A former LPL advisor is heading to prison for three-and-a-half years for his role in orchestrating a long-running scheme that bilked dozens of investors out of nearly $5 million.
James Booth, 75, ran what prosecutors described as a Ponzi scheme in which he made a series of "misrepresentations and lies" about how he was handling clients' investments, diverting funds into a bank account that he controlled and using the money to pay business and personal expenses.
In a sentencing memo filed in September, government attorneys detailed the lengths to which Booth went to conceal his scheme.
"To prevent investors from seeking a return of their money, and to induce additional investments, Booth provided investors with fabricated account statements that falsely indicated that he had purchased certain securities on their behalf and that those investments had generated a profit," acting U.S. Attorney Aubrey Strauss and Assistant U.S. Attorney Robert Boone wrote.
"Booth further concealed the truth from investors by using money obtained from new investors to make redemption payments to previous investors, in Ponzi-like fashion," they wrote.
Booth's attorney, Frank Bevilacqua with the law firm DePanfilis & Vallerie, says his client accepts the sentence, which, he noted, could have been far harsher.
"The judge was extremely reasonable and fair, and so was the U.S. attorney," Bevilacqua says. "It was a reasonable disposition under the circumstance and facts."
The prosecution advocated for a prison sentence of between 78 and 97 months, considerably longer than the 42 months that Booth received.
‘Outright theft’
Booth pleaded guilty to one count of securities fraud in October 2019, but the sentencing was delayed due to the coronavirus pandemic. He is due to begin serving the sentence in January.
The misconduct started in 2013 when the former LPL advisor began touting securities to his clients outside of their advisory and brokerage accounts, enticing them to move money into an entity called Insurance Trends, whose bank account Booth controlled. In some cases, he would make far-fetched promises to clients about the rate at which the purported investments would grow, or that the principal would be protected from downturns.
In reality, Booth was using the money to pay salaries at his firm, Booth Financial, and other miscellaneous business and personal expenses. Some of the money also went to paying out dividends to earlier investors, who received falsified statements detailing investments in securities that had not been made.
"As these lies illustrate, Booth's fraud was not a momentary lapse in judgment," the prosecuting attorneys wrote in a sentencing memo in September. "Rather, it was an outright theft that spanned a multiyear period."
LPL discharged Booth in May 2019 after the allegations of fraud came to light. Spokespeople for the brokerage did not immediately respond to requests for comment.
Not in his nature
One of Booth’s victim’s was a widow who had invested more than $600,000 from her late husband's pension with him. Booth promised that she would have a million dollars by the time she turned 100.
He persuaded another elderly investor to withdraw $18,000 from an annuity that had been set up to care for his disabled sibling.
Booth’s lawyer maintains that his client was not motivated by greed.
"Mr. Booth's behavior at first was completely driven by need and poor judgment to satisfy investors, pay salaries and to meet monthly expenses," Bevilacqua wrote in a February court filing advocating for a lesser sentence than prosecutors had recommended, contending that "criminal conduct in this case is a significant departure of his general nature."
In the same February filing, Bevilacqua wrote that Booth "accepts full responsibility for his actions as it pertains to Booth Financial and Insurance Trends."
Bevilacqua reiterated that point in an interview, saying of his client, "He's never been in trouble a day in his life until this unfortunate situation."
Deterrent necessary
Prosecutors emphasized the abuse of trust that characterizes fraud cases like this one, where an advisor takes advantage of "unsophisticated investors."
"Because victims of such schemes oftentimes do not understand, or do not want to believe, that they have been defrauded by someone they trust, the schemes can be both highly lucrative and difficult to detect," the prosecutors said. "As such, significant punishment is necessary to deter others from similar conduct."
Bevilacqua says Booth remains troubled by his deceit.
"The money is the money," Bevilacqua says. “But the trust he betrayed really weighs heavy on his heart."
