Debra BorchardtAfter several years, the Securities and Exchange Commission has obtained final judgments on the charges against the SHE Beverage company. The SHE Beverage principals Lupe L. Rose, Sonja F. Shelby, and Katherine E. Dirden were charged in 2021 with defrauding investors between 2017 and 2019.
SHE Beverages
The women were accused of conducting a fraudulent offering during those years and raised $15.4 million by misleading investors. The bottled water drinks were falsely claimed to be “proprietary” and “FDA approved,” which the SEC says wasn’t true. The women claimed to have received acquisition offers in the millions of dollars, which the SEC also said wasn’t true. The women claimed they had invested millions of their own money into the company and the SEC alleged that the amount was less than $200,000.
Co-founder and owner Rose was the CEO, president, and chair of the board of directors of SHE Beverages. Co-founder Shelby was owner, vice president, treasurer, vice chair, chief financial officer (“CFO”), principal financial officer, and member of the board of directors. Dirden was the chief operations officer (“COO”), investor relations director, and a member of the board of directors.
The women told investors that a public offering was imminent when in reality they had never filed the paperwork with the SEC. In addition to all this, the SEC stated, “They touted the acquisition of a cannabis-related company, concealing that it was obtained from affiliates (sisters of one of the Defendants) with no independent valuation, and had no operations or sales.”
Fake offering
SHE Beverages raised money without registering with the SEC so investors had no access to financial information about the company. The SEC complaint stated:
Defendants raised money from thousands of investors in numerous states, including from unaccredited investors. The company engaged in general solicitation over the internet and solicited investors to deposit by cash, checks, credit cards and electronic payment processor, at times offering referral, two-for-one, and other bonuses, and frequently hyping investors’ last chance to invest pre-IPO. The only Form S-1 registration statement ever filed by the Defendants, in January 2020, never went effective and was declared abandoned in 2021.
The women also told investors that SHE Beverages made $4-5 million in revenue, when the number was closer to $1.7 million and most of that came from events, not product sales.
Lavish spending
As it turns out, the SEC said that the women only spent about 2% of the money raised on the company. Instead, they used most of the funds for personal expenses, luxury items, and cash withdrawals, far over any disclosed amounts of salary or compensation to the principals. The SEC claimed the women spent the money on the following items:
- approximately $6 million in cash withdrawals and transfers to Rose, Shelby, and Dirden’s personal bank accounts
- approximately $1.2 million spent at casinos
- approximately $180,000 to purchase 8 cars and trucks for personal use and payment of a title loan on Shelby’s Porsche
- approximately $100,000 in payments for the lease on the house occupied by Rose and Shelby
- approximately $50,000 in purchases from luxury clothing retailers such as Gucci and Louis Vuitton.
CBD Water
The SEC claimed that on or about September 9, 2018, SHE Beverage acquired Elite Green Solutions, a cannabis-related product company, for a combination of cash and stock. It was rebranded to The Pink Leaf and promoted to investors, “stating that it “recently hired its growers” for a cannabis grow farm and that it “will begin manufacturing CBD, THC, and Cannabis Products.” None of which was true. Elite Green was owned by Shelby’s sisters, which also wasn’t disclosed to investors.
The complaint also stated that in or around 2019, SHE Beverage paid approximately $26,007 to a Florida distributor for its CBD bottled water to sell under the SHE Beverage brand name.
Final judgments
The Court ordered SHE Beverage Company, Rose, Shelby, and Dirden to jointly and severally pay $12,021,500 in disgorgement of ill-gotten gains plus $738,774 in prejudgment interest thereon. The Court also imposed a civil monetary penalty of $669,687 against Rose, a civil monetary penalty of $334,842 against Shelby, and a civil monetary penalty of $334,842 against Dirden.
The women are also permanently barred from serving as officers or directors of public companies.
