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David L. Smith

‘Arrogant’ McGinn gets 15-year sentence

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Wednesday, August 7, 2013

It wasn’t the life term prosecutors sought, but 65-year-old security industry investor Timothy McGinn today was sentenced to be in federal prison until he’s 80. McGinn had asked for a more lenient sentence after being convicted earlier this year of fraud, conspiracy and tax evasion in a Ponzi-like scheme that caused investors to lose millions. A judge spurned that request, calling McGinn  “arrogant,” news reports say.

David L. Smith, 68, McGinn's former partner in the Albany, N.Y.-based brokerage firm of McGinn, Smith & Co., which conducted dealings in the alarm industry, received a sentence of 10 years. Smith was convicted of the same charges on Feb. 6, but of fewer counts than McGinn. The judge criticized Smith for "going along" with McGinn with no regard for the law, according to an Albany Times Union story on the sentencing.

Here’s more from the Times Union on what happened in court today:
 

"I came up with one word that describes your downfall -- and that word is arrogant," U.S. District Court Judge David Hurd told McGinn.

"You ran your business and you didn't really care about the rules as long as you made money for you and your favorite clients," the judge continued.

… The crimes for which [McGinn and Smith] were convicted carry sentences of up to 20 years in prison. However, the Justice Department said federal sentencing guidelines call for life sentences because of aggravating factors that include the high amount of losses, number of victims and the sophisticated nature of the scheme.

Prosecutors said McGinn and Smith not only defrauded investors but diverted approximately $4.1 million from investment trusts for their own benefit. They said the two created false loan documents, misled investors and lied to federal regulators.

Assistant U.S. Attorney Elizabeth Coombe reject McGinn and Smith's assertions that the collapse of their business was caused by a downturn in the economy not criminal conduct.

… The former brokers' attorneys asked Hurd to sentence their clients to no more than "single-digit" prison sentences for their crimes, according to court documents unsealed last week at the request by the Times Union.

… [McGinn and Smith were indicted by a grand jury in early 2012.] ... [This February] McGinn was convicted on 27 of the 29 counts he faced; Smith on 15 of 28 counts. Both were convicted of conspiracy to commit mail and wire fraud, mail fraud, wire fraud and failure to file a tax return.

 

Life in prison for McGinn, Smith?

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Wednesday, July 31, 2013

Security industry investors Timothy McGinn and David L. Smith are set to be sentenced next week and could spend the rest of their lives in prison after being convicted of fraud, conspiracy and tax evasion earlier this year.

That’s the sentence prosecutors want a judge to impose on the pair—formerly partners at the Albany, N.Y.-based brokerage firm of McGinn, Smith & Co., which conducted dealings in the alarm industry—when they appear in court on Aug. 7, according to the Time Union, an Albany-based newspaper. Life in prison is warranted because the pair caused at least 250 victims to lose more than $30 million, prosecutors say.

However, McGinn, 64, and Smith, 68, are seeking leniency and having friends and relatives send letters testifying to their good characters, according to news reports.

Here’s more from the recent Times Union article:
 

In a sentencing memorandum filed Wednesday, assistant U.S. Attorney Elizabeth C. Coombe said the maximum term of imprisonment is warranted by factors that include more than $30 million in losses to at least 250 victims. She said the defendants' argument that their misdeeds were caused by a collapsing financial market "misses the mark."

"After persuading investors to part with their money, defendants used it as if it were their own. Not only did they secretly skim large percentages of investor funds to line their own pockets, but they did their very best to make sure that the investments would keep coming in by using new investor money to pay old investors," Coombe wrote in a 13-page memorandum addressed to U.S. District Judge David N. Hurd.

The government also filed a motion seeking $30.2 million in forfeiture penalties from McGinn and Smith, whose bank accounts and assets were frozen three years ago under court orders. It's unclear that they have the assets to pay the proposed penalty.

A federal jury on Feb. 6 convicted the pair of conspiracy to commit mail and wire fraud, mail fraud, wire fraud, securities fraud, and filing false tax returns. The two also were the target of a civil suit by the Securities and Exchange Commission claiming they bilked investors of at least $80 million in a Ponzi scheme.

However, McGinn and Smith, formerly partners at the brokerage firm of McGinn, Smith & Co., filed motions asking a federal judge to overturn their convictions, saying the government’s claims were “based on the complete failure of the government to attempt to comprehend concepts of investment banking and the inner-workings of running a broker-dealer.”

It will be interesting to see what the judge decides in this case. Stay posted.

 

Will security investors McGinn and Smith do time?

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Wednesday, May 29, 2013

Security industry investors Timothy McGinn and David L. Smith are set to be sentenced next month and could face years in prison after being convicted of fraud earlier this year. But whether they’ll be sent to prison or just get probation and how much the Albany, N.Y.-based brokers owe as a result of their fraudulent activities are questions that remain up in the air, according to a recent article from the Time Union, an Albany, N.Y.-based newspaper.

