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Press Release

Former President Of Investment Adviser Firm Pleads Guilty To Defrauding Clients

For Immediate Release
U.S. Attorney's Office, Southern District of New York

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that HECTOR MAY, the president of Executive Compensation Planners, Inc. (“ECP”), a registered investment adviser and financial planning firm located in New City, New York, pled guilty today to participating in a conspiracy to defraud certain investment advisory clients (the “Victims”) out of more than $11 million.  MAY pled guilty before U.S. Magistrate Judge Judith C. McCarthy.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As Hector May admitted today, for decades he and his co-conspirator violated his clients’ trust by siphoning money from their accounts to line their pockets and continue to perpetrate their illegal scheme.  In total, May and his co-conspirator stole more than $11 million.  Now, he has confessed to his crimes and faces significant time in prison.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “This case has all the markings of a classic Ponzi Scheme with payments made to investors with other investor money, bogus account statements, etc. Mr. May also used investor money to pay personal and business expenses. His day of reckoning has arrived.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “Hector May spent decades defrauding investors and gaming the system to make himself wealthier, all at the expense of those who trusted him to serve as a responsible steward of their funds.  This kind of criminal behavior undermines the strength and security of our financial systems.  Today’s conviction should serve as a warning to those who think they can get away with similar schemes -- the FBI and our law enforcement partners will discover the truth and hold you accountable for your actions.”

According to the Information filed today, to which MAY pled guilty:        

Since 1982, MAY has been the president of ECP and has provided financial advisory services to numerous clients.  Since 1994, MAY has been a registered representative of a broker dealer (“Broker Dealer-1”).  In its role as a broker dealer, Broker Dealer-1 facilitated the buying and selling of securities for clients of Broker Dealer-1’s registered representatives, including clients of MAY.  To that end, Broker Dealer-1 and associated clearing firms maintained securities accounts for ECP’s clients and, through those accounts, held ECP’s clients’ money, executed their securities trades, produced account statements reflecting activity in the clients’ accounts, and forwarded these account statements to ECP’s clients.

In order to obtain money from the Victims’ securities accounts with Broker Dealer-1, MAY advised the Victims, among other things, that they should use money from those accounts to have ECP, rather than Broker Dealer-1, purchase bonds on their behalf.  He further represented that by purchasing bonds through ECP directly, the Victims could avoid transaction fees.  Because MAY lacked the authority to withdraw money directly from the Victims’ accounts with Broker Dealer-1, he persuaded the Victims to withdraw the money themselves and to forward that money to an ECP “custodial” account (the “ECP Custodial Account”), so that he could use the money to purchase bonds on their behalf. 

With the assistance of his co-conspirator (“CC-1”), MAY guided the Victims, first, to withdraw their money from their Broker Dealer-1 accounts, and second, to send that money to the ECP Custodial Account by wire transfer or check.  At times, MAY falsely represented that the funds being withdrawn from Victims’ Broker Dealer-1 accounts were the proceeds of prior bond purchases MAY had made.  After the Victims sent their money to the ECP Custodial Account, MAY did not use the money to purchase bonds.  Instead, MAY and CC-1 spent the money on business expenses, personal expenses, and to make payments to certain Victims in order to perpetuate the scheme and conceal the fraud. 

Specifically, in some cases, MAY used Victims’ funds to make purported bond interest payments to other Victims.  In other cases, MAY used Victims’ funds to make payments to other Victims who wished to withdraw funds from their accounts.  MAY and CC-1 also created phony “consolidated” account statements that they issued through ECP and sent to the Victims.  These “consolidated” account statements purported to reflect the Victims’ total portfolio balances and included the names of bonds MAY falsely represented that he purchased for the Victims and the amounts of interest the Victims were supposedly earning on the bonds.  In order to create the phony consolidated account statements, MAY provided CC-1 with bond names and false interest earnings, and CC-1 created ECP computerized account statements and had them distributed to the Victims.

To keep track of the money that the co-conspirators were taking from the Victims, CC-1 processed the Victims’ payments for the purported bonds, entered them in a computerized accounting program, and, through that program, kept track of how MAY and CC-1 received and spent the Victims’ stolen money.  In this way, from the late 1990’s through March 9, 2018, MAY and CC-1 induced Victims to forward them more than $11,400,000.

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MAY, 77, of Orangeburg, New York, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; and one count of investment adviser fraud, which carries a maximum sentence of five years in prison and a maximum fine of $10,000 or twice the gross gain or loss from the offense.  Sentencing before Judge Vincent L. Briccetti has been scheduled for March 15, 2019.

The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the U.S. Postal Inspection Service, Special Agents of the United States Attorney’s Office, and the Federal Bureau of Investigation.

In a related case, the Securities & Exchange Commission brought a civil action today against May and another in the White Plains federal court. 

The criminal case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorneys Margery B. Feinzig and Vlad Vainberg are in charge of the prosecution.

Updated December 13, 2018

Securities, Commodities, & Investment Fraud
Press Release Number: 18-441