A former GunnAllen Financial Inc. and Ameriprise Financial Services Inc. broker pleaded guilty this month to two federal charges, one of mail fraud and the other of filing a false tax return, and he faces up to 23 years in prison when he is sentenced in September.
A former GunnAllen Financial Inc. and Ameriprise Financial Services Inc. broker pleaded guilty this month to two federal charges, one of mail fraud and the other of filing a false tax return, and he faces up to 23 years in prison when he is sentenced in September.
According to court documents, Jeffrey Southard stole $1.83 million from at least 14 clients who believed they were buying tax-free bonds dubbed “Ohio bonds” and “Bank of America bonds” with guaranteed returns of 6% to 10%. In reality, the securities didn't exist. Mr. Southard also owes $112,534 in back taxes.
On June 12, Mr. Southard, 44, entered the plea in U.S. District Court for the District of New Jersey in Camden. The charge of mail fraud carries a maximum sentence of 20 years and a fine of $250,000 or twice the gross loss to his victims. The charge of filing a false tax return carries a maximum sentence of three years and a maximum fine of $100,000.
Mr. Southard spent the victims' money on mortgage payments, auto payments for his Lincoln Navigator and other vehicles, private schools for his five children, vacations and numerous other personal expenses, according to court papers.
In 2003, he claimed taxable business income of $1,670 from his advisory practice, JD BAC Financial Services. According to the case filings, that return did not include $245,042 in taxable business income Mr. Southard received when he diverted clients' money to buy the fictitious securities.
The rogue broker, who worked out of his home in Pittsgrove, N.J., was affiliated with Minneapolis-based Ameriprise, at the time called American Express Financial Advisors, from July 1997 to September 2003, when he was suspended and allowed to resign.
Mr. Southard became affiliated with GunnAllen of Tampa, Fla., in December 2003 to July 2008. At that time, GunnAllen was investigating him over the sale of non-existent investments through an undisclosed and unapproved outside business activity, according to the federal complaint, which was filed in December.
A month earlier, the New Jersey Bureau of Securities of Newark barred him because of the theft of $1.8 million from elderly clients.
Mr. Southard's attorney, Mark Catanzaro, did not return a call seeking comment.
According to Mr. Southard's records with the Financial Industry Regulatory Authority Inc. of New York and Washington, he has three arbitration claims pending against him. GunnAllen faces three claims involving Mr. Southard, two alone and one jointly with Ameriprise. The first GunnAllen claim involves a $109,000 investment into a bogus Ohio bond, and the second is for allegedly unsuitable investments of $70,000 into variable annuities.
In the third claim, the two firms face allegations that Mr. Southard “converted” $1 million of their assets by selling them fraudulent, nonexistent and unregistered securities from 1997 to 2008.
“As a matter of policy, we generally won't comment on ongoing civil disputes,” said David Jarvis, general counsel for GunnAllen.
Chris Reese, a spokesman for Ameriprise, did not return a call seeking comment.
E-mail Bruce Kelly at bkelly@investmentnews.com.
