SEC Files Complaint Against Falls Event Center, CEO

Steven L. Down, CEO of Falls Event Center. | 

May 15, 2018 |

UPDATED 1:45 p.m. | 

In a document dated on May 10, 2018, the Securities Exchange Commission has filed a complaint against the Falls Event Center, LLC, and its chief executive officer, Steven L. Down.

The complaint alleges that Down, through his founding and chief executive role of the West Jordan, Utah-based company has made misrepresentations to approximately 300 investors. The company owns and operates eight event centers, including one in Elk Grove and Roseville, California, and also currently operates in facilities in Arizona, Colorado, Oregon, and Utah.

In the complaint, the SEC has leveled allegations that Down had misrepresented the profitability of event centers to investors through a series of seminars. Additionally, Down, the complaint alleges, continued to say the event centers were profitable even though other company employees, most notably the unnamed chief executive officer who left the company after they advised against making claims of profitability during seminars.

According to the complaint, Down held the sales pitches during lunchtime breaks for continuing education seminars held for dentists. In one sales pitch held in Seattle in January 2017 Down claimed the Elk Grove were immediately profitable.

“. . . we went into Elk Grove and built these two buildings. These two buildings were profitable in month one. We’re getting about 35 percent return this year, ” Down is quoted in the complaint telling investors potential investors at the Seattle meeting.

Contrary to his claims, the SEC document states "On a GAAP (generally accepted accounting practices) basis, and even on a “modified accrual” basis, Downs' claim that Elk Grove was “profitable in month one” was incorrect. Elk Grove opened in November 2014. For its first month, its net loss was $114,268. In its second month, its net loss was $84,186. On a “modified accrual” basis, Elk Grove lost $67,689 in its first month and lost $52,813 in its second.   

The SEC also asserts that Down and the Falls Event Center,  in 2014 they switched the accounting of revenues. "Beginning in 2014 and continuing until March 2017, The Falls’ CFO provided Down with “modified accrual” profit and loss statements for the event centers by e-mail every month."

This complaint is not the first time Down has come under the scrutiny of the SEC. His company, Investors Dynamic Corporations was alleged to have been operating a multi-level marketing pyramid scheme. In 1998 a consent agreement was reached where Down did not admit guilt and the SEC ordered him to have no "association with any broker, broker-dealer, investment company, investment adviser or municipal securities dealer" for two years.   

Last December the City of Roseville initiated a tax foreclosure against the company after failing to pay property taxes. The Roseville facility opened just over one year ago.

According to information on the Sacramento County Tax Collector's web page, the Falls Event Center, which is located at 8280 Elk Grove Boulevard has missed its last two property tax payments totaling $70,818. Along with late assessments, the business owes $77,915.

The Elk Grove facility has been part of the City of Elk Grove and its partners at Visit Elk Grove efforts to develop the city as a tourist and conference destination. Many of current and past Elk Grove city council members have used the event center for political fundraisers since its opening in 2014. 

The complaint can be viewed below.

Updated to reflect property taxes owed to Sacramento County.