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TRENTON
- Attorney General Anne Milgram announced
that a Salem County investment broker was
sentenced to prison today for defrauding South
Jersey investors out of $1.8 million through
a Ponzi scheme.
According
to Criminal Justice Director Deborah L. Gramiccioni,
Jeffrey J. Southard, 45, of Pittsgrove, was
sentenced to 15 years in state prison, including
five years without possibility of parole,
by Superior Court Judge Patricia Richmond
LeBon in Burlington County.
Southard
pleaded guilty on June 15 to state charges
of first-degree money laundering and second-degree
securities fraud filed by the New Jersey Division
of Criminal Justice Major Crimes Bureau. Deputy
Attorney General Francine Ehrenberg prosecuted
the case and represented the state at the
sentencing hearing.
The
state sentence will run concurrently with
an eight-year federal prison sentence imposed
on Southard as a result of charges filed by
the U.S. Attorney’s Office for the District
of New Jersey in connection with the fraudulent
scheme. In a global resolution of the case,
Southard pleaded guilty on June 12 to federal
charges of mail fraud and signing a false
tax return.
Southard
was sentenced on the federal charges on Nov.
20 by U.S. District Court Judge Robert B.
Kugler. As part of the global resolution,
Judge Kugler ordered Southard to pay full
restitution to his victims of $1,833,399.
“This
investment broker stole the savings of elderly
clients, depriving them of their financial
security and ability to give to their children
and grandchildren,” said Attorney General
Milgram. “We have ensured that he will
serve a lengthy prison term through this global
resolution involving our federal law enforcement
partners, which also requires him to pay full
restitution.”
The New Jersey Bureau of Securities initiated
the investigation and referred the matter
to the Division of Criminal Justice. Southard
was arrested on Dec. 18, 2008 by members of
the Division of Criminal Justice, FBI, Internal
Revenue Service and U.S. Department of Labor.
“This
prison sentence should send a strong message
to those who would defraud investors in New
Jersey,” said Criminal Justice Director
Gramiccioni. “We will aggressively investigate
financial crimes and prosecute those responsible
to the full extent of the law.”
Between
Jan. 1, 2002 and May 31, 2008, Southard, an
investment broker-dealer, offered at least
16 clients a fictitious “Ohio Bond”
through his own company, JD BAC Financial.
He claimed that that the bonds offered investors
a tax-free, guaranteed annual rate of return
of between 6 and 11 percent. Instead of purchasing
“Ohio Bonds,” Southard laundered
and converted the funds through a series of
financial transactions, using the funds to
pay for personal expenses, including $236,678
in private school tuitions for his five children;
$270,142 toward his mortgage; $58,334 in car
payments; $87,002 in ATM withdrawals; and
$36,175 in debit card purchases.
Southard
used approximately $480,000 to pay investors
monthly interest payments, although he also
gave investors the option to reinvest their
interest. Southard generated phony statements
on a monthly basis to his investors. Southard
perpetrated the fraud by personally visiting
his clients on a regular basis. Many of the
clients were in their eighties or nineties.
The clients stated that they wanted a conservative
investment to fund their retirements, supplement
their Social Security and provide money to
their grandchildren. Southard’s victims
lived in several counties in South Jersey,
including Burlington, Camden, Gloucester and
Salem.
Southard
was a registered agent and investment representative
with GunnAllen Financial Inc. from 2003 to
2008. He was discharged while under internal
investigation. From 1997 to 2003, he worked
as a registered agent and investment representative
for American Express Financial Services. He
resigned from that position while under internal
investigation.
On
Nov. 25, 2008, the New Jersey Bureau of Securities
revoked Southard’s registration and
ordered him to pay restitution. It also assessed
civil monetary penalties against him.
The
investigation was coordinated by Detective
Sgt. Louis Matirko, Lt. John Jesperson, Detective
Eric Ludwick, Lt. Stephanie Stenzel and Deputy
Attorney General Ehrenberg of the Division
of Criminal Justice Major Crimes Bureau.
Attorney
General Milgram also thanked the following
individuals and agencies for their assistance
in the investigation: Deputy Bureau Chief
Amy Kopleton and Chief Investigator Rudolph
Bassman of the New Jersey Bureau of Securities;
the FBI Atlantic City Resident Agency; Assistant
U.S. Attorneys Allen Harberg Jr. and R. Stephen
Stigall; the Internal Revenue Service; and
the U.S. Department of Labor, Marjorie Franzman,
Special Agent in Charge, New York City.
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