The two men are seeking leniency and having friends and relatives send letters testifying to their good characters, according to the article.

A New York grand jury about one year ago indicted McGinn, 64, and Smith, 68—the founders of an investment firm that conducted dealings in the alarm industry—on a variety of fraud charges.

A federal jury on Feb. 6 convicted the pair of conspiracy to commit mail and wire fraud, mail fraud, wire fraud, securities fraud, and filing false tax returns. The two—who also were the target of a civil suit by the Securities and Exchange Commission claiming they bilked investors of at least $80 million in a Ponzi scheme—are slated to be sentenced on their criminal convictions on June 28. Their possible sentences range from probation to more than a decade in prison, according to the Times Union.

However, McGinn and Smith, formerly partners at the brokerage firm of McGinn, Smith & Co., have filed motions asking a federal judge to overturn their convictions, saying the government’s allegations against them “are based on the complete failure of the government to attempt to comprehend concepts of investment banking and the inner-workings of running a broker-dealer.”

Also, Smith’s attorney, William J. Dreyer of Albany, is asking that the sentencing date be delayed because it’s not clear how much victims are owed. Here’s what the article had to say:
 

Dreyer wrote a letter to [U.S. District Judge David] Hurd saying there is not enough information available from the government or a federal receiver to accurately calculate the losses to victims. He said it will be a "large undertaking" to establish cash flows for each of the trusts and operating companies that were embroiled in the criminal case and also to determine the amount of back taxes owed by David and Lynn Smith, [David Smith's wife].

Also, Smith was acquitted on 14 of the 29 counts he faced, and Dreyer told the judge that makes "a proper calculation of the fraud amount the more challenging."

In addition, Dreyer said the government recently notified him it has pegged the forfeiture amount owed by McGinn and Smith at "four times" the $8 million listed in the indictment.

"No supporting data as to how such a number was reached was provided and this court should find that because the receiver is not in a position to determine a loss amount, there is no possible way that the government could make a logical calculation," Dreyer wrote. "As such, on its face, the government's proposed loss amount is misleading, obscene and further reinforces its complete ignorance of investment banking and accounting standards."

 

Stay posted here for updates on this interesting case.

Fraud trial, white gloves in McGinn, Smith case

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Wednesday, July 11, 2012

When the Securities and Exchange Commission charged alarm industry investors David L. Smith and Timothy McGinn in 2010 with running a Ponzi scheme that defrauded investors of at least $80 million, one of the SEC’s contentions was that some of the money was diverted to pay for “strippers and go-go dancers” on McGinn’s You Only Live Once cruise ship business.

Now, a judge has ordered that another cruise business associated with the case—this one with the tonier name of White Glove Cruises—be sold for more than half a million dollars to help pay the creditors of Smith and McGinn—who served as CEO of IASG from 2003-2006.

McGinn and Smith, founders of an Albany, N.Y.-based investment firm that conducted dealing in the alarm industry, also were indicted this year on criminal fraud charges that could send them to prison for years, if convicted. Each has pleaded not guilty and their trial—originally scheduled for last month—now is set to begin on Nov. 13.

The sale of Dania Beach, Fla.-based White Glove Cruises was approved by U.S. Magistrate Judge David R. Homer in a June 20 decision in U.S. District Court in the Northern District of New York. The buyer of White Glove, and a related business called Luxury Cruise Receivables, is Caribbean World Travel Services, and the purchase price is $575,000 in cash, along with other considerations, including being relieved from further lease obligations of more than $258,000, court records show.

White Glove is a travel agency “with Timothy McGinn appearing to have taken a material role in its management,” according to court records.

This business sounds much more refined than McGinn’s YOLO (You Only Live Once) venture. The agency specializes in booking cruises “on more luxurious cruise lines,” and had gross billings of between $9.7 million to $12.4 million for each of the past three years, court records say.

McGinn Smith Alarm Trading accounts sold for $2m

The criminal trial of alarm industry investors Timothy McGinn and David L. Smith also is about to begin, on June 18
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04/25/2012

ALBANY, N.Y.—More than 5,000 alarm accounts managed by McGinn Smith Alarm Trading LLC have been auctioned to Security Systems Inc. of Cromwell, Conn. for more than $2 million, legal documents show.

McGinn, Smith indicted on fraud charges

The new charges come just weeks before the alarm industry investors go on trial in civil court for alleged Ponzi scheme
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02/01/2012

ALBANY, N.Y.—Security industry investors Timothy McGinn and David L. Smith—already being sued by the Securities and Exchange Commission on a claim they bilked investors of at least $80 million in a Ponzi scheme—now are facing criminal charges that could send them to prison for years, if convicted.