Blotter: March 2012

Fool Me Twice

Robert Pinkas was not deterred the first time, SEC charges suggest. The regulator says Pinkas stole $173,000 from a fund client to cover the costs of defending himself in a separate investigation. Pinkas then lied to the client about the funds he lifted, according to the SEC, saying that a number of law firms had looked into the transfers and decided they were perfectly legal. Pinkas then stole another $632,000 from the same client to cover fines that he agreed to pay as part of a settlement of the original investigation, according to the SEC. Pinkas also violated the bar imposed in this settlement by continuing to associate with an investment adviser, says the SEC. Talk about digging yourself into a hole.

Jailbird

Chase Norwood sold bogus Internet start-ups to unwitting investors to fund an extravagant lifestyle and will spend five years in prison for it, according to the U.S. Attorney's Office. In mid-February, U.S. District Judge Terry J. Hatter sentenced him to 60 months in jail, and ordered him to pay $876,386.20 in restitution. He was convicted by jury trial in December of 2009 on 15 counts, and has been in custody since his arrest in March 2008.

Norwood often used his former name, Thomas Gray, and the names of third parties as officers and directors of companies he promoted. He used the funds he collected to pay for his part-time residence in luxury hotels in Los Angeles and Beverly Hills, including L'Ermitage, the Mondrian, and the “W,” as well as personal expenses for his family and friends.

McKee Inc.

James Scott McKee, a former Morgan Stanley Smith Barney advisor from Eugene, Ore. was arrested in February on theft charges and faces disciplinary action from FINRA. The regulator's complaint alleges that McKee defrauded clients of at least $370,000 and used at least $650,000 for his own personal expenses. He is charged with promising unreasonable rates of return, lying about how he would use their funds, and lying about the nature and terms of investments, among other things. In one case, McKee advised a church that wanted a conservative investment to put its money into a shopping center coffee house in which he had an interest. McKee worked for Morgan Stanley from December 2010 until September 2011, when the brokerage fired him for convincing a client to invest in a real estate venture he owned without the firm's consent.