Tied to $21M Ponzi scheme, ex-adviser to plead guilty
A former adviser is set to plead guilty to five counts of wire fraud and one count of tax fraud related to a $21 million Ponzi scheme, according to the U.S. Attorney’s Office District of Rhode Island.
Ex-adviser Patrick Churchville also allegedly used $2.5 million in client funds to buy a waterfront home in Barrington, R.I., a town on the eastern shore of Narragansett Bay, according to authorities. He is also accused of failing to pay more than $820,000 in personal federal income taxes.
"His lies, piled on one after another, have led to today’s substantial and serious charges," U.S. Attorney Peter Neronha said.
Churchville could not be reached for immediate comment. His attorney, Michael Lepizzera, declined to comment on the case.
Churchville, 47, worked at Morgan Stanley until 2007, according to BrokerCheck. He left the wirehouse to found ClearPath Wealth Management, an RIA based in Providence and Barrington, authorities say.
From the spring of 2008 to October 2011, Churchville allegedly invested approximately $18 million in client funds in JER Receivables under participation agreements, whereby his firm would loan money to JER to purchase healthcare receivables, according to authorities. The investments were purported to yield an approximat 30% return after 16 months.
Churchville allegedly became aware that the investments in JER were fraudulent, but he failed to notify his clients; instead Churchville used new client money to pay back the previous JER investors, telling them that the funds were the return on their investment, authorities say.
He then told new clients that his firm's previous investments with JER had been a success, authorities say.
"Rather than act in the interest of his clients, he acted only in his own. His lies, piled on one after another, have led to today’s substantial and serious charges," U.S. Attorney Peter Neronha said in a statement.
Churchville entered into a plea agreement last week. The maximum for all penalties is 105 years in prison, a fine of $1.35 million and three years of supervised release, according to court documents. A reduction in the sentence is possible, according to the documents.
Churchville has also agreed to cooperate fully with the IRS in the assessment and payment of any unpaid personal income taxes, according to the plea agreement.
"We remain committed to ferreting out such schemes, which defraud investors of millions in savings and also taxes due to the IRS," IRS Special Agent Joel Garland said in a statement.
Churchville also faces charges from the SEC that he misused $11 million in client funds. That case is still pending.