A Massachusetts financial advisor who is credited with bringing the Shaklee home distributorship operation to the East Coast has been charged with defrauding 36 people, the majority of them Shaklee representatives and many of them elderly. One of those allegedly defrauded was his own sister.

John William Cranney of Belmont, Mass., bilked the people by building a Ponzi scheme that took $10.4 million from people nationwide, charges William F. Galvin, Secretary of the Commonwealth of Massachusetts. Many of those defrauded are people Cranney associated with through Shaklee and he knew most of them for 15 to 20 years, Galvin says.

Shaklee Corp. is a multi-level marketing system company based in Pleasanton, Calif. that bills itself as the No. 1 natural nutrition company in the United states. The company, founded in 1956, recruits sales people to sell health and personal care products. Distributors are given credit for new salespeople they bring into the system. Cranney started with Shaklee in 1967 and was the sponsor for about 50,000 distributorship contracts, the secretary says.

He enticed people who trusted him into investing money in unregistered securities he called promissory notes that he said were safe investments that would pay 6% or more in interest. He then used the money for his own purposes, to operate his Shaklee distributorship, and to pay other investors.

Cranney and none of his companies are registered in Massachusetts nor are they registered with Finra. The securities he sold also are not registered.The complaint was originally brought by a couple in Maine. In Massachusetts, two investors filed civil suits against him and obtained attachments totaling $450,000 on his Belmont estate, which is on the market for $3.8 million.

Cranney's sister, who lives in Salt Lake City, invested $400,000 with Cranney in 2007 but a year later asked for her money back. She complained she was not able to get adequate answers from Cranney. She eventually received $154,000 back, Galvin says.

"Whenever anyone is presented with an investment proposal, they should check to make sure both the person and the security they are selling are registered," Galvin says. "This is vital, even when the person is known to the investor as a friend, neighbor, co-worker, employer, even relative, for these relationships can be the foot in the door for affinity fraud."

Cranney did business as Cranney Capital I LLC, Cranney Capital I Employee Stock Ownership Trust, Cranney Capital II LLC, Cranney Capital III Inc., and Cranney Industries, doing business as Belmont Industries.

The complaint asks for an order barring Cranney from doing securities business in Massachusetts, compensation for the victims and an administrative fine.

-Karen DeMasters