Joliet native Rudy settles SEC stock fraud allegations

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Daniel "Rudy" Ruettiger, on whose life the movie "Rudy" was based, works with students at a Notre Dame pep rally in 2005. (AP Photo/South Bend Tribune, Kohl Threlkeld)

Updated: January 19, 2012 11:05AM

Famed Joliet native Daniel Ruettiger was charged Friday by the SEC for allegedly deceiving investors into buying stock in his sports drink company.

Ruettiger isn’t admitting or denying the allegations, but he will pay $382,866 to settle the charges.

The Joliet Catholic High School graduate achieved his dream of playing football at Notre Dame, inspiring the 1993 motion picture “Rudy.”

Ruettiger, like many of his family members still in the Joliet area, is nicknamed “Rudy.”

The U.S. Securities and Exchange Commission filed a complaint in federal court in Las Vegas. The complaint says Ruettiger founded Rudy Nutrition to compete with Gatorade in the sports drink market. Rudy Nutrition produced and sold modest amounts of a sports drink called “Rudy” with the tagline, “Dream Big! Never Quit!” However, the company primarily served as a vehicle for a pump-and-dump scheme that occurred in 2008 and generated more than $11 million in illicit profits, the complaint alleges.

The SEC says investors were given false and misleading press releases, SEC filings and promotional materials, including claims that the drink outsold Gatorade or did better in taste tests.

Manipulative trading artificially inflated the price of Rudy Nutrition stock, the complaint says, even as promoters sold unregistered shares to investors.

The SEC suspended trading and later revoked registration of the stock in late 2008. Rudy Nutrition is no longer in business.

“Investors were lured into the scheme by Mr. Ruettiger’s well-known, feel-good story, but found themselves in a situation that did not have a happy ending,” said Scott W. Friestad, associate director of the SEC’s Division of Enforcement. “The tall tales in this elaborate scheme included phony taste tests and other false information that was used to convince investors they were investing in something special.”

‘Rudy’

The story of Daniel Ruettiger’s youth was documented in the 1993 motion picture “Rudy,” starring Sean Astin and Ned Beatty. Astin played the role of Ruettiger.

Ruettiger, the son of a Joliet factory worker, starred on an undefeated Joliet Catholic High School team in 1965, and worked several jobs after graduation. He then decided to chase his dream and attend the University of Notre Dame in South Bend, Ind. He first attended Holy Cross Junior College to get his grades up. He was admitted to Notre Dame in 1974.

Ruettiger gained the respect of players and coaches alike at Notre Dame. Ruettiger walked on the team during the Dan Devine and Joe Montana era.

“Rudy” was an undersized defensive lineman and played only 27 seconds in his entire collegiate career. He used that time to sack the quarterback on the last play of the game in Notre Dame’s regular-season finale against Georgia Tech and was carried off the field by his teammates.

After the motion picture was released in the early 1990s, Ruettiger became one of the most sought-after motivational speakers in the United States.

Ruettiger’s “Yes I Can” message received national and international acclaim. He fired up high school, college and professional sports teams and sparked corporate and political leaders, including President Clinton and his guests at a White House gathering, according to a 1998 Herald-News story.

Business venture

According to the SEC’s complaint, Ruettiger was the principal founder and namesake of a company called Rudy Beverage Inc. that he and a college friend ran out of South Bend until October 2007, when Rocky Brandonisio became the company’s president and day-to-day business manager.

He moved the company’s operations to Las Vegas, where he and Ruettiger live. Ruettiger remained CEO. During this time, the company struggled financially with few customers, few assets and no profits, the SEC said.

The SEC alleges Ruettiger and Brandonisio brought in an experienced penny stock promoter named Stephen DeCesare to orchestrate a public distribution of company stock in late 2007. Ruettiger knew DeCesare from previous business dealings, and they were neighbors in Las Vegas. Ruettiger and Brandonisio gave DeCesare sufficient control to turn Rudy Beverage into a publicly traded company. DeCesare became the primary organizer of the resulting pump-and-dump scheme, according to the complaint.

On Feb. 11, 2008, they acquired a shell company in a reverse merger and changed its name to Rudy Nutrition, the complaint says. Ruettiger authorized his signature to be placed electronically on an SEC filing four days later, and Rudy Nutrition began to be quoted on the Pink Sheets on Feb. 21, 2008, under the ticker symbol RUNU.

DeCesare and consultant Kevin Quinn, a disbarred California lawyer, arranged for RUNU shares to be issued to nominee entities, which sold shares to unsuspecting investors in the public market during the scheme.

The SEC alleges that DeCesare then organized efforts to inflate the price and volume artificially through fraudulent touting and manipulative trading. In less than a month, RUNU went from trading 720 shares to more than 3 million shares, and within two weeks the price of RUNU stock climbed from 25 cents to $1.05 per share.

After March 12, 2008, RUNU stock began a rollercoaster ride as the scheme’s participants sold millions of RUNU shares to the market amid their simultaneous efforts to pump the stock, the complaint said.

The SEC issued a trading suspension against RUNU on Sept. 12, 2008, for delinquent periodic filings and revoked the registration of Rudy Nutrition securities on Nov. 14, 2008.

Ruettiger and 10 of the scheme’s other participants have agreed to settle the SEC’s charges without admitting or denying the allegations. The settlements, which are subject to court approval, impose penny stock bars and officer-and-director bars as appropriate. Ruettiger agreed to pay $382,866 in settling the charges, and other participants consented to final judgments also ordering disgorgement, prejudgment interest and financial penalties.