The U.S. Attorney’s Office has issued a statement announcing that Patrick E. Churchville, the president and owner of ClearPath Wealth Management, will plead guilty to one count of tax fraud and numerous counts of wire fraud related to the running a $21M Ponzi scam. According to prosecutors, Churchville also used $2.5M of investor money to buy a house and neglected to pay over $820K of his federal income taxes.
Court documents report that a federal probe determined that from ‘08 through October ’11 the Rhode Island investment adviser and his firm invested about $18M in JER Receivables on behalf of investors. The government said that in 6/10, Churchville found out that the investments were no longer rendering returns and that ClearPath had been the subject of misleading and fraudulent representations by JER principals. However, instead of notifying clients that he lost millions of dollars of their money, he tried to hide the losses while continuing to collect investment fees.
As a result, Churchville misappropriated about $21M of investor money, misusing their funds while bringing in money from new investors. For example, he used investor money to repay JER investors while pretending that the funds were investment returns. He also lied when he told investors that past investments with JER Receivables had resulted in high return rates.
The government’s probe, conducted by the FBI, the U.S. Attorney’s office, and the IRS Criminal Investigation, also found that Churchville set up a scam in which he used investor money as collateral and, without their permission, used the funds to help him get $2.5M to buy a home. He did not report that money as income on his personal tax returns, hence the more than $820K nonpayment of his taxes.
In addition to this criminal case, Churchville is also a defendant in the Securities and Exchange Commission’s civil lawsuit against him. The regulator filed the charges last year. The SEC is accusing him and ClearPath of engaging in deceptive actions and misleading accounting tricks to fool accountants, auditors, fund administrators, and others.
Unfortunately Ponzi scams can lead to devastating losses for investors who are misled into believing that they are earning significant return—that is until the scheme is exposed and/or collapses. Please contact our securities lawyers at Shepherd Smith Edwards and Kantas, LTD LLP to request your free consultation with an experienced investment adviser fraud lawyer.
Investment Advisor to Plead Guilty to Orchestrating $21M Dollar Ponzi Scheme, Justice.Gov, July 5, 2016