In a continuing effort to target financial fraud in Connecticut, U.S. Attorney David B. Fein today announced the results of six Connecticut Securities, Commodities and Investor Fraud Task Force investigations of individuals who have, or are alleged to have, stolen funds from investors.  Among the prosecutions, an investiment manager from Madison who has admitted the he defrauded four investors of nearly $675,000.

“One year ago, we announced the formation of the Connecticut Securities, Commodities and Investor Fraud Task Force, an unprecedented partnership in the State to investigate and prosecute financial crimes,” said U.S. Attorney Fein.  “At that time, we also announced the local results of a Department of Justice nationwide operation that targeted a broad array of investment fraud schemes that directly prey upon the investing public.  The prosecutions we are announcing today show the Task Force’s ongoing efforts to uncover fraud in the marketplace and root out fraudsters who steal individuals hard-earned funds.”

“These recent prosecutions demonstrate that the investing public must be vigilant before entrusting their funds to any individual or firm,” U.S. Attorney Fein continued.  “People should  research their investment advisors and verify information provided to them.  Everyone should be suspicious of guaranteed high rates of return, investments that promise ‘little or no risk of loss,’ and investment scenarios that are difficult to understand.”

U.S. Attorney Fein further noted that individuals need to be wary of high-pressure tactics from individuals who solicit investment funds, regardless of whether the individuals are complete strangers or friends.

“We have found that, in many instances, the individuals who have orchestrated these schemes have victimized friends, associates or fellow members of their religious or other community organizations,” stated U.S. Attorney Fein.  “You should be rigorous in your due diligence when considering whether and where to place your investment and retirement funds and be alert to these schemes.  And to anyone who is operating a scheme to cheat investors – particularly vulnerable investors – of their savings, the U.S. Attorney’s Office and our Task Force partners are committed to bringing you to justice.”

“Investor confidence is integral to this nation’s economic recovery and relies upon the integrity of the financial institutions entrusted with investors’ hard-earned funds,” said Kimberly K. Mertz, Special Agent in Charge of the Federal Bureau of Investigation in New Haven.  “The Connecticut Securities, Commodities and Investor Fraud Task Force represents a unique partnership between Connecticut’s federal, state and local law enforcement, and state and national regulatory agencies, that has been formed to ensure that those working in the financial services arena do not violate investors’ trust through criminal practices.  The FBI, along with its partners, is dedicated to proactively investigating the perpetrators of these crimes to ensure they are brought to justice.”

The FBI encouraged citizens to report any financial fraud schemes by calling, toll free, 855-236-9740, or by sending an email to ctsecuritiesfraud@ic.fbi.gov.

The Connecticut Securities, Commodities and Investor Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Justice’s Criminal Division, Fraud Section and Antitrust Division; U.S. Securities and Exchange Commission (SEC); U.S. Commodity Futures Trading Commission (CFTC); Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); Office of the Chief State’s Attorney; State of Connecticut Department of Banking; Greenwich Police Department and Stamford Police Department.

The Task Force is actively investigating matters relating to insider trading, market manipulation, Ponzi schemes, investor fraud, financial statement fraud, violations of the Foreign Corrupt Practices Act, and embezzlement.  Each Task Force participant brings an expertise to the Task Force, and members will conduct parallel investigations and share information as necessary so that all Task Force members may benefit from the different tools and resources each agency can provide.

U.S. Attorney Fein specifically acknowledged the investigative efforts of the Federal Bureau of Investigation, the Internal Revenue Service – Criminal Investigation, the U.S. Postal Inspection Service, the Securities and Exchange Commission, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the State of Connecticut Department of Banking for investigating the fraud schemes targeted during this most recent enforcement effort.

“Illegal activity involving the investment industry has brought financial ruin to many Americans,” said William P. Offord, Special Agent in Charge, IRS Criminal Investigation. “IRS Criminal Investigation is proud to utilize our forensic accounting skills to put a stop to this type of white collar fraud.”

“The U.S. Postal Inspection Service has a long-standing commitment protecting consumers from fraud,” said Robert Bethel, Inspector in Charge of the U.S. Postal Inspection Service in New England.  “The Postal Inspection Service is proud to be a member of the Connecticut Securities, Commodities and Investor Fraud Task Force.  Through this partnership, we are able to bring those responsible for financial related crimes perpetrated through the use of the U.S. Mail to justice.”

“SIGTARP, the law enforcement agency that protects taxpayers who became investors in financial institutions under the federal Troubled Asset Relief Program, is a proud member of the Connecticut Securities, Commodities and Investor Fraud Task Force,” said Christy Romero, Deputy Special Inspector General for SIGTARP.  “Our progress on these cases where TARP has been exploited is the product of extraordinary teamwork among these task force agencies and law enforcement partners.  We have high expectations for the work that lies ahead, and we will continue to work as a formidable team to bring to justice those who seek to profit criminally from our country's economic crisis.”

“As a member of the Connecticut Securities, Commodities and Investors Task Force the Department of Banking is committed to sharing its resources and expertise in our collective efforts to protect the investing public,” said Commissioner Howard F. Pitkin of the Connecticut Department of Banking.  “We commend the U.S. Attorney for establishing this task force to help us all achieve this important goal.”

The Connecticut Securities, Commodities and Investors Task Force operates in conjunction with the President’s Financial Fraud Enforcement Task Force, which also includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The Task Force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.  For more information on the task force, please visit www.StopFraud.gov.

Investment Fraud Prosecutions

As to the defendants who are awaiting trial, U.S. Attorney Fein stressed that the charges are not evidence of guilt.  The charges are only allegations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt.

US v. Donnelly

On December 13, 2011, Thomas F. Donnelly, Jr., 57, of Madison, waived his right to indictment and pleaded guilty before U.S. Magistrate Judge Donna F. Martinez in Hartford to one count of mail fraud stemming from his scheme to defraud four investors of approximately $675,000.  According to court documents and statements made in court, Donnelly, an investment manager, engaged in a scheme to defraud investors of an entity he created and managed known as Shoreline Index Partners LP (“Shoreline”).  In an effort to solicit investors to provide funds to Shoreline, Donnelly made misrepresentations in an investment prospectus falsely indicating that he had received a significant return prior to June 2006 when he knew that no such returns had been generated.  Between June 2006 and July 2008, Donnelly obtained approximately $675,000 from four investors.  While he represented to these four investors that their funds would be invested, Donnelly forwarded only approximately $175,000 of these funds to a Chicago-based brokerage clearing house.  In an effort to convince these investors that their investments had generated a significant return, Donnelly altered the actual monthly brokerage statements by creating fraudulent monthly statements that purported to be from the Chicago-based clearing house.  In one statement that he mailed to Shoreline investors in approximately October 2008, Donnelly fraudulently indicated that Shoreline’s investments at the brokerage clearing house had a total value of more than $3.8 million when he knew that there was less than $50,000 in Shoreline funds at the brokerage clearing house. In pleading guilty, Donnelly also has admitted that he altered documents prepared by an accounting firm, forged the signature of a certified public accountant, and then submitted these altered and forged accounting documents to Shoreline’s investors. 

Donnelly is scheduled to be sentenced on March 5, 2012, at which time he faces a maximum term of imprisonment of 20 years, a fine of up to $1.35 million and an order of restitution.  This matter is being investigated by the Federal Bureau of Investigation and is being prosecuted by Senior Litigation Counsel Richard J. Schechter.