Robbing Hood to Pay Paul
The SEC reported, October 24th, 2006, that Regald B. Smith "the Honorable Joseph M. Hood of the District Court for the Eastern District of Kentucky ordered former registered representative Regald B. Smith to pay disgorgement of $2,413,950.20 in connection with his scheme to defraud his brokerage customers out of funds through a fictitious bond scheme."
The complete story is a bit odd, as the SEC claimed in 2001 that "The Commission alleged that Smith, age 55, was, employed by Stifel as the Investment Executive in charge of the Firm's Pikeville, Kentucky office. Smith stole his clients' funds by luring them into believing he had a "special situation" he could offer them. He told them that other Stifel clients were interested, for one reason or another, in selling short-term bonds from their portfolio. The bonds were particularly attractive not only because they were short-term, but also because they were tax-free and promised high yields. After his victims gave him money to purchase the bonds, Smith simply diverted their funds to his own personal use, including the renovation of the Hotel Anthony in Pikeville. To conceal his deceit, Smith told at least one of his victims at or about the time the first bond he sold to them was about to mature, that he could reinvest the client's original investment, plus accrued interest, into another tax-free bond. Smith's repeated this ploy until the victim had written and given Smith checks totaling $3.8 million, all of which Smith misappropriated. Smith also admitted that he tried to cover-up his scheme by, among other things, attempting to convince a bank officer to issue him copies of legitimate bond certificates which he could pass off as the fictitious bonds he was selling."
I would hazard a guess that the Hotel Anthony in Pikeville is not a 5 Star establishment raking in the internet reservation crowd.
Technorati Tags: term bonds, ponzi, Pikeville
