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SEC Charges Perpetrator of Washington-Area Ponzi Scheme


Washington, D.C., Nov. 18, 2011 — The Securities and Exchange Commission today charged a Bethesda, Md. man and several family members and friends with conducting a multi-million dollar Ponzi scheme targeting investors in the Washington D.C. metropolitan area.

The SEC alleges that Garfield M. Taylor lured primarily middle-class residents in his community with little to no investing experience to invest in promissory notes issued by his two companies that engaged in purportedly low-risk options trading. Taylor urged investors to refinance their homes and use any available means to invest, including their personal savings and retirement funds. He promised returns as high as 20 percent per year and falsely assured investors that their investments would be protected by a “reserve account” or that he would employ a “covered call” trading strategy that would not touch the principal amount of their investment.

According to the SEC’s complaint filed in federal court in Washington D.C., Taylor and his companies instead engaged in very high-risk, speculative options trading and suffered massive losses. Taylor relied upon money from new investors to pay returns to earlier investors in typical Ponzi scheme fashion. He also siphoned off $5 million in investor funds to pay family and friends and for other personal uses, including $73,000 to the private school his children attended.

“Garfield Taylor and his partners in the scheme touted themselves as seasoned and trustworthy financial professionals offering a conservative but lucrative investment opportunity. In reality, they were gambling away investor assets in extremely risky trades and operating a classic Ponzi scheme,” said Stephen L. Cohen, Associate Director of the SEC’s Division of Enforcement.

The SEC alleges that the Ponzi scheme defrauded more than $27 million from approximately 130 investors from 2005 to 2010. The scheme ultimately collapsed in the fall of 2010 when the companies’ accounts were depleted by the trading losses and interest payments to investors.

The SEC’s complaint charged Taylor’s companies Garfield Taylor Inc. and Gibraltar Asset Management Group LLC — which were not registered with the SEC — as well as five collaborators in Taylor’s scheme:

  • Maurice G. Taylor of Bowie, Md., who is the brother of Garfield Taylor. He is the Chief Investment Officer at Gibraltar and worked as a trader for Garfield Taylor Inc.
  • Randolph M. Taylor of Washington D.C., who is the nephew of Garfield Taylor. He was formerly the Vice President for Organizational Development at Gibraltar.
  • Benjamin C. Dalley of Washington D.C., who is the childhood friend and business partner of Randolph Taylor. He was formerly Vice President of Operations at Gibraltar.
  • Jeffrey A. King of Upper Marlboro, Md., whose sister is married to Maurice Taylor. He was a former independent contractor for Garfield Taylor Inc. and former President and Chief Operating Officer of Gibraltar.
  • William B. Mitchell of Middle River, Md., who was formerly Vice President for Finance at Garfield Taylor Inc. and former Executive Vice President of Strategic Planning at Gibraltar.

According to the SEC’s complaint, Garfield Taylor and the others jointly prepared and finalized a Gibraltar PowerPoint presentation for prospective investors that was riddled with false and misleading statements. They misrepresented the nature of the company’s options trading strategy, the anticipated rate of return, the protections offered by its outside accountant, and the overall level of risk involved in an investment with Gibraltar. They pitched the PowerPoint presentation to potential institutional investors and charitable organizations, including a Washington D.C.-based children’s charity and a Baptist church in Maryland. Garfield Taylor went so far as to provide the Baptist church with a fake “letter of recommendation” from Charles Schwab as he pitched the investment opportunity.

The SEC alleges that in order to maintain a steady flow of new investor money, Garfield Taylor induced current investors and others including King and Mitchell to solicit and refer new investors to him in exchange for commission payments based on the amounts invested. Garfield Taylor, who was not a licensed securities broker, persuaded several individuals to give him online access to their personal brokerage accounts so he could place trades and give them a promised share of any profits generated.

The SEC’s complaint charges each of the Taylors, Dalley, King, Garfield Taylor Inc. and Gibraltar Asset Management Group with violating the anti-fraud provisions of federal securities laws. The SEC charged Garfield Taylor, King, and Mitchell with violating the broker-dealer registration requirements, and Garfield Taylor, Garfield Taylor Inc. and Gibraltar Asset Management Group with violating the offering registration requirements of the federal securities laws. The SEC seeks a judgment permanently enjoining the defendants from future violations of the relevant provisions of the federal securities laws and ordering them to pay penalties and disgorgement with prejudgment interest. The SEC also named three companies belonging to Randolph Taylor, Dalley, King, and Mitchell as relief defendants for the purposes of seeking disgorgement with prejudgment interest of investor funds in their possession.

The SEC’s investigation was conducted by Sarah Allgeier, Richard Johnston and Donato Furlano. The SEC’s litigation will be led by Richard Hong.

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For more information about this enforcement action, contact:

Stephen L. Cohen
Associate Director, SEC Division of Enforcement
(202) 551-4472

Jennifer S. Leete
Assistant Director, SEC Division of Enforcement
(202) 551-4971



Modified: 11/18/2011