Finra Alleges $89M Private Placement Scam

Just to complete this story: On August 7, 2013 McGinn was sentenced to 15 years, Smith to 10. There was a $5.7M forfeiture assessed against the pair jointly and severally. The Judge really took down McGinn, describing him as arrogant and reading back his presentence interview comments about the jury after McGinn insincerely "thanked" the jury in the sentencing hearing. They are being held at a state prison in NY for eventual dispatch to federal facilities. McGinn and smith could be out after serving as little as 85% of their sentences, which would make McGinn about 77 or 78 and Smith about 76 or 77 when they could be released. To get to work on earning sufficient income to pay the $5.7M.... not!

Just to update this even further. Sentencing was originally scheduled for June 28th, but defendants successfully sought a delay, and now that will happen on August 7th. The reason for the requested delay was that the defendants were not certain of the amount of restitution that will be requested by the US Attorney, and they stated they need to know a finite number so they could prepare their sentencing recommendations. Which is pretty crazy because whether the number is $4M or $44M, it's not going to get paid by two defendants who are now in their sixties and should expect to spend the next 15 years in federal prison. The Receiver has amassed approximately $13M, but that will be whittled down by further litigation costs, and then will be distributed to people who invested north of $80M. So the restitution terms of the sentencing are almost irrelevant. The judge allowed the rescheduling to August 7th, but that is a final date.

FYI: McGinn, Smith guilty of investor swindle By Robert Gavin Updated 3:58 pm, Wednesday, February 6, 2013 UTICA -- After four days of deliberating, a jury convicted longtime Albany brokers Timothy McGinn and David Smith of a Ponzi-type scheme that scammed dozens of investors out of millions of dollars. McGinn was convicted of 27 of 29 counts - conspiracy to commit fraud, wire, mail and securities fraud and filing false tax returns. Smith was convicted of 15 of 29 counts - conspiracy to commit fraud, mail, wire, securities fraud and filing false tax returns. The two men face up to 15 years in prison when they are sentenced by U.S. District Judge David N. Hurd on June 28. "This verdict brings some measure of justice to the many investors who placed their trust and in some cases their life savings in these 2 men and their brokerage," U.S. Attorney Richard Hartunian said. "I think it is clear this case is about greed and self-interest," he said. Hartunian said the harm the duo caused could "never be fully undone" but that the verdict showed investor fraud would be exposed and prosecuted. "It is an important case for our community and beyond," he said. McGinn, 64, and Smith, 67, exchanged hugs with their attorneys, E. Stewart Jones and William Dreyer, after the verdicts were delivered. McGinn and Smith declined to talk to reporters and got into a car behind the federal courthouse. Jones, who represented McGinn, told reporters the verdicts were "tragically wrong ...perplexing, frustrating." "I don't think the justice system is capable of dealing with financial crimes of this type," Jones said. McGinn and Smith were allowed to remain free on $100,000 unsecured bond until sentencing by U.S. District Judge David N. Hurd. The five-week trial featured allegations from prosecutors that the brokers made up loan documents, misled investors, lied to federal regulators and used investors' dollars for personal expenses and to pay off "preferred" investors who were otherwise losing money but needed to keep their struggling firm afloat. The indictment charged the two men with conspiracy, wire and mail fraud, and tax evasion. The defendants were accused of defrauding dozens of investors — and diverting $4.1 million from investment trusts for their own benefit. The fees were cast as "loans" in backdated documents that McGinn and Smith provided to the Financial Industry Regulator Authority, testimony showed. The trial featured more than two dozen witnesses, including testimony from McGinn, Smith, their ex-business partner Matthew Rogers of Miami, and their accountant, Ronald Simons of Binghamton. Rogers testified that fees he received — along with McGinn and Smith — were not going to be repaid. Prosecutors said that by characterizing the payments as loans, the men each avoided paying more than $240,000 in taxes. McGinn and Smith shut down their firm three years ago before federal regulators obtained a court order to freeze their bank accounts. The U.S. Securities and Exchange Commission said McGinn and Smith defrauded 900 investors of more than $130 million. A civil complaint was filed as a criminal investigation continued, fueled by a series of raids of the offices and homes of McGinn and Smith. Read more: http://www.timesunion.com/business/article/McGinn-Smith-guilty-of-investor-swindle-4255993.php#ixzz2KAaM9bdD