Gordon Grigg, ProTrust Financial and ProTrust Management – Fined $570,000 for (Say) Unethical Behavior?

Seemingly kicked out of one state some three years ago, it seems that action wasn’t enough for Gordon Grigg.   In a story I wrote several weeks back (read here) about an SEC investigation into the finacial actions of Gordon Grigg and ProTrust Financial, I stated that I would call him “mini-Madoff” as it seemed clear from published reports that Grigg was representing himself as a financial advisor, when it seems that all he was doing was operating a Ponzi scheme.  But, in our country all are innocent until proven guilty.  So, I began to explore whether there was any merit to what had been reported only days earlier.

Seems there is more…so here is the rest of the story – at least thus far.

On June 28, 2006 the State of North Dakota issued a Cease and Decist Order and fined Grigg, ProTrust Financial and ProTrust Management some $570,000 which, according to the State of North Dakota have not been paid to date.  Hum…seems that where there is smoke there is fire.  Let’s look further at the issues that the State of North Dakota felt warranted such a fine.

ISSUES:

• From 1990 to 2005 ProTrust Financial was registered in Tennessee as an investment advisor.  ProTrust Financial was NEVER registered in the State of North Dakota as an investment advisor.
• Likewise, ProTrust Management was NEVER registered in the State of North Dakota as an investment advisor.
• And, of course, Gordon Grigg as – you guessed it – NEVER registered in the State of North Dakota as an investment advisor.
• From June 2001 to August 2005, Grigg engaged in 30 transactions issued by ProTrust Management and affiliated with ProTrust Financial with a North Dakota resident.
• Those securities were NEVER registered with the Securities Department within the State of North Dakota.
• With respect to 13 of the securities sold, the State of North Dakota says that they were fraudulent in that they were described as CDs to the North Dakota investor.

THE OUTCOME:

Based on the investigation by the State of North Dakota, a civil penalty was assessed against Grigg, ProTrust Financial and ProTrust Management.

1. $350,000 was required to be paid into the North Dakota Investor Restitution Fund for the purpose of reimbursing the complainant for losses incurred as a result of investments with Grigg.
2. $220,000 was to be paid to the North Dakota Securities Department.

WHERE FROM HERE?

As I understand it, the SEC is busy with discovery.  The original report says that Grigg (mini-Madoff) had defrauded 27 investors of over $6.5 million.  From what I am finding there are many more than 27.   Likely the SEC (with egg on their face from the Madoff debacle) will do their do diligence – by dotting “i’s” and crossing “t’s” to bring this to an effective conclusion legally.  More than likely it will find its way into the hands of a federal criminal investigator and eventually Grigg will find himself spending time in prison.

But what about the investors?  Well, there may – I EMPHASIZE MAY – be some funds for restitution, but frankly, I doubt much.  Rarely do fraudsters keep excess funds around for a rainy day – say to make restitution.  But I suppose there is always hope.

PLEASE NOTE:  If you feel that you have been defrauded by Gordon Grigg, please contact me as I am actively working this story and would like to confidentially discuss with you how and when you were defrauded.   I can be reached at chuck@chuckgallagher.com.  Any communication will be confidential.

MORE TO COME…and your COMMENTS are welcome!

And the Fraud Begins – Gordon Grigg and his firm, ProTrust Management Inc. Charged with Securities Fraud – I Shall Call Him “Mini Madoff”

In tough economic times fraud will rise!  And with government funds flooding the markets to stimulate the economy, there is no doubt that some will see this as an opportunity to – well take advantage of an unregulated environment.  That seems to the be case with Gordon Grigg of Nashville and his firm, ProTrust Management Inc.

According to the Associated Press – “Federal regulators on Wednesday charged an investment adviser with securities fraud, saying he bilked clients of at least $6.5 million in the first scheme using the government’s $700 billion financial bailout program as a front to lure investments.”

Need, opportunity and rationalization – these are the three components of fraud – white collar crime.  And while a person is considered innocent until proven innocent, it would seem that there is enough evidence to cause the Securities and Exchange Commission to obtain a court order freezing the assets of Gordon Grigg of Nashville and his firm, ProTrust Management Inc.

It would seem that based on the information thus far that Grigg could be called “Mini Madoff.”  No he might not have yet created a Ponzi scheme, but it does seem it was headed in that direction.

The Associated Press reports:

Grigg represents himself as a financial planner and investment adviser, but neither he nor his firm is registered with the SEC or a state regulator, the agency said in its civil lawsuit filed in federal court in Nashville. The SEC said that Grigg, who obtained control over funds of at least 27 clients, falsely claimed to have invested their money in securities described as “private placements,” creating phony account statements.

