Ex-advisor and daughter’s $11M fraud paid for diamonds and pearls, feds say
Over a 20-year period, former Securities America advisor Hector May allegedly pretended to be investing in bond funds when, instead, he was spending $11.5 million of his clients' money to buy the trappings of luxury, including diamonds, pearls and a mink coat for his wife.
May and his daughter Vania Bell, a senior compliance staffer at their now-shuttered RIA, Executive Compensation Planners, ran their Ponzi scheme via QuickBooks, according to the SEC and the U.S. Attorney’s Office for the Southern District of New York.
Securities America is a subsidiary of independent broker-dealer network Ladenburg Thalmann. In September, the SEC accused Ladenburg's primary shareholder Phillip Frost of participating in a $27 million pump-and-dump scheme. The firms didn't respond when asked if former clients of the New City, New York-based practice will be quickly compensated for their losses after May pleaded guilty to fraud.
“This father-daughter team betrayed the very people who knew and trusted them – including family members, close friends, seniors and local community members,” Marc Berger, the SEC's New York regional director, said in a statement.
May could face 20 years in prison. His daughter has not been charged with any crimes.
The SEC filed civil charges on Dec. 13 against May and Bell, while naming his wife Sonia May as a relief defendant, from whom the regulator hopes to recover losses for victims. May pleaded guilty in White Plains federal court to charges of conspiracy to commit wire fraud and investment adviser fraud.
He has agreed to forfeit items such as a diamond Cartier bracelet and jackets made of mink and fox fur. Federal investigators disclosed the felony investigation on FINRA BrokerCheck in March, when Securities America fired May amid allegations of misappropriation.
The firm's supervision of May is the subject of at least two arbitration claims with $3.9 million in combined requested damages. In its third-quarter earnings, Ladenburg also said 14 customers claim an unnamed former Securities America representative defrauded them of $21.9 million in arbitration cases.
May had convinced clients to move their assets into his outside RIA by telling them they would avoid fees, among other inducements, investigators say.
“This kind of criminal behavior undermines the strength and security of our financial systems,” William Sweeney, assistant director in charge of the FBI's New York office, said in a press release. “Today’s conviction should serve as a warning to those who think they can get away with similar schemes — the FBI and our law enforcement partners will discover the truth and hold you accountable for your actions.”
The Justice Department disclosed a felony probe the day before the broker’s termination.April 6
A FINRA arbitration claim followed an asset freeze and the launch of a federal investigation into the fired advisor’s RIA.June 27
The 4,300-advisor network is investing in insurance distribution after benefiting from rising interest rates and record client assets.November 7
Neither Sonia May nor Bell, who is identified as a conspirator in May’s federal court case, face criminal charges. Representatives for the Southern District declined to comment on whether they could one day.
Reached by phone, May, 77, said, "No comment" and hung up when asked about the case last week. His lawyer didn’t immediately return a phone call. Bell, 53, has no attorney listed in court filings as representing her. There was no immediate response to attempts to reach her.
May "will try to focus on what he can do to make the parties whole," the former advisor's attorney, Kevin Conway, told the local Rockland County paper, The Journal News. “Mr. May entered a plea to accept responsibility and start to bring closure to this terrible tragedy for the 15 clients."
Omaha, Nebraska-based Securities America has noted it cooperated with authorities in their investigation.
When May joined the IBD in 1994 he was already a 20-year veteran in the industry, according to BrokerCheck. His daughter served as his firm's controller and senior compliance administrator, helping to prepare phony account statements sent to clients, SEC investigators say.
“There is nothing in this office that I don't know, haven't touched, haven't seen, haven't done,” she said in a recorded February 2016 conversation, according to the SEC complaint. “I am his daughter. I am his confidante.”
May and Bell tracked the fraud on the RIA’s balance sheets in QuickBooks under long-term liabilities, with money stolen from each client labeled as a “loan payable,” according to the SEC complaint.
To convince them to wire money from their Securities America accounts to his RIA, May offered the clients non-existent tax-free corporate bond products in companies like GE and General Motors, according to lawyer Jenice Malecki, who filed an arbitration claim in June against Securities America on behalf of nine clients.
“I am renewing a $75,000 bond today for one year," he emailed one of the victims in 2014, according to the SEC complaint. "I can get a higher rate (from 2.25 to 2.75%) if you are inclined to deposit an additional $25,000."
May then spent their money on Ponzi scheme payments to other clients, salaries for himself and his daughter, credit card bills, a limousine driver, country club dues, a vacation home and political contributions, the SEC says.
Federal prosecutors listed 20 luxury items May will forfeit to the government, including: pearl and diamond earrings, an antique grandfather clock, a Russian lynx vest and a matching blush-colored fox skin jacket and headband. He also agreed to turn over holdings in multiple bank and investment accounts.
The SEC is seeking disgorgement of stolen funds, plus interest, as well as a penalty. Conspiracy to commit wire fraud, one of the crimes to which May has admitted, carries up to 20 years in prison. His sentencing hearing before Judge Vincent Briccetti is scheduled for March.
May — who received an award from the Rockland Business Association in 2016 and served on its board — told the judge “I agree with the presentation” after federal prosecutors laid out the government’s case in last week’s hearing, according to the local news outlet.
“It's not the money, it's the betrayal of our trust and friendship,” one victim, April Voorhis, told The Journal News. "It's just a very sad day because this was a friendship of over 20 years. He was a man who was respected and considered a pillar of the community."