SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16735 / September 28, 2000
Securities and Exchange Commission v. Robert C. Sears (United States District Court for the District of Massachusetts C.A. No. 00 CV 30170-FHF)
SEC Obtains Temporary Restraining Order and Asset Freeze Against Massachusetts Investment Adviser Who Defrauded Clients of $1.9 Million
The Securities and Exchange Commission ("Commission") announced today the entry of a temporary restraining order and asset freeze against Robert C. Sears of Northampton, Massachusetts, based upon allegations that Sears defrauded his investment advisory clients of over $1.9 million. The Commission alleged that, beginning in February 2000, Sears, an unregistered investment adviser, misappropriated funds from several clients' brokerage accounts and fraudulently induced other clients to transfer funds to an entity he controlled. Sears obtained over two thirds of the funds from elderly clients over 65. According to the Commission's Complaint filed on September 26, Sears accomplished his misappropriation by forging clients' signatures on at least 13 Letters of Authorization directing brokerage firms to transfer client funds to his own corporation and forging client signatures on margin agreements to obtain unauthorized margin loans. For example, Sears used such forged documents to take over $500,000 from one client, including the client's retirement savings and college funds for the client's three young sons.
According to the Commission's Complaint, Sears transferred his clients' money to Last Minute Concessions Inc., a Massachusetts corporation of which he is president and co-owner with James W. Casagrande of Pelham, Massachusetts. Last Minute used the fraudulently obtained money to buy a controlling interest in Cold Spring Golf Course Inc., a company developing a golf course near Belchertown, Massachusetts. Last Minute also used money from Sears' clients to buy an interest in Cold Spring Development Inc., which is building a condominium project associated with the golf course. The Complaint named Casagrande, Last Minute, and the two Cold Spring companies as relief defendants, alleging that they were unjustly enriched through their receipt of illegally obtained funds from Sears.
On September 26, 2000, the Honorable Frank H. Freedman of the U.S. District Court for the District of Massachusetts granted the Commission's motion for an ex parte order temporarily restraining Sears' fraudulent activities, freezing Sears' assets and the assets of the relief defendants obtained from Sears' clients, and imposing other equitable relief. A hearing on the Commission's motion for a preliminary injunction has been scheduled for October 6, 2000.
The Commission's Complaint alleged that Sears violated the antifraud provisions of the federal securities laws, including Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The Commission coordinated its investigation with the Massachusetts Securities Division in the Office of the Secretary of State of the Commonwealth of Massachusetts. On September 27, the Massachusetts Securities Division entered an order requiring Sears to cease and desist operating as an unlicensed investment adviser in Massachusetts.