sale to the public?

And lastly, are promoters providing investors with full disclosure, a company prospectus and a written background of their company?

"If all you're getting is promises — 'We're doing really well,' 'We're going to go public soon' — if you're not getting any of that in writing, then you know to run," Klein said.

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