U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23612 / August 5, 2016
Securities and Exchange Commission v. Patrick Churchville, et al. No. 15-cv-00191-S-LDA (May 7, 2015) (D. R.I.)
United States v. Patrick Churchville, Criminal Action No. 1:16-cr-00068-S-LDA (July 5, 2016) (D. R.I.)
Rhode Island Investment Adviser Pleads Guilty to Orchestrating a $21 Million Ponzi Scheme
On August 4, 2016, Patrick Churchville, a defendant in an ongoing SEC litigation, pled guilty to an information charging him with five counts of wire fraud and one count of tax evasion in connection with orchestrating a $21 million Ponzi scheme and additional misappropriation from funds he advised. The court accepted Churchville's plea and scheduled sentencing for October 25, 2016 at 9:30 a.m.
The SEC previously charged Churchville, the owner and president of ClearPath Wealth Management, LLC, an investment adviser formerly located in Providence, Rhode Island, and ClearPath in a civil action filed on May 7, 2015. According to the SEC's complaint, from at least December 2010, ClearPath and Churchville diverted deposits from investors to pay other investors, used proceeds from selling particular investments to pay unrelated investors, used investors' funds as collateral for loans to make investments for their own benefit then used other investors' money to repay the loans, and converted investor funds into investments for ClearPath's own benefit. Churchville borrowed money by using investors' funds as collateral, without investors' knowledge, and stole $2.5 million of the borrowed money in order to purchase his waterfront home in Barrington, Rhode Island. The complaint alleges that Churchville and ClearPath used a variety of deceptive acts and misleading accounting tricks to conceal their fraud from auditors, accountants, fund administrators, and their own staff.
The criminal information filed by the United States Attorney for the District of Rhode Island additionally alleges that Churchville failed to report the $2.5 million as income on his tax returns, which resulted in a loss to the Internal Revenue Service of approximately $820,000 in personal income taxes.
The SEC's litigation against Churchville and ClearPath continues. The SEC's complaint seeks a permanent injunction plus disgorgement, prejudgment interest, and penalties. The SEC's investigation is also continuing. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of Rhode Island, the Federal Bureau of Investigation for the District of Rhode Island, the Internal Revenue Service — Criminal Investigation Division and the United States Postal Inspection Service.
For further information, please see Litigation Release No. 23255 (May 8, 2015).