A Long Island, N.Y., financial advisor has been charged with misappropriating more than a million dollars from a California couple to pay for a lavish lifestyle that included purchases of jewelry, clothing and a luxury car as well as golf club membership fees.
Jeffrey L. Slothower, 43, of Southampton was arrested early yesterday and an indictment was unsealed in the U.S. District Court for the Eastern District of New York, according to the U.S. Department of Justice. He faces up to 20 years in prison if convicted, the DOJ said.
Slothower is a former SEC-registered advisor and until 2016 worked at Merrill Lynch Pierce Fenner & Smith, according to BrokerCheck. He founded his own firm, Battery Private, in New York City in 2016.
Prosecutors said he approached two married clients who had worked with him previously, peppering them with texts, emails and phone calls to get them to invest with his new venture. First the wife, in 2016, and then the husband, in 2017, signed an advisory agreement with Battery Private. According to the prosecutors, Slothower said he could get the couple investments with better returns without risk. He told the husband, who asked for a more conservative portfolio, that he would invest their money in bonds backed by homeowner’s association fees, promising these securities would return 8% per year, payable quarterly. The investment documents, in detailing the rate of return, said that the investments would be held as “capital reserves” of Private Battery.
At Slothower’s behest, the husband made three wire transfers in January 2017 to a New York-based bank account, First Battery Private Bank Account, totaling $546,727. But Slothower did not invest the money or hold it in reserve, the indictment said.
“Instead, Slothower misappropriated the money, including by, among other things: (i) transferring more than $70,000 to his personal bank account, funds which were then used to pay $10,000 to Slothower’s wife, $1,000 to Slothower’s mother, and to pay down the balance of a credit card in Slothower’s name that had been used to purchase luxury clothing and jewelry; (ii) purchasing a luxury automobile for approximately $125,000; (iii) paying approximately $19,000 in fees to a private golf club on Long Island; (iv) paying off approximately $13,432 in debt on his mother’s car loan; and (v) purchasing real estate and securities in other companies,” the indictment said.
The car was a Mercedes-Benz G-Class SUV, according to a separate Securities and Exchange Commission complaint.
Slothower did direct checks to be cut to the husband in April, July and October 2017, for about $10,934 each, but the funds for these did not come from bonds or interest linked to homeowner’s association fees, prosecutors said.
The wife was similarly asked to move $540,208 from a personal bank account to the First Battery Private Bank Account in December 2017, but this money also never made it to HOA bonds or capital reserves, the U.S. Attorney said. (According to the SEC, the private bank account previously held 89 cents when the wife transferred her assets to it.) Prosecutors said that Slothower transferred $76,000 of the wife’s investment to his personal bank account and used $33,599 to pay down his personal credit cards. In June 2018, the husband sent another $84,000 in wire transfers to a Washington, D.C.-based bank account. This money was also misappropriated, in part for payment to a private Long Island golf club, while some of the money went right back to the husband client as a regular payment even though it had never been invested, prosecutors said.
After the quarterly payments stopped in November 2018 and Slothower told the clients that he might have to return their principal, the husband demanded that the advisor return the couple’s investments and earnings. Slothower offered an alternative investment, which was refused. Slothower said in other instances he would return the money but didn’t, the indictment said.