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The Blotter Report: Party's Over

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Colorful Investing

One New Jersey advisor invested heavily in real estate, education, sports and in the auto industry over the years. So what got him in trouble?

Everett C. Miller bought a house on a leafy cul-de-sac in Cherry Hill, N.J. he used as a party handout, loaned his girlfriend $221,000 for college, purchased luxury box for New Jersey Devils hockey games and Phillies baseball games, as well as owned five company cars, including a limo and a Hummer—all with investors’ funds, according to the Philadelphia Inquirer.

Although he never graduated high school, Miller, 43, became a financial advisor and convinced his largely elderly clients to part with their savings in return for promissory notes that gave 7 to 12 percent returns.  But out of the $41 million he raised from his clients, only $22.9 was invested, according to court documents. And of that, he lost $15.7 million.

Miller pled guilty to securities fraud on Tuesday, after prosecutors claimed he ran a Ponzi scheme with the $41.2 million between June 2006 and December 2010. A civil suit is also pending in New Jersey courts against the advisor.

 

Leveraging Your Connections

As the saying goes, it’s all about who you know. But one former Ameriprise advisor is set to spend six months in jail for his role in an insider-trading scheme—which he conducted through Alcoholics Anonymous.

According to prosecutors, Malvern, Pa.-based Timothy J. McGee learned from a friend in the 12-step program who worked at Philadelphia Consolidated Holding that the company was to be purchased by Tokio Marine Holdings. Taking advantage of the information, McGee bought shares and sold them for over $1.8 million after the deal took place.

The former Ameriprise advisor also made purchases in some of his clients’ accounts and shared the information with co-workers, prompting further trades. When caught, McGee lied under oath, saying he had no prior knowledge of the $4.7 billion acquisition. 

In addition to his six-month jail sentence, McGee is also on the hook for $100,000 fine. A parallel civil case brought by the SEC over his actions is still pending.

 

Watch What You Say

Popular radio show host and financial advisor Raymond J. Lucia Sr. was barred from associating with other advisors and fined $300,000 by the SEC on Monday over his  investment strategies for clients.

Through advice on REITs given on his nationally syndicated "Ray Lucia Show" and to clients, an SEC-administrative judge found the advisor violated his fiduciary duty because the recommendations were not based on historical data and were misleading. Further, Judge Cameron Elliot said that Lucia—popular for his “buckets of money” investment strategy—gained financially from the recommendations.

Lucia has denied the allegations and his attorney told Reuters that an appeal was likely. If the decision stands, it would put the advisor and his firm Raymond J. Lucia Cos Inc. out of business. 

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