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The Blotter Report: Career Criminals

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Niche Crime

A South Florida man holding himself out as an investment advisor is behind bars for the next 12 years for targeting a local Haitian community in a multimillion-dollar Ponzi scheme.

A Florida judge sentenced George Louis Theodule last Tuesday, after the unregistered investment advisor pled guilty to wire fraud. According to prosecutors, Theodule persuaded many in a Haitian community to join “investment clubs” throughout 2007 and 2008, promising to double their money. Instead, very little of the victims’ money was invested, most went to paying off previous investors.

The scheme unraveled in early 2009 when the SEC came knocking, having obtained a restraining order and later an injunction to stop Theodule’s tactics. Theodule also was sentenced to three years of probation last Tuesday. A restitution hearing is set for May 9, 2014, according to prosecutors.

 

Piling on the Pain

A former Merrill Lynch financial advisor currently serving a 33-year sentence was indicted again on Friday for another alleged fraud scheme. The U.S. Attorney’s office for Massachusetts claims Jane E. O'Brien, 61, fraudulently drained her clients’ accounts over the course of two decades.

O’Brien—who was convicted in 2012 of securities fraud for attempting to sell a client stock in a company that didn’t exist—allegedly gained control of clients’ accounts and then used money earmarked for investments to pay off personal debts and loans to other clients. In one instance, a client to invest in the Hollywood movie “Crooked Arrows,” but O’Brien never made it.

The former advisor allegedly carried on the schemes for quite some time, with prosecutors alleging the fraud dates back to 1995, when O’Brien was an advisor with CitiGroup’s Smith Barney.

If convicted of all charges, O’Brien faces up to 25 years in prison and a $260,000 in fines. 

 

Reeling Them In

A man masquerading as an investment advisor is finally facing the music after the SEC alleged that the La Jolla, Calif.A resident stole $25 million from investors. 

The regulator filed a complaint against James Y. Lee on Feb. 13, claiming he started a scheme in 2008, recruiting clients by telling them he had a law degree, an MBA, a Ph.D and was a CPA. The SEC claims he’s not, and that he promised dozens of investors high returns while raking in management fees as high as 50 percent of their monthly profits.  

Investors bought into it because he said he would share equally in their losses—holding himself out as a successful financial industry insider. Needless to say, he didn’t live up to his side of the bargain. 

But this isn’t the first time Lee has been taken to task for his financial schemes. In addition to acting as an unregistered advisor, Lee earned a previous conviction for embezzlement in 1997, and the SEC previously issued a cease-and-desist order for his role in illegal, unregistered penny stock offerings—details he neglected to share with his clients. 

The SEC is seeking disgorgement, restitution, injunction and penalties for violations of the Advisors Act, the Exchange Act and the Securities Act. 

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