Connecticut Financial Advisor Agrees to Plead Guilty to Obstructing SEC Investigation
BOSTON – A Connecticut financial advisor has agreed to plead guilty in connection with obstructing a Securities and Exchange Commission (SEC) investigation by attempting to conceal secret and improper referral payments he had made to a lawyer in order to secure the business of a wealthy client.
“Today’s charge underscores our determination to investigate and prosecute those who impede SEC examinations and enforcement,” said United States Attorney Carmen M. Ortiz. “The SEC depends on the provision of accurate, truthful information from the people and entities it regulates. When those people choose to mislead the SEC, my office will act to ensure that the truth comes forth.”
“The charges announced today by the United States Attorney’s Office reflect the Office of Inspector General’s commitment to investigate individuals who obstruct SEC enforcement activities,” said SEC Inspector General Carl Hoecker.
John William Rafal, 66, the former president of a financial services company in Connecticut, was charged today with obstructing the SEC’s investigation. U.S. District Court Judge Nathaniel M. Gorton scheduled a plea hearing for Jan. 20, 2017.
It is alleged that in 2011, Rafal struck a deal with an attorney in which Rafal’s company would pay the attorney a $50,000 referral fee in return for referring a wealthy client to the company. Rafal knew that this payment violated federal and state regulations. Rafal’s company discovered the payments, stopped them, and directed Rafal to have the attorney return the fees that had already been paid. Unbeknownst to the company, however, Rafal secretly wrote checks to the attorney out of private checking accounts, paying him the referral fee after all.
In May 2015, Rafal testified about the referral agreement as part of a formal SEC examination. In his testimony, Rafal repeatedly described the referral matter as “cured,” “reverse[d],” “undo[ne],” or “fix[ed]” in an effort to prevent the SEC from learning about his secret payments to the attorney. In his testimony, Rafal never mentioned the checks he had written to the attorney out of his personal accounts.
The charging statute provides for a sentence of no greater than five years in prison, three years of supervised release, and a fine to $250,000. Actual sentences for federal crimes are typically less than the maximum penalties. If the plea agreement is accepted by the Court, Rafal will be sentenced to four months of home confinement and four months of probation, and will pay a fine of $4,000. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
Rafal has also entered into a separate agreement with the SEC which, among other sanctions and penalties, will bar him for life from working in the securities industry. As part of the agreement, Rafal will also pay over $500,000 to the SEC in disgorgement and penalties.
United States Attorney Ortiz and SEC Inspector General Hoecker made the announcement today. Inspector General Hoecker expressed his appreciation to the dedicated prosecutors and IG staff who worked collaboratively on this investigation. The case is being prosecuted by Assistant U.S. Attorney Brian Pérez-Daple of Ortiz’s Economic Crimes Unit.