The SEC filed an action against a Texas and Mexico based unregistered investment adviser, Jorge Gomez, charging that he misappropriated millions of dollars from one client. The Commission’s complaint also named as a defendant the broker and investment adviser for whom he acted as a “finder,” Roberto Espinosa. SEC v. Gomez, Civil Action No. 1:12-cv-21962 (S.D. Fla. Filed May 29, 2012). Mr. Espinosa settled. Mr. Gomez did not.

Over a three year period beginning in 2007, Mr. Gomez misappropriated over $4.3 million from an advisory client who had entrusted him with $10.8 million to invest. The client came to Mr. Gomez based on his false claims about affiliations with Bank of New York Mellon and Pershing LLC as well as his investment strategy. Mr. Gomez also made false representations regarding the client’s proposed relationship to Pershing and BNY Mellon.

During the relationship Mr. Gomez concealed his illegal acts from the client by furnishing him with false account statements which overvalued the account. He also furnished the client with fraudulent certificates for fictitious securities supposedly held In the client’s account. In addition, Mr. Gomez created a fake customer service hotline to take calls from the client.

Mr. Gomez prolonged the scheme by threatening the client if he withdrew his money. In correspondence the client was told that legal action would be taken under IRS regulations and the Patriot Act if the funds were withdrawn.

Mr. Espinosa provided advisory and brokerage services to the client during the time period of his relationship with Mr. Gomez. Although he was aware of the wrongful actions by Mr. Gomez, he failed to inform the client. He also did not disclose certain fees.

The complaint alleges as to Mr. Gomez, violations of Exchange Act Section 10(b) and Advisers Act Sections 206(1) and (2). As to Mr. Espinosa the complaint alleges violations of Exchange Act Section 15(a) and Advisers Act Sections 206(1), (2) and (4).

Mr. Espinosa settled with the Commission, consenting to the entry of a permanent injunction prohibiting future violations of the Sections cited in the complaint. He also agreed to pay disgorgement of $855,000 along with prejudgment interest and a civil penalty of $130,000. The case is in litigation as to Mr. Gomez.

ABA Program: The New Era of FCPA Enforcement and the Collapse of the Africa Sting Cases: Time to Reevaluate? Tuesday June 5, 2012, 12:00 PM to 1:30 PM EST, Live in Washington, DC and webcast.

Moderators: Thomas O. Gorman, Partner, Dorsey & Whitney LLP, Washington, D.C. and Frank C. Razzano, Partner, Pepper Hamilton, LLP, Washington, D.C.

Panel: John D. Buretta, Deputy Asst. AG, Criminal Division, DOJ, Washington, D.C.; Charles E. Cain, Deputy Chief FCPA Unit, SEC, Washington, D.C.; France Chain, Senior Legal Analyst, Anti-Corruption Division, OECD, Paris, France; Prof. Mike Koehler, Butler University, Indianapolis, Ind.; Hon. Stanley Sporkin, Washington, D.C.; Greg D. Andres, Partner, Davis Polk, New York, New York; Eric Bruce, Partner, Kobre & Kim, New York, New York. Live Presentation from Washington, DC.

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