SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17088 \ August 3, 2001
SEC CHARGES UNREGISTERED INVESTMENT ADVISER FOR HIS FLAGRANT MISAPPROPRIATION OF CLIENTS' FUNDS
SECURITIES AND EXCHANGE COMMISSION V. CRAIG SCANLON AND SCANLON & ASSOCIATES, INC., Case No. 8:01-CV-1446-T-24TGW (M.D. Fla.)
The Securities and Exchange Commission (SEC) announced that on August 3, 2001, it filed a complaint against an unregistered investment adviser, Craig P. Scanlon and his company, Scanlon & Associates, Inc. of Madeira Beach, Florida. The SEC's complaint alleges that the defendants misappropriated over $700,000 from at least seven clients. At the same time, the United States Attorney's Office of the Northern District of Ohio announced that Scanlon was indicted and arrested for mail fraud and money laundering. The Office of the Comptroller of the Florida Department of Banking and Finance also announced today its filing of an administrative complaint with the intent to issue a cease and desist order against Scanlon.
According to the SEC's complaint, since at least June 1999, Scanlon has misappropriated over $700,000 from at least seven clients by employing a common scheme to defraud them. The SEC alleges that Scanlon had a professional relationship with each of the clients in Ohio during his previous associations with certain broker-dealers and, that based on those relationships, Scanlon knew that each of these clients had substantial funds. The SEC's complaint further alleges that Scanlon fraudulently induced these clients to sell their securities holdings at these broker-dealers and to transfer the monies to him with the promise that he would reinvest, and manage, their sales proceeds through Scanlon & Associates. The SEC also alleges that contrary to those representations and others, Scanlon diverted these clients' funds to purchase items such as, but not limited to, imports, Persian rugs, furniture and home entertainment equipment. Among other things, the SEC also alleges that Scanlon used the investors' funds to pay for his personal expenses such as credit card debts, personal loans, cars and utilities bills. In addition, the SEC alleges that Scanlon used investor funds to trade in common stock and to purchase at least five houses in or about the City of Madeira Beach, Florida.
The SEC's complaint charges the defendants with violating Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q, Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and Rule 10b-5, 17 C.F.R. 240.10b-5, promulgated thereunder; and Sections 206(1) and (2) of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-6. Those sections and rules prohibit fraud in the offer and sale, and in connection with the purchase and sale, of securities. In addition, the SEC seeks a court order against the defendants for an accounting, disgorgement and civil penalties.
The SEC appreciates the cooperative efforts of the United States Attorney's Office for the Northern District of Ohio, the Federal Bureau of Investigation and the Office of the Comptroller of the State of Florida Department of Banking and Finance in this coordinated effort.