On September 23, 2013, the Securities and Exchange Commission (SEC) initiated an administrative enforcement proceeding against 10 former brokers of McGinn Smith & Co. (McGinn Smith). The SEC alleges that these individuals sold investments in a Ponzi scheme operated by McGinn Smith’s owners, Timothy McGinn and David Smith.
Timothy McGinn and David Smith were recently convicted of multiple counts of wire fraud, mail fraud and securities fraud for embezzling over $4M from the 17 trusts and other entities that they controlled.
According to the SEC, McGinn Smith’s brokers “sold millions of dollars of [McGinn Smith] private placements in spite of numerous red flags, including a policy – which was clearly inconsistent with the terms of the offerings – that required them to ‘replace’ customers seeking to redeem notes with new customers before the redemption would be honored.
The SEC also contends that in January 2008 the brokers became aware that McGinn Smith related investments had suffered $80 million in losses yet continued to sell the investments to their clients.
Combined, the brokers garnered around $3.5M in commissions for selling investments in the Ponzi scheme operated by McGinn Smith’s owners.
The brokers named in the SEC’s complaint are as follows:
Donald J. Anthony, Jr.
Frank H. Chiappone
Richard D. Feldmann
William P. Gamello
Andrew G. Guzzetti
William F. Lex
Thomas E. Livingston
Brian T. Mayer
Philip S. Rabinovich
Ryan C. Rogers
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