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September 23, 2019Cart

Business

by Westchester County Business Journal
by WCBJ

Rockland investment adviser pleads guilty in $11M fraud

Hector May, the president of Executive Compensation Planners Inc., a now-defunct investment adviser and financial planning firm in New City, pleaded guilty yesterday to participating in a conspiracy to defraud investment advisory clients out of more than $11 million.

The Securities and Exchange Commission then in turn charged May and his daughter, Vania Bell, with running a multimillion-dollar Ponzi scheme.

In the case brought by the U.S. Attorney’s Office of the Southern District of New York, May, 77, of Orangeburg, pleaded guilty to one count of conspiracy to commit wire fraud and one count of investment adviser fraud.

The conspiracy charge carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the crime. The fraud charge carries a maximum sentence of five years in prison and a maximum fine of $10,000 or twice the gross gain or loss from the offense.  

Sentencing was set for March 15, 2019.

In June, the federal government froze the financial accounts of May and his wife while conducting a criminal investigation for possible securities fraud.

According to the court filing, May had been president of Executive Compensation Planners since 1982. From the late 1990s through March 9, 2018, he and a co-conspirator defrauded victims of $11.4 million.

According to the filing, since 1994, May was a registered representative of a broker dealer (Broker Dealer-1). Broker Dealer-1 facilitated the buying and selling of securities for clients of its registered representatives, including clients of May. The broker dealer and associated clearing firms maintained securities accounts for ECP’s clients and, through those accounts, held ECP’s clients’ money, executed their securities trades, produced account statements reflecting activity in the clients’ accounts, and forwarded these account statements to ECP’s clients.

In order to obtain money from the clients’ accounts with the broker dealer, May suggested the clients should use money from those accounts to have ECP, rather than the broker dealer, buy bonds on their behalf. By buying bonds directly through ECP, the clients could avoid transaction fees. Because he lacked the authority to withdraw money directly from their accounts, May persuaded the clients to withdraw the money themselves and to forward the money to an ECP “custodial” account.

Once the money was in the account, May did not use the money to buy bonds. Instead, he and a co-conspirator spent the money on business expenses, personal expenses, and to make payments to certain clients in order to perpetuate the scheme and conceal the fraud.

To keep track of the money taken from the clients, the co-conspirator processed the payments for the purported bonds, entered them in a computerized accounting program, and, through that program, kept track of how May and the co-conspirator received and spent the stolen money.

In the SEC case, May and Bell, who served as ECP’s controller and senior compliance administrator, misappropriated more than $7.9 million in a Ponzi scheme involving bonds.

The SEC complaint, filed in federal court in White Plains, charges May and Bell with violating the antifraud provisions of the securities laws. May has agreed to the entry of a partial judgment against him in which he consents to injunctive relief with monetary and other relief to be decided in the future.

According to the SEC complaint, with Bell’s help, May lied to investors by promising to invest their money in bonds when they actually used the money to pay for personal and business expenses, as well as extravagant items, such as jewelry, furs, vacations, and a limousine driver. To conceal the fraudulent scheme, they sent bogus account statements to clients referencing the bonds that had never been bought. 

“As alleged, this father-daughter team betrayed the very people who knew and trusted them – including family members, close friends, seniors, and local community members,” said Marc P. Berger, director of the SEC’s New York Regional Office.