A focus of a typical bail hearing is flight risk – is the person charged likely to return for the pending court proceedings and face the charges. Recently, a long established investment adviser was arrested on fraud charges. He had three separate offices in the community. Bail was set and the adviser was released. It was soon revoked. Law enforcement officials discovered that the adviser did indeed return to the community. He also continued to fleece investors. Bail was revoked; new charges were brought; a guilty plea followed. U.S. v. Newsholme, No. 3:17-mj-05015 (D. N.J.).
Scott Newsholme owned and operated at least three different financial advisory and tax return preparation businesses in the area where he lived, Farmingdale New Jersey. Over a ten year period, beginning in 2007 and continuing until last year, he furnished investment advice to clients. At times he recommended that the clients permit him to invest their hard earned cash in various securities, municipal bonds, movies and other investments. Mr. Newsholme also recommended more traditional securities including, mutual funds, annuities, life insurance policies, college education accounts and money market funds.
The adviser would have the client write a check for the amount they sought to invest to him or one of his firms. Mr. Newsholme then cashed the check and diverted the investor money to his personal use. When clients sought to withdraw their funds he used money diverted from other clients to facilitate the withdrawal. Clients were also furnished with fraudulent account statements.
In September 2017 Mr. Newsholme was arrested and charged in a criminal complaint with mail fraud, wire fraud and securities fraud. He was released on bail in October 2017. During his release Mr. Newsholme provided a letter to one of his investment clients from whom he had misappropriated $62,000. The letter was from an attorney. It represented that the client’s funds were safely deposited in the attorney’s escrow account. The letter was a fabrication; the attorney’s signature was forged. Overall Mr. Newsholme misappropriated over $3.1 million.
When his bail was revoked a new criminal complaint was prepared, adding additional charges. This week Mr. Newsholme pleaded guilty to charges of wire fraud, preparing false tax returns and aggravated identity theft. Sentencing is scheduled for July 19, 2018. See also SEC v. Newsholme, Civil Action No. 3:17-cv-06813 (D.N.J.).