A former New Jersey broker has been sentenced to 15 years in prison for using $9.8 million in his elderly clients' savings to pay for his mortgage, home renovations and vacations to France.
Maxwell B. Smith III, 73, of Fair Haven, N.J., was sentenced yesterday in state Superior Court in Morristown, N.J., after he pleaded guilty to first-degree money laundering, New Jersey Acting Attorney General John J. Hoffman announced.
Smith operated a Ponzi scheme for 17 years, victimizing a dozen elderly clients through several bank accounts he controlled, Hoffman said.
Clients thought they were giving Smith money to invest in health-care facilities, but he instead used the money to pay for his personal expenses, including yearly trips to Gordes, France, for several weeks each summer, according to the attorney general. Smith described the fictitious investments as safe and free from federal income tax, and he promised semi-annual interest payments of 7.5 percent to 9 percent.
Smith began marketing the fraudulent investments in 1992 and continued the scheme through 2009 as a registered representative at various brokerage firms, according to the attorney general's office.
In June, Smith was sentenced to seven years in prison after pleading guilty in U.S. District Court to federal mail fraud charges stemming from the fraud. He will serve both sentences concurrently.
Smith must pay restitution to his victims of $7,847,823, which represents the amount taken from investors minus what he returned to clients as fake interest payments.
Smith also entered into an administrative consent order with the New Jersey Bureau of Securities that permanently bars him from working in the securities industry in the state.
Smith marketed investments he called “Health Care Financial Partnership Direct Municipal Loans.” He told clients that his firm, Health Care Financial, made investments involving the financing and refinancing of health care facilities, such as nursing homes and continuing care retirement centers for the elderly.