Idaho Man Pleads Guilty to Scheming to Defraud Investment Company of $3.1 Million

BOSTON, MA—An Idaho man was convicted today in federal court of one count of wire fraud in connection with a scheme to defraud an investment company of $3.1 million in order to buy and sell securities using the company’s money rather than his own.

United States Attorney Carmen M. Ortiz and Warren T. Bamford, Special Agent in Charge of the Federal Bureau of Investigation - Boston Field Division, announced today that TIMOTHY PATRICK FLAHERTY, age 28, of Idaho, pled guilty before U.S. District Judge Nancy Gertner to one count of wire fraud.

At today’s plea hearing, the prosecutor told the Court that had the case proceeded to trial the government’s evidence would have proven that FLAHERTY, formerly an employee of a savings and loan association, had been in debt due to failed investments. To obtain more money for investing, FLAHERTY began a scheme that lasted from September 10 through 22, 2008. During this period, FLAHERTY initiated 31 separate electronic funds transfers (EFTs) of $100,000 apiece to transfer a total of $3.1 million from his checking account at a bank into his brokerage account at a separate investment company, even though the checking account had less than $1,300 when the fraud began. FLAHERTY knew that he did not have $3.1 million, that it would take the investment company one or two days to learn that he lacked the money, and that the investment company would advance him the funds in the meantime. When FLAHERTY received the advanced funds, he used them to buy and sell over $2 million in stock before the EFTs were rejected. At that point, the investment company liquidated FLAHERTY’s stock purchases and lost over $547,000. FLAHERTY then promised the investment company to repay it, never made a payment, and eventually left his home without giving his relatives an address or telephone number at which to contact him.

Judge Gertner scheduled sentencing for March 25, 2010. FLAHERTY faces up to 20 years of imprisonment, to be followed by three years of supervised release; a fine of $250,000 or twice the gain or loss, whichever is highest; and restitution to the investment company.

The case was investigated by the Federal Bureau of Investigation. It is being prosecuted by Assistant U.S. Attorney Scott L. Garland of Ortiz’s Computer Crime Unit.