About a decade ago, Harriet and Jeffrey Taniyama went in search of a financial planner "just to make sure we were headed in the right direction" with respect to retirement, Harriet Taniyama says.
The one they found, a former FINRA-licensed advisor named Christopher Dougherty in San Diego, persuaded them that they not only had enough money to retire but also to invest in his own ventures, including an organic farm and a real estate business.
The Taniyamas — Leonard was a Costco pharmacist and Harriet was a hospital administrator — lost as much as $440,000, Harriet says.
Dougherty, a “criminal recidivist” according to the SEC, is accused of stealing nearly $8 million from more than 50 clients through a Ponzi scheme over a five-year period ending last year. The San Diego County District Attorney's office has filed separate criminal charges, based on more than 80 felony counts, against Dougherty, who could face up to 35 years in prison.
"These aren’t rich investors," San Diego County District Attorney Summer Stephan said during a press conference following Dougherty's arrest last week. "They’re people who worked hard and trusted their life savings with someone who preyed on their vulnerabilities."
"[We] are not stupid people," Taniyama says, referring to her husband and Dougherty's other former clients. "We were just conned."
Dougherty, who is being held on $5 million in bail, allegedly ran his scam through his advisory firm, C&N Wealth Management in San Diego, according to the SEC. Neither Dougherty, nor his lawyer, returned calls and emails asking for comment.
The Taniyamas only gave Dougherty about 25% of their savings, Taniyama says. Others, however, handed over much of their savings.
One couple in their mid-70s lost their entire $1.2 million nest egg, San Diego County Sheriff William Gore said during the press conference. "They will most likely have to sell their home," he added.
For years, Dougherty allegedly offered clients traditional investments, including life insurance policies, according to Taniyama, who is acquainted with other clients of Dougherty.
"He was super friendly, always talked about the family," she recalls, adding that a friend recommended the advisor to them about a decade ago. "He was just a likable guy."
Starting in 2015, Dougherty began offering clients "tax-free quarterly dividends of between 3% and 10%" on a variety of ventures, according to the SEC complaint.
Far from being stable investments, "in reality, Dougherty was just running a Ponzi scheme — using new investment funds to pay out the quarterly dividends and/or principal payments owed on existing investments, along with his own personal expenses," the SEC states. "Dougherty’s clients were unaware of the scheme and believed their money was safe because Dougherty provided them with false account statements."
The investments included real estate properties and a 100-acre "alpine" organic farm. A statement supplied by Dougherty's attorney to the U.S. Bankruptcy Court for the Southern District of California mentions a raid on the farm by the U.S. Drug Enforcement Agency, but does not specify what agents were looking for.
Dougherty and his wife filed for bankruptcy in October to protect themselves against creditors, including his former clients.
Authorities are focusing on obtaining as much value from Dougherty's remaining holdings as possible for victims, Michael Zachry, deputy district attorney in the fraud division of the San Diego County District Attorney's office, tells Financial Planning.
"Securing restitution is one of the highest priorities that we have," says Zachry, who is prosecuting the case. "When you have people who are 65 or 70 years old and they have lost their nest eggs, they have an almost impossible task to try to recover."
For more than six years, a clue that might have steered clients away from Dougherty had been available on FINRA's public BrokerCheck report, Stephan pointed out during the press conference.
While working as an advisor at SagePoint Financial in San Diego, Dougherty was convicted of a criminal misdemeanor in 2009 for stealing more than $950 from the Tecolote Youth Baseball team while he was the team's treasurer, according to FINRA BrokerCheck and the felony complaint filed with the Superior Court of California.
"Due to extreme financial hardship and personal issues," Dougherty wrote on his BrokerCheck report, in explanation about the theft, "Mr. Dougherty suffered a lapse in judgment that was fortunately resolved within a short period of time." He added that he repaid the money and was sentenced to community service.
Dougherty left SagePoint the year following his conviction. He has not worked for a FINRA-registered firm since.
"Those who scam continue to scam,” Stephan says.
Taniyama, who had not been aware of BrokerCheck, says that, "I now know there are places you can go to look things up.”
The current list of Dougherty's alleged victims may not be complete. The attorney general's office is evaluating 26 more potential victims to include in the case, Stephan says.
