SEC Obtains Final Judgment Against Broker Sentenced for Defrauding Retail Investors
The Securities and Exchange Commission received a final judgment against former Connecticut investment adviser Lester Burroughs, who pled guilty in December 2019 to one count of wire fraud in a criminal case for misappropriating $575,000.
The Securities and Exchange Commission received a final judgment against former Connecticut investment adviser Lester Burroughs, who pled guilty in December 2019 to one count of wire fraud for misappropriating $575,000 from three advisory clients by selling fictitious financial products.
In the parallel criminal case, Burroughs was sentenced to 33 months in prison, followed by three years of supervised release, and ordered to pay restitution of $575,000 to his victims.
On April 21, 2021, the U.S. District Court for the District of Connecticut entered a final judgment by consent against Burroughs in the SEC’s civil case. Without admitting or denying the allegations, he was permanently enjoined from violating the antifraud provisions of federal securities laws. He was also ordered to pay disgorgement of $560,000, which was deemed satisfied by the criminal restitution order. Burroughs was barred by the SEC in January 2020.
According to the SEC’s original complaint, Burroughs defrauded his retail clients from at least November 2012 to January 2019. He allegedly told his clients that he would invest their money in guaranteed interest contracts with annual returns of 4 percent or 7 percent, however, he never invested the money and instead provided his clients with fake account statements.
Prior to his bar from the industry, Burroughs had been registered as a broker since 1969 and as an investment adviser since 1978. He was most recently affiliated with Lincoln Investment Planning, which fired him in December 2019, and he also served as an investment adviser representative with Capital Analysts.
According to the SEC’s complaint, Burroughs sold his first investor, an elderly client, four separate fictitious guaranteed interest contracts totaling approximately $370,000. The SEC claimed that bank records showed that he misappropriated the money and used it to pay other clients, as well as for his own use.
When a relative of the client began to ask Burroughs to explain these investments, he supposedly created and sent a fake statement from a well-known insurance company, the SEC said. The statement reportedly showed the client had a guaranteed interest contract that paid 4 percent interest and was worth approximately $152,000. When Burroughs was pressed by the relative to return the money, he allegedly convinced three other investment advisory clients to invest so that he could pay the money back.
The three clients invested approximately $560,000, some of which he used to repay the original client approximately $445,000, which reflected the principal invested plus 4 percent annual interest.
Prior to Lincoln Investment Planning, Burroughs was affiliated with the now-expelled Brookstone Securities, Woodbury Financial, Tower Square Securities, and Price Securities, among others. According to his Brokercheck profile, he had 14 customer disputes since 1996 and was fined $1000 by the Connecticut Insurance Commissioner in 2003.
