$50 Million Securities Fraud Charge Guilty Plea Entered by Watchung Man
David Connolly faces possible prison time and fines after entering plea.
Watchung resident David Connolly, 51, pleaded guilty today to one count of securities fraud and one count of money laundering, after admitting that he had defrauded participants of an investment plan by misusing their capital contributions and misrepresenting the performance of their investments, U.S. Attorney Paul J. Fishman said.
Connolly pleaded guilty to the charges that were issued Jan. 23 in a Superseding Indictment before U.S. District Judge William J. Martini in Newark federal court.
He was charged on May 16, 2012 in an indictment with one count of securities fraud, five counts of mail fraud, three counts of wire fraud and seven counts of money laundering, and entered a not guilty pleas to all of the charges on May 31.
The grand jury returned a 15-count Superseding Indictment on Jan. 23 charging Connolly with one count of securities fraud, six counts of mail fraud, two counts of wire fraud, and six counts of money laundering, U.S. Attorney Fishman said.
The U.S. Attorney's Office said Connolly had received more than $50 million from more than 200 investors between 2006 through October 2009 for the plan to invest in a property which realized a $9 million loss.
"To induce victims to invest, Connolly made various types of materially false and misleading statements and omissions," a statement from the U.S. Attorney reported. "He told victims their money would be used to purchase a specific property, and the property would generate rental income that would be used to pay investors monthly distributions...Connolly misrepresented the amount of equity victims had in the properties, the condition of the properties, and the financial performance of the properties."
U.S. Attorney Fishman said Connolly told investors the invetsments were performing well despite actual negative cash flows, and added Connolly took "significant portions of his victims’ money, which had been provided for specific real estate transactions, and used it for other purposes, without disclosing the diversions of funds to victims."
Connolly allegedly used the money taken to pay for unrelated real estate transactions, as well as paying other investors and himself. The scheme fell apart in the summer of 2009, when Connolly defaulted on payments on the invetsment properties, U.S. Attorney Fishman said.
He faces a maximum of 20 years in prison and a $5 million fine on the securities fraud count, and a maximum potential penalty of 10 years in prison and a $250,000 fine on the money laundering charges, U.S. Attorney Fishman said.
Connolly also agreed to forfeit $9.92 million as part of the plea agreement.
Sentencing is scheduled for June 4, 2013.
In the statement announcing the plea, U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez in Newark, for the investigation leading to today’sindictment. He also thanked special agents of IRS – Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen, for their important contributions to the investigation.
The government is represented by Assistant U.S. Attorney Charlton A. Rugg of the OCDETF Unit and Senior Litigation Counsel Leslie F. Schwartz of the Economic Crimes Unit.
Anyone believeing they may have been a victim of or otherwise have information concerning this alleged scheme should contact the FBI at 973-792-3000.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, created to wage an "aggressive, coordinated, and proactive effort to investigateand prosecute financial crimes," according to the U.S. Attoney's office.