Madison Man Sentenced to Two Years in Prison for Running Investment Fraud Scheme
|U.S. Attorney’s Office October 16, 2012|
David B. Fein, United States Attorney for the District of Connecticut, announced that Thomas F. Donnelly, Jr., 58, of Madison, was sentenced today by United States District Judge Robert N. Chatigny in Hartford to 24 months of imprisonment, followed by three years of supervised release, for defrauding four investors of $675,000.
“This prosecution is part of an ongoing effort by the U.S. Attorney’s Office, FBI, and our other law enforcement partners to root out fraudsters who steal individuals’ hard-earned funds,” stated U.S. Attorney Fein. “We are committed not only to prosecuting corrupt investment advisors and seeking long prison terms but also to educating the investing public. Citizens are encouraged to be vigilant before entrusting funds to any individual or firm. Potential investors should be suspicious of guaranteed high rates of return, investments that promise ‘little or no risk of loss,’ and investment scenarios that are difficult to understand.”
According to court documents and statements made in court, Donnelly engaged in a scheme to defraud investors of an entity he created and managed known as Shoreline Index Partners LP (“Shoreline”). In an effort to solicit investors to provide funds to Shoreline, Donnelly made misrepresentations in an investment prospectus falsely indicating that he had received a significant return prior to June 2006 when he knew that no such returns had been generated.
Between June 2006 and July 2008, Donnelly obtained a total of $675,000 from four investors. Although Donnelly represented to the four investors that their funds would be invested, he forwarded only approximately $175,000 of these funds to a Chicago-based brokerage clearing house. Donnelly used the majority of the invested funds, including about half the funds he had forwarded to the brokerage clearing house, for his own use and enjoyment, including to make mortgage payments on his Madison residence. The investigation revealed that Donnelly lost approximately $88,000 in funds through securities trades he made.
In an effort to convince the investors that their investments had generated a significant return, Donnelly altered the actual monthly brokerage statements by creating fraudulent monthly statements that purported to be from the Chicago-based clearing house. In one statement that he mailed to Shoreline investors in approximately October 2008, Donnelly fraudulently indicated that Shoreline’s investments at the brokerage clearing house had a total value of more than $3.8 million when he knew that there was less than $50,000 in Shoreline funds at the brokerage clearing house.
Donnelly also altered documents prepared by an accounting firm, forged the signature of a certified public accountant, and then submitted these altered and forged accounting documents to Shoreline’s investors.
One of Donnelly’s victim-investors addressed the court today and stated that he had known Donnelly on a social basis for more than 20 years. Even though Donnelly knew that the victim faced significant personal and business financial pressures, the victim stated that Donnelly “found me to be easy prey and took advantage of my situation” by promising a “very limited opportunity to generate great investment returns in a very secure and liquid environment.”
Donnelly has paid full restitution to the victims.
On December 13, 2011, Donnelly pleaded guilty to one count of mail fraud.
This case was investigated by the Federal Bureau of Investigation and was prosecuted by Senior Litigation Counsel Richard J. Schechter.
The Connecticut Securities, Commodities, and Investor Fraud Task Force investigates matters relating to insider trading, market manipulation, Ponzi schemes, investor fraud, financial statement fraud, violations of the Foreign Corrupt Practices Act, and embezzlement. The task force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service-Criminal Investigation; U.S. Secret Service; U.S. Postal Inspection Service; U.S. Department of Justice’s Criminal Division, Fraud Section and Antitrust Division; U.S. Securities and Exchange Commission (SEC); U.S. Commodity Futures Trading Commission (CFTC); Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); Office of the Chief State’s Attorney; State of Connecticut Department of Banking; Greenwich Police Department; and Stamford Police Department.
Citizens are encouraged to report any financial fraud schemes by calling, toll-free, 855-236-9740 or by sending an e-mail to firstname.lastname@example.org.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants.
To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.