BE AWARE:

One of the first indications of fraud is when the investment advisor says – he/she has something that is “private” something that no one else has – something that is special.  Madoff had something special – and now it seems so did Grigg.  Only in both cases it appears that neither was true.

According to the SEC, Grigg began falsely claiming that his firm could invest client funds in government-guaranteed commercial paper and bank debt as part of the federal TARP program. His claims also included that he had partnerships and other business relationships with several leading U.S. investment firms.

Grigg and his firm “preyed upon investors’ desire for safety by claiming associations with reputable investment firms and the government’s TARP program,” Katherine Addleman, regional director of the SEC’s Atlanta office, said in a statement. “Investors should carefully check any purported affiliations. In this case, not only were such claims false, but there is in fact no program in which investors can buy debt guaranteed by the TARP program.”

THE VICTIMS:

As reported in the Charolotte Observer – “Davidson resident Steve Wieland has prayed with Gordon Grigg, invited the former Charlotte resident into his home and trusted him enough to let Grigg’s company invest his life savings.  Wieland, 59, a disabled former pilot who flew for US Airways for 25 years, said he lost $252,000, the bulk of his life savings.

“You read about this happening in the newspaper. But when it happens to you, you go, ‘Oh my God, how do I recover,’” Wieland said. “I can’t. I’m done.”

Grigg’s alleged fraud started in 2003 and according to reports – ProTrust also was subject to a cease and desist order in North Dakota in 2006 for allegedly selling nonexistent securities, records show.

THE PIT – THAT HOLE THAT INVESTORS FALL INTO (AND DON’T RECOVER FROM):

As a fraud prevention expert and business ethics speaker, I am often asked how is it that people get suckered into investments like this?  I wish I could say it was difficult.  But from experience that cost me time in prison – I have to admit it is easy.   More times that not the scammed investors fall into what I have referred to as the PIT.

But here is what Mr. Wieland had to say, “I gave my money to a ‘friend’ instead of doing my research,” Wieland said. “Never do that. I don’t want anybody else to lose any more money.”

P – first there is the “promise” that the investor can get something that is special – something that the average person can’t get.  That “something special” is the allure of a better return – or something that gives one a chance at the gold at the end of the rainbow.  The fraudster plays on that emotional need.

I – second there is the “illusion.” In Grigg’s case – he claimed to have “private placements.”  That was supported by false and fraudulent account statements reflecting client ownership of the non-existent securities.  The false information is part of the illusion.  When you see it on paper or on the web in a fake account, you are lulled into believing it’s truth.

T – the final part is the all important aspect of “trust.” As stated in the Charlotte Observer article – “Steve Wieland has prayed with Gordon Grigg, invited the former Charlotte resident into his home and trusted him enough to let Grigg’s company invest his life savings.”  Ah…there’s that word – TRUST. Bernie Madoff had it, Gordon Grigg had it and so did I.  And in each case the abuse of trust was a key factor in a fraud taking place.

THIS STORY ISN’T OVER:

There is more to this story and likely many more victims.  I feel for them and hope that this writing might alert others to the importance of due diligence when investing.  Grigg, if convicted, will spend time in Federal Prison where he’ll have ample opportunity to think about this choices and the consequences that follow.  As I speak nationwide on ethics and fraud prevention – the first words out of my mouth are – “Every choice has a consequence.”

YOUR COMMENTS ARE WELCOME!

Jamal Nayfeh – Associate Dean for U. of Central Florida Faces Fraud and Theft Charges. White Collar Crime Knows No Boundaries.

One of the worst things that organizational executives face is the possibility of adverse publicity.  All manner of effort is placed on making effective decisions that produce positive results and publicity that promotes the organizations mission.  But, one thing that cannot be controlled is the choices that our employees make.  Needless to say, organizations must face the very real possibility that employees may make less than effective or ethical decisions.

In the case recently reported from the University of Central Florida – an associate dean  in the College of Engineering has been arrested and charged with grand theft.  Jamal Nayfeh is facing fraud and theft charges after he allegedly charged $40,000 worth of home electronics to a university-issued credit card and tried to conceal the purchases from the university, The Orlando Sentinel reported.

MOTIVATION:

As a white collar crime expert – speaker and fraud prevention consultant – the question always arises – what would motivate such behavior?  Nayfeh purportedly had the equipment installed in his $900,000 dollar home located in the gated and secluded community of Seminole Woods in Geneva.

