LITIGATION RELEASE NO. 17959 / JANUARY 31, 2003
SECURITIES AND EXCHANGE COMMISSION V. ROBERT C. SEARS, Civil Action No. 00CV30170-FHF(D. MA) United States District Court for the District of Massachusetts (September 26, 2000)
Former Investment Adviser Sears Criminally Indicted for Securities Fraud
The Securities and Exchange Commission ("Commission") announced today that on January 23, 2003, Robert C. Sears ("Sears") of Northampton, Massachusetts and Block Island, Rhode Island was criminally indicted by the U.S. Attorney for the District of Massachusetts for wire fraud.
The indictment alleges that from February 1, 2000 to September 15, 2000, Sears, an unregistered investment adviser, misappropriated more than $1.3 million of his clients' funds by causing unauthorized wire transfers from his clients' accounts at several brokerage firms. To accomplish the transfers, Sears either forged his clients' signatures on letters directing the brokerage firms to transfer funds or fraudulently induced clients to transfer funds to the bank account of a corporation, Last Minute Concessions, Inc. ("Last Minute"), of which Sears was the president and 50% owner. To generate the transferred cash, Sears forged client signatures on margin agreements and obtained unauthorized margin loans in client accounts. Last Minute used the money to buy a controlling interest in Cold Spring Golf, an entity developing a golf course near Belchertown, Massachusetts. Last Minute also purchased stock in Cold Spring Development, which was to build an adjoining condominium community. The indictment further alleges that when Sears' clients eventually learned of the transfers and began to question Sears, he provided varying false explanations and failed to disclose material facts, including his own financial interest in Last Minute and Last Minutes' controlling interest in Cold Spring Golf. If convicted on the current criminal charges, Sears faces up to five years imprisonment and a $250,000 fine.
On September 26, 2000, the Commission filed a civil complaint in connection with the scheme described above. The Commission's complaint charged that Sears' conduct violated the antifraud provisions of the Securities Act of 1933 (Section 17(a)), the Securities Exchange Act of 1934 (Section 10(b) and Rule 10b-5 thereunder), and the Investment Advisers Act of 1940 (Sections 206(1) and 206(2)). On September 10, 2002, the United States District Court for the District of Massachusetts entered a default judgment against Sears enjoining him from further violations of the antifraud provisions cited above and ordering him to pay disgorgement and prejudgment interest of over $2.5 million and a penalty of $500,000.
The Commission also obtained a default judgment against Sears on January 13, 2003 in an administrative proceeding before an Administrative Law Judge, who ordered Sears barred from acting as an investment adviser and from associating with an investment adviser.