A Chatham, N.J., advisor and his firm have been fined $500,000 for fraudulently raising $6.1 million from elderly investors who thought they were putting their money into classic New Jersey diners, New Jersey Attorney General Gurbir S. Grewal announced on Friday.
Richard Belott, the managing member and investment advisor representative of Financial Planning Advisors LLC, and the firm also lost their state registration because of the scheme, which included Belott using $1.55 million of the investors’ money for his own expenses, according to the state Division of Consumer Affairs’ Bureau of Securities.
The securities sold to the eight investors were unregistered and the money was supposed to go into diners and real estate, but instead Belott used part of the money to pay for his daughters’ college tuition, extravagant trips for himself and his wife, and mortgage payments on the couple’s New Jersey beach house, the attorney general said.
Between 2008 and 2015, Belott and the firm offered and sold at least 24 promissory notes purportedly issued by local diners and a real estate developer. In reality, instead of receiving promissory notes from the diners or developer, investors received personal promissory notes from the owners of those businesses, who had undisclosed business relationships with Belott. In at least one instance, Belott issued the promissory note, the attorney general said.
The promissory notes had a term of one year or more with stated interest rates ranging from 5 percent to 18 percent annually. Interest and principal payments to the investors were paid from the bank accounts of various entities, including the diners, developer and FPA, Grewal said.
In offering and selling the promissory notes, Belott failed to disclose to investors that: the diners and developer purportedly issuing the promissory notes were clients of his accounting firm, that he had outside business relationships with the owners of the businesses, or that he was a co-owner of some of the diners. Belott also failed to disclose that he received a commission on the sale of certain promissory notes he sold, or that he would use the investors’ funds for his personal benefit, Grewal said.