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Justice News

Department of Justice
U.S. Attorney’s Office
Middle District of Pennsylvania

FOR IMMEDIATE RELEASE
Friday, January 31, 2020

East Stroudsburg Financial Planner Convicted Of Scheme To Defraud His Clients

SCRANTON - The United States Attorney’s Office for the Middle District of Pennsylvania announced that Anthony Diaz, age 52, formerly of East Stroudsburg, Pennsylvania, was convicted on January 30, 2020 following a jury trial, of wire fraud and mail fraud offenses.  The 12-day trial was held before United States District Court Judge Malachy E. Mannion in Scranton.

According to United States Attorney David J. Freed, the jury returned the guilty verdict on all counts charged in the superseding indictment after approximately eight hours of deliberation.  Diaz was convicted of seven counts of wire fraud and four counts of mail fraud, all stemming from the same scheme.

“Schemes like this one committed by unscrupulous investment advisors seeking to line their own pockets by selling high-risk and high-commission securities to unsophisticated investors based on lies about the safety of the security and net worth of the investor are fraud, pure and simple,” said U.S. Attorney Freed. “I hope this case sends a message to others in the industry that similar misconduct will not be tolerated and will have potential criminal consequences as well as the more common civil consequences.”

The evidence presented at trial showed that from approximately 2008 through April 2015, Diaz owned and operated Financial Planners Group of America, a financial planning business in East Stroudsburg and Scotrun, Pennsylvania.  Diaz persuaded his clients to invest in high risk, illiquid “alternative investment products,” including real estate investment trusts, business development companies, oil and gas drilling companies, and equipment leasing companies.

A dozen of Diaz’s former clients testified at trial that Diaz convinced them to invest their life savings in the alternative investments through a series of false representations, including that the investments were low-risk, with guaranteed protection of principle and guaranteed rates of return, and that the investments were liquid, giving investors access to their funds in an emergency.  Evidence introduced at trial showed that the investments were high-risk and speculative, with no guarantees, and that in some instances, investors lost all of their money.  Evidence at trial also showed that the investments had lengthy holding periods, with no access to funds, and that could be extended indefinitely at the unilateral discretion of the investment company.  Some witnesses testified to having invested money over a decade ago that they still could not liquidate.

At trial, jurors saw extensive client documentation bearing false information about the clients’ assets, risk tolerance, investment experience, and investment objectives.  Clients testified that Diaz regularly had them sign blank documents, with the promise that missing information would be filled in by his office.  Former employees of Diaz testified that he ordered them to add false information to the account forms, inflating clients’ assets, risk tolerance, and investment experience to qualify them as suitable investors for the alternative investments.

Jurors also learned that Diaz was terminated by five broker-dealers and permitted to resign by a sixth broker-dealer.  Clients who asked about the frequent changes to new broker-dealers were told that it was for their benefit.  Diaz’s former employees testified that they were ordered to conceal his firings and lie to the clients about his changes between broker-dealers.

Jurors also learned that Diaz was suspended by the Certified Financial Planners Board of Standards in 2013, and under investigation by the Financial Industry Regulatory Authority and the Pennsylvania Department of Banking, both of whom ultimately barred Diaz from the securities industry in 2015.  Diaz’s clients testified that he failed to disclose his suspension from the Certified Financial Planners Board of Standards, and concealed the nature and severity of the regulatory investigations.

Various industry witnesses testified that Diaz earned commissions on the alternative investments that were often double, or even quadruple the commissions earned on more conventional investments, such as stocks, bonds, and mutual funds.  Documents at trial showed that Diaz regularly earned in excess of $1.5 million in commissions annually.  Witnesses described how Diaz spent his money on expensive automobiles, a dozen properties across the United States, and frequent vacations to exotic locales.

The case was investigated by the Federal Bureau of Investigation.  Assistant United States Attorneys Phillip Caraballo and Robert O’Hara prosecuted the case.

The combined maximum penalty under federal law for Diaz is up to 220 years of imprisonment. There is also a term of supervised release following imprisonment, and a fine. Under the Federal Sentencing Guidelines, the Judge is also required to consider and weigh a number of factors, including the nature, circumstances and seriousness of the offense; the history and characteristics of the defendant; and the need to punish the defendant, protect the public and provide for the defendant's educational, vocational and medical needs. For these reasons, the statutory maximum penalty for the offense is not an accurate indicator of the potential sentence for a specific defendant.

 

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Topic(s): 
Financial Fraud
Updated February 3, 2020