Money Matters - Simplified

Rudy Ruettiger pays $383K to settle SEC fraud suit

Ruettiger founded Rudy Nutrition to compete with the popular Gatorade but used the company as a 'pump-and-dump scheme' that generated more than $11 million in illicit gains through fraudulent methods.

Daniel 'Rudy' Ruettiger, best remembered as the underdog football player at University of Notre Dame, was charged Friday by the Securities and Exchange Commission (SEC) for a stock fraud scheme.

According to the SEC, Ruettiger, who inspired the 1993 film 'Rudy', along with 12 other individuals tricked investors into buying stock of a sports drink company that came with the tagline 'Dream Big! Never Quit!'

Ruettiger founded Rudy Nutrition with a college friend in South Bend, Indiana to compete with the popular Gatorade but used the company as a 'pump-and-dump scheme' that generated more than $11 million in illicit gains through fraudulent methods.

The promoters used misleading information to increase the value of Rudy Nutrition stock while selling unregistered shares to unsuspecting investors.

A pump-and-dump scheme
Though Rudy Nutrition produced and sold modest amounts of the sports drink, it was used primarily as a vehicle to swindle investors between February and September 2008, the SEC alleged.

The promoters used misleading information to increase the value of Rudy Nutrition stock while selling unregistered shares to unsuspecting investors.

It falsely claimed that Rudy Nutrition outsold industry Gatorade 2 to 1 in “a major southwest test.”

Also, that a Rudy-branded sports drink outperformed Gatorade and Powerade by 2 to 1 in a blind taste test, the SEC said.

Both statements were false, according to the lawsuit filed in federal court in Las Vegas.

Scott W. Friestad, an associate director in the SEC’s enforcement unit, said in a statement, “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.

“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.”

Settlement of suit
Ruettiger along with 10 other defendants settled the suit with SEC without admitting or denying charges. Litigation continues against the two who have not paid in the fraud case.

Ruettiger agreed to pay back a total of $382,866 he made in the alleged scam. In addition, he has been banned from serving as an officer or director of a public company and from promoting penny stocks.

"He was a willing participant in the scheme, but not the ringleader," Friestad said.

The SEC suspended trading and revoked registration of the stock in 2008. Rudy Nutrition is now defunct.