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Justice News

Department of Justice
U.S. Attorney’s Office
District of Rhode Island

FOR IMMEDIATE RELEASE
Thursday, August 4, 2016

Investment Advisor Admits to Orchestrating $21M Dollar Ponzi Scheme, Using Client Funds to Purchase $2.5 Million Home, Failure to Pay Taxes

PROVIDENCE, R.I. – Patrick E. Churchville, 47, of Barrington, R.I., owner and president of ClearPath Wealth Management, LLC, formerly located in Providence and Barrington, admitted in federal court in Providence today that he orchestrated a $21 million dollar Ponzi scheme, stole $2.5 million dollars of investors’ funds to purchase a waterfront home, and failed to pay more than $820,000 in personal federal income taxes.

Appearing before U.S. District Court Chief Judge William E. Smith, Churchville pleaded guilty as charged in an Information filed on July 5, 2016, to five counts of wire fraud and one count of tax fraud, announced United States Attorney Peter F. Neronha, Harold H. Shaw, Special Agent in Charge of the Boston Field Office of the FBI, and Joel P. Garland, Special Agent in Charge of IRS Criminal Investigation.

According to court documents and information presented to the court, an investigation by the FBI, IRS Criminal Investigation and the United States Attorney’s Office determined that in the spring of 2008 through October 2011, Churchville and ClearPath, on behalf of their client investors, invested approximately $18 million dollars in JER Receivables, an entity incorporated in Maryland. In June 2010, Churchville became aware that the investments with JER were no longer producing returns and that ClearPath had been subjected to fraudulent and misleading representations by the principals of JER. Churchville failed to notify his client investors that he had lost millions of dollars of invested funds.

According to court documents, in order to hide the fact that he had lost millions of dollars of client investor funds through his dealings with JER Receivables, and to continue to operate his business and reap his investment fees, Churchville misappropriated approximately $21 million dollars of investment money. To obtain the $21 million dollars, Churchville misused investor money already under his control and obtained new investor funds. He used this money to pay back the JER investors and told them, falsely, that the money was the return on their investments. To induce new investments to carry out the schemes, Churchville lied and told investors that ClearPath’s previous investments with JER Receivables had been successful and produced high rates of return.

Additionally, the investigation determined that in 2011, Churchville created a scheme to obtain $2.5 million dollars, using investors’ funds as collateral without their knowledge, to purchase a personal residence in Barrington. Churchville failed to report the $2.5 million dollars as income on his personal tax returns, resulting in a loss to the IRS of $820,528.

Churchville, who was ordered by the court to home detention with GPS electronic monitoring, is scheduled to be sentenced on October 25, 2016.

The case is being prosecuted by Assistant U.S. Attorney Dulce Donovan.

United States Attorney Peter F. Neronha acknowledges and thanks the United States Postal Inspection Service - Boston Division for their assistance in the investigation of this matter.

Patrick Churchville is also a defendant in a U.S. Securities and Exchange Commission civil matter.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force.  The President established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

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16-80
Topic: 
Financial Fraud
Tax
Updated August 4, 2016