Owner of Investment Company Pleads Guilty to Engaging in a Fradulent Investment Scheme
The owner of an investment company pleaded guilty today for his role in an investment scheme involving false promises, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney for the Eastern District of Virginia Neil H. MacBride, and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office.
David Eugene Howard II, 34, of Queens Village, N.Y., pleaded guilty before U.S. District Judge T. S. Ellis III in the Eastern District of Virginia to one count of mail fraud.
According to the plea documents, from in or about March 2008 through in or about April 2009, Howard falsely represented to investors that his company, Flatiron Systems LLC, traded pooled equity accounts using a proprietary trading system called “Pathfinder.” Through distributing false and misleading letters, operating agreements, account statements and other materials, he caused investors to send investments of at least $5,000, which were deposited into an account that he exclusively controlled and which he later misappropriated for his own benefit and the benefit of others.
Over the course of his scheme, Howard directly misappropriated approximately $373,000 of $1.8 million in investor funds. Howard’s misappropriation included approximately $86,000 in transfers to his personal bank account, cash withdrawals and personal expenditures made with his company debit card, to include approximately $34,500 in charges at a night club and approximately $3,600 in charges towards the purchase of a Tiffany necklace for Howard’s girlfriend at the time.
According to court documents, in December 2008, Howard falsely informed investors that trading had been voluntarily halted so that an independent audit could be performed. Nonetheless, Howard continued to transfer approximately $26,500 in investor funds to his personal bank account, along with additional cash withdrawals and personal expenditures over the course of the following four months. Howard followed up with another letter which falsely advised investors of prolonged audit and tax procedures, which his nonexistent attorneys and accountants were purportedly diligently working on.
At sentencing, Howard faces a maximum penalty of 20 years in prison, a fine of $250,000 or twice the gross gain or loss, and full restitution. Sentencing is scheduled for Sept. 20, 2013.
In a related action, the U.S. Securities and Exchange Commission (SEC) filed a civil enforcement action against Howard on March 21, 2011.
This prosecution is the result of an investigation by the FBI’s Washington Field Office, along with a parallel investigation by the SEC. The case is being prosecuted by Trial Attorneys Mark Grider, N. Nathan Dimock, and Luke B. Marsh of the Justice Department Criminal Division’s Fraud Section, and by Assistant U.S. Attorney Kosta S. Stojilkovic of the Eastern District of Virginia.