Sunday, November 23, 2014
Amsterdam, NY ,

Brokers charged by SEC

Saturday, September 28, 2013 - Updated: 4:08 AM


Ten additional former brokers of McGinn, Smith & Co., Inc., a firm accused of swindling millions of dollars from area residents, were charged by the Securities and Exchange Commission earlier this week.

Co-owners Timothy M. McGinn and David L. Smith were charged criminally by the U.S. Attorney's Office and found guilty on numerous counts of wire and securities fraud, conspiracy and filing a false tax return.

The SEC filed an emergency action in 2010 to stop the scheme and freeze the assets of the firm, McGinn and Smith. McGinn was sentenced to 15 years in prison and Smith, an Amsterdam native, 10 years last month.

According to the new charges, the SEC alleges that 10 employed brokers, in addition to McGinn and Smith, recommended the investment products involved in the scheme made "material misrepresentations and omissions to their customers."

These representatives, a news release said, ignored red flags that should have led them to "conduct due diligence into the securities they were recommending to their customers."

"As securities professionals, these brokers had an important duty to determine whether the securities they recommended to customers were suitable, especially when red flags were apparent," Andrew M. Calamari, director of the SEC's New York Regional Office, said in the release. "These registered representatives performed inadequate due diligence and failed to fulfill their duties."

The brokers charged include: Donald J. Anthony Jr. of Loudonville, Frank H. Chiappone of Clifton Park, Richard D. Feldmann of Delmar, William P. Gamello of Rexford, Andrew G. Guzzetti of Saratoga Springs, William F. Lex of Phonexville, Pa., Thomas E. Livingston of Slingerlands, Brian T. Mayer of Princeton, N.J., Philip S. Rabinovich of Roslyn and Ryan C. Rogers of East Northport.

Guzzetti was the managing director of McGinn, Smith & Co.'s private client group from 2004-09, according to the news release, and supervised brokers who recommended the firm's products. The SEC's enforcement division alleges that Guzzetti failed to take action to investigate the offerings and instead encouraged brokers to sell the notes, despite having knowledge of "serious red flags."

The nine other brokers, the filing states, should have conducted research prior to recommending the products to their customers. In 2009, Smith and McGinn received emails telling them the investors were wondering "if they've bought into a Ponzi scheme," and a broker reported to McGinn and Smith that there are "many people who refer to our deals as a Ponzi scheme."

In 2006, a broker sent an email to Smith telling him that an investor wanted to redeem $100,000 in notes and purchase $100,000 in one of the trusts. In an email, Smith replied that the broker "needs to replace the $100,000 before doing the trade." According to the filing, Smith continued: "I am running on fumes with all these redemptions and cannot afford anymore."

The news release said the SEC's civil case continues against the firm, McGinn and Smith.


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