SEC Files Bond Fraud Charges Against South Florida Company
On August 14th, 2018, the Securities and Exchange Commission (SEC) announced investment fraud charges against two companies and eighteen different individuals. One of the investment firms, Core Management Performance, LLC (CPM), is based in Boca Raton, Florida, and was operated by four South Florida individuals:
- James Scherr of Boca Raton, FL;
- Deborah Dora of Lighthouse Point, FL;
- Sharelene F. Mesite of St. Lucie, FL; and
- James O’Neil of Jupiter, FL.
All four individuals have held securities licenses at some point in the recent past. According to the SEC, this was a longstanding fraud scheme that improperly diverted bonds to broker-dealers at the expense of ordinary investors. Here, our Miami investment fraud attorneys review the specific allegations raised in the SEC’s complaint.
SEC Complaint: Bond Fraud
The Investment Fraud Scheme
The SEC filed its complaint against Core Performance Management et. al. in the United States District Court for the Southern District of Florida. The agency alleges that the perpetrators used CPM to improperly place retail orders on behalf of broker-dealers, thereby preventing actual retail investors from receiving the proper priority on these municipal bond offerings.
The Mechanics
Federal regulators allege that CPM created the false impression that they were purchasing bond offerings on behalf of ordinary investors. By doing so, they were able to receive priority on certain orders. They concealed the true identity of their business operation by:
- Providing fraudulent zip codes to qualify for certain restricted municipal bond offerings;
- Creating a scheme of false accounts and false entities to maximize the number of orders they could place; and
- Employing deceptive means to conceal the fact that they were purchasing bonds solely for the purpose of flipping them.
Altogether, more than 25 different fake business names were used to get access to these offerings. The SEC contends that the perpetrators used names such as Dockside Asset Management and Chapel Bay Asset Management to give false impressions that retail investors were getting access to these priority bond offerings.
Ordinary Investors Were Damaged
In most cases, municipal issuers mandate that underwriters provide retail investors with the highest priority. This is particularly true of investors who actually reside within the jurisdiction of the municipal bond issuer. By taking advantage of priority that should not have been available, CPM took in millions in illicit profits and forced investors to pay unfair prices.
In this case, NW Capital Markets Inc. (CRD#: 17622) and its former representative Charles Kerry Morris (CRD#: 1047626) allegedly received illegal kickbacks to help CPM get around these regulations. NW Capital and Mr. Morris have been fined more than $340,000 for their role. Mr. Morris was also suspended to the securities industry for six months.
Get Help From Our Miami Investment Fraud Lawyers
At Carlson & Associates, P.A., we advocate for investors. If you or your family member sustained serious investment losses, our FINRA arbitration lawyers are ready to help. For a no fee, no risk review of your claim, please contact us at our Miami law office today.
Resources:
sec.gov/news/press-release/2018-153
brokercheck.finra.org/firm/summary/17622
brokercheck.finra.org/individual/summary/1047626
sec.gov/litigation/complaints/2018/comp-pr2018-153.pdf