A former LPL advisor faces decades in prison after pleading guilty in connection with a long-running scheme that bilked clients out of more than $2.8 million, according to the U.S. Attorney for the District of Massachusetts.

James Kenneth Couture, 42, of Sutton, Mass., pleaded guilty yesterday to four counts of wire fraud, four counts of aggravated identity theft, one count of investment adviser fraud and one count of witness tampering. He is scheduled to be sentenced on Jan. 11.

Couture was initially charged in connection with this scheme in June 2021, but later engaged in witness tampering by creating fake documents purported to be for his clients’ accounts and providing false information to at least one victim in the case for about six months, prosecutors said. He was charged with witness tampering on Jan. 14.

Authorities said the charges of wire fraud each provide for a sentence of up to 20 years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. The charges of aggravated identity theft each provide for a mandatory consecutive term of two years in prison. The charge of investment advisor fraud provides for a sentence of up to five years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. The charge of witness tampering provides for a sentence of up to 20 years in prison, three years of supervised release and a fine of $250,000.

In a parallel action, the SEC filed civil charges against Couture in connection with the fraud in June 2021.

Couture was fired by LPL in June 2020, and the Financial Industry Regulatory Authority barred him in October 2020 for refusing to comply with its requests for information and documents related to the investigation of the alleged fraud.

Couture, who was a registered investment advisor with LPL from 2009 to 2020, also owned the Private Wealth Management Group (PWMG), which he created in 2010. The business had offices in Worcester and Springfield, Mass.,and provided investment advisory services and sold insurance products. It was not registered with the Securities and Exchange Commission, according to the SEC’s complaint.

Authorities said from about 2009 to December 2020, Couture, while operating PWMG, fraudulently prompted his clients to sell portions or all of their securities holdings to fund large money transfers to Legacy Financial Group LLC, which, unbeknownst to his clients, was owned and controlled by Couture.

Couture, the SEC said, formed Legacy Financial Group (a third-party sub-advisor) in 2009 to “purchase, own and hold ownership interests in other companies.” He also owned and operated CWM Retirement Plan Services LLC, another third-party business that managed the administration of certain employee benefit and retirement plans. The complaint said he used CWM to create fake employee benefits, through which he could filter payments from one client to another and give the false impression that the payments were part of an employment relationship.

Authorities said Couture misappropriated about $2.8 million from the six clients by transferring funds from their accounts, investing it in fictitious mutual funds and then selling other clients’ holdings to pay investment returns.

The SEC said Couture persuaded his clients to authorize transactions, falsely claiming that the proceeds would be reinvested for their financial benefit. Instead, Couture diverted the sale proceeds for his own use and provided his clients with fabricated account statements, tricking them into believing that their sale proceeds had been reinvested, the SEC said.

The complaint said Couture borrowed assets from clients’ accounts to cover other clients’ requests for withdrawals. He further hid the misappropriations by transferring the money through a web of third-party accounts to disguise that he was stealing from one client to replace funds he had previously stolen from another, the complaint said.

“As part of this scheme, Couture forged clients’ signatures on documents, or caused clients to sign documents by falsely representing that the proceeds of transactions would be used for the clients’ benefit. Couture also stole from clients using their own profit-sharing plans and conducting transactions in their names to disguise his fraudulent transactions,” the U.S. Attorney's Office said.

In one instance, the complaint said, Couture repeatedly prompted a married couple, who became brokerage clients of his when he moved to LPL in 2009, to sell portions of their securities holdings to fund money transfers to Legacy Financial. He directed them to sign withdrawal request authorizations that he had pre-filled for the issuance of three checks totaling $700,000 between September 2009 and October 2013.

In May 2016, when the client finally gained access, with the help of Couture, to a LPL database to see his account holdings,  he noticed that his accounts were missing from the LPL database and directed Couture to move them back. The complaint said over the next weeks Couture emailed the client a series of updates that falsely stated that he was processing a “tax neutral” sale of their securities holdings to return the funds to LPL. Couture, the SEC said, never purchased any securities with the client’s money. Instead, he used a portion of the money to buy a book of advisory clients from another investment advisor representative.

In June 2016, he promised to send the clients two checks from the sale of the securities. But that money was not available from Legacy Financial Group because he had spent it. So, Couture robbed another client by cashing in two annuities – one worth about $558,000 and another $362,000 – to pay the couple. Authorities said Couture repeated such behavior.

The New Hampshire Department of State dissolved Legacy Financial Group in August 2013.