Mail and Wire Fraud Charges Filed Against Franklin Financial Adviser Gordon B. Grigg
|U.S. Attorney’s Office April 22, 2009|
NASHVILLE, TN—U.S. Attorney for the Middle District of Tennessee Edward M. Yarbrough; Neil Barofsky, Special Inspector General, Troubled Asset Relief Program (SIGTARP); Katherine S. Addleman, Regional Director, the U.S. Securities and Exchange Commission (SEC), Atlanta Regional Office; My Harrison, Special Agent-in-Charge, Memphis Division of the FBI; Martin P. Phanco, Inspector in Charge, U.S. Postal Inspection Service (USPIS); Leslie A. Newman, Commissioner, Tennessee Department of Commerce and Insurance; and Jackie Moore, Franklin, Tenn., Police Chief, announced today the filing of a federal felony criminal information against Gordon B. Grigg, the former Franklin financial advisor and owner of ProTrust Management, Inc.; ProTrust Management Group, LLC; ProTrust Management Group, Inc.; ProTrust Corporation; ProTrust Financial Group, Inc.; and ProTrust Capital Advisors, Inc. (collectively “ProTrust”).
The felony information, filed earlier today in the U.S. District Court for the Middle District of Tennessee in Nashville, charged Grigg with four counts of mail fraud, in violation of Title 18, United States Code, Section 1341; and four counts of wire fraud, in violation of Title 18, United States Code, Section 1343.
The charges are based on Grigg’s alleged role in embezzling more than $10,922,000 in client investment funds. Grigg made an initial appearance this morning before Magistrate Judge John S. Bryant, and was released pending further proceedings.
The information alleges the following scheme:
As early as 1996, Grigg began operating a scheme to defraud investors who deposited funds with ProTrust for investment in pooled-client purchases of fixed-term certificates of deposit, private placements, corporate notes and debentures, and with the accounts being titled collectively in the Protrust company name.
As part of the scheme, Grigg convinced clients to transfer money to ProTrust accounts that purportedly were to be managed personally by Grigg. As an inducement for clients to invest in ProTrust, Grigg promised investors that he would generate and sustain high rates of annualized returns on investment and as part of his solicitation, he falsely represented that he had already committed more than $5,000,000 in Pro Trust pooled client funds towards purchase of TARP guaranteed debt as part of private placement partnership. Despite Grigg’s representations to investors, it was never his intention to invest the client funds he solicited. Instead, Grigg allegedly used the money placed with ProTrust for his personal benefit and expenses, to operate ProTrust, and to disburse “fictitious” earnings and return of deposits to clients who cashed out or closed their ProTrust investment accounts.
Grigg made representations to investors that their ProTrust investment accounts were safe and profitable, and inflated returns on investment. In order to conceal the scheme from investors and to encourage future investment in ProTrust, Grigg fabricated documents, including forged correspondence and invoices and fraudulent account statements purporting to reflect client ownership of non-existent securities. The false documents were intended to deceive investors into believing that Grigg was actively managing their money in pooled ProTrust investment accounts, and that their investments were generating and meeting the profitability and growth expectations that Grigg had promised.
It was further part of the scheme that Grigg falsely represented to investors that their investments were safe. In order to assure investors of the validity and safety of their investments, Grigg falsely claimed to have negotiated partnerships and special business relationships with several of the nation’s most successful investment firms, however, the information alleges, no such business relationships between Grigg, ProTrust, and the national investment firms ever existed. In order to deceive clients into believing that the relations with investment firms existed, Grigg used counterfeit corporate letterhead, and the forged signatures of national investment firm executives to create fictitious documents and correspondence that appeared to confirm unique pooled investment opportunities between ProTrust and national investment firms.
The information alleges that Grigg transmitted the fictitious and forged documents via the U.S. mails, Internet e-mails, and private or commercial interstate carriers with the intention of falsely reassuring investors of the safety and profitability of their investments, to induce new clients to invest money, and to influence existing investors to roll-over maturing investments or to invest new funds into additional fictitious securities.
Between January 1990 and January 2009, the information alleges, Grigg solicited approximately sixty investors to invest funds in ProTrust investment accounts totaling approximately $10,922,661, of which, approximately $6.6 million was returned to investors who either cashed out or closed their Pro Trust investment Accounts. The total loss to investors during that same period of time is in excess of $4.9 million. Grigg never purchased securities or managed accounts for clients who invested funds with ProTrust; instead, according to the Information, Grigg used the investor funds for his personal benefit and expenses, to operate ProTrust, and to disburse “fictitious” earnings and return of deposits to clients who cashed out or closed their accounts.
An information constitutes only an allegation and is not evidence of guilt. A charged defendant is presumed innocent and is entitled to a jury trial at which the government would bear the burden of proof beyond a reasonable doubt as to each count of the information.
“Cases like these are very serious, in particular for the investors,” U.S. Attorney Edward M. Yarbrough said. “According to the information, Grigg repeatedly encouraged people to invest by falsely promising sustained growth based on ‘unique’ pooled-investment opportunities that included access to TARP guaranteed funds. Grigg was able to sell clients on these fictitious investments by falsely representing that he had “special relationships with nationally prominent investment firms; but no such “special relationships” ever existed. Instead, the investors lost their savings as part of an elaborate Ponzi scheme. In cases like these, a lot of people have invested money they can't afford to lose, particularly in hard economic times. The United States Attorney’s Office will diligently and aggressively prosecute the perpetrators of such schemes.”
“This investigation highlights the FBI's commitment to working closely with our regulatory and law enforcement partners protecting investor confidence in the United States financial markets,” said FBI Memphis Division Special Agent in Charge My Harrison.
“The filing of charges today against Gordon Grigg, the first criminal charges brought in connection with a SIGTARP investigation, marks a significant milestone in the evolution of SIGTARP and of TARP oversight generally,” said Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program. “Today, SIGTARP, the U.S. Attorney’s Office for the Middle District of Tennessee, the SEC, and the FBI, along with our state and local partners, serve notice on all who might try to profit criminally from the current national crisis that the United States Government stands ready to detect, investigate and punish any and all who use the TARP program to commit fraud. This is true irrespective of whether the victim is the United States Government itself, unsuspecting investors, or struggling home owners.”
“The Tennessee Department of Commerce and Insurance values its ongoing coordination with Federal agencies in order to protect investors and insurance policyholders in this state,” said Commerce and Insurance Commissioner Leslie A. Newman.
Franklin, Tenn., Police Chief Jackie Moore stated: “I would like to thank the United States Attorney’s Office, SIGTARP, the SEC, and fellow cooperating law enforcement agencies, including the FBI, the Postal Inspection Service, and TBI for their tireless efforts in filing a complaint against this individual. Law enforcement efforts like these will help victims living in Franklin and elsewhere receive some justice, and hopefully return of some of their assets, when they fall victim to fraud schemes like the one alleged here.”
The charges in the information were brought following a coordinated investigation conducted by agents from the FBI, USPIS, SIGTARP, the SEC and the Franklin Police Department.
Assistant U.S. Attorney John K. Webb, Deputy Criminal Chief of the White Collar Fraud and Economic Crimes Section, is prosecuting the case for the United States.