There are three components of fraud:  (1) need; (2) opportunity and (3) rationalization.  I can’t speak to need or rationalization, yet, those two components are necessary parts of fraud.  Regarding “opportunity” – unfortunately the University of Central Florida created that with the all too easy issuance of a university issued credit card.  According to Fox News – UCF spokesperson Grant Heston says Nayfeh and other employees with the college credit cards had to sign an agreement promising to only purchase goods for the schools use.

PREVENTION:

Good people, people who you would never suspect, can be tempted and make choices that have very serious consequences.  A university spokesman, Grant Heston, said Mr. Nayfeh was suspended with pay this month after auditors discovered the purchases, made in December. The arrest affidavit says that Mr. Nayfeh gave the auditors an “altered receipt to make it appear that non-taggable business related items were purchased … rather than a home-entertainment system.”

But could such a purported fraud be prevented.  Yes.  While Mr. Nayfeh made the choices that would lead to his arrest, the University provided the opportunity.  This is very much like a similar situation with the Dallas Independent School District where the FBI has under investigation over 90 individuals who misused organizational credit cards.

Let me be clear  – I do not hold the University at fault nor do I hold the Dallas Independent School District responsibile for their employees fraudulent activities.  As a fraud prevention consultant, however, it is practical to observe how the fraud took place.  Had the opportunity not been in place there is a very real likelyhood that the fraud would not have occured.

COMMENTS:

According to a story on WFTV.com:

Nayfeh’s attorney had brokered a deal with UCF police to turn himself in at the Orange County jail as soon as an arrest warrant was produced. That warrant was issued Wednesday afternoon and Nayfeh turned himself in on charges of second-degree grant theft, fraud and credit card fraud greater than $100.

Among the $40,000 worth of items allegedly charged to Nayfeh’s UCF credit card were a home theatre system with an 80-inch screen, high-def projection system and surround sound, 52-inch LCD TVs in each bedroom and racks and racks of high-end audio equipment.

UCF spokesperson Grant Heston said Nayfeh made the purchases in December and had all of that equipment installed in his home. UCF auditors found the purchases after the high-dollar amount was red-flagged.”The individual has been suspended from the university. The legal process is running its course. And our intention now is to be reimbursed to the fullest extent possible,” Heston said.

Every choice has a consequence.  It is fair to be aware that though Mr. Nayfeh has been charged, he is innocent until proven guilty.

COMMENTS ARE WELCOME

Dallas Theological Seminary Files Charges Against Rodney Bryant. White Collar Crime Not Limited To Wall Street. Comments by Chuck Gallagher Ethics Speaker

Every choice has a consequence and no one including the teachers of God’s principles are safe.  Fraud is not a socially defined crime or one that is limited to the rich, famous or Wall Street addressed.  Fraud can happen anywhere, at any time, to any organization.

As we begin 2009 with the worst January on record for Wall Street, I have stated over and over again in numerous interviews and in many publications, fraud will be on the rise.  You just don’t know where it will rear it’s ugly head.  But, as a fraud prevention and business ethics speaker, one thing I do know, most of the time it happens by those closest to the organization or by those who have been trusted.

Reported by the Dallas Business Journal – Rodney Bryant, former CFO for the Dallas Theological Seminary, was named in a lawsuit claiming that he embezzled $165,000 during the course of his employment.  He was employed from 2000 till October 12, 2008.

The following was included in an article published in the Dallas News:

Mark L. Bailey, president of Dallas Thehological Seminary, said in a written statement that the decision to sue Bryant — “our former employee” — was a difficult one.

“Over the last few weeks, we have found ourselves in the unpleasant position of needing to take appropriate legal action in our fiduciary duty to pursue a biblically appropriate, deliberate, and mutually protected course of action,” he said.

He instructed everyone at the seminary to refer questions about the dispute to the school’s official spokesman, saying, “As responsible Christians, it is imperative that we avoid any gossip or slander.”

Bryant claims the allegations are not true.  In the same Dallas News article the following was quoted:

He said he was working with lawyers and could not discuss specifics of the case. He added: “Everything will work out in the end, and I think I’ll be vindicated.”

You are innocent until proven guilty.  Likewise you reap what you sow.   I understand the truth in both of those statements.  While I am not proud of my past, I do believe the past can be an effective learning ground, and one thing (among many) that I’ve learned is that in fraud – especially white collar crime fraud – no matter what you might say, the truth is found in black and white on paper – cause financial crimes leave a paper trial that most folks can follow.  You don’t have to work for CSI to figure most of these crimes out.

THE ALLEGATIONS:

According to the Dallas Business Journal – “The university alleges that Bryant set up corporate entities that he himself controlled and managed to dispense thousands of dollars into bank accounts for companies that did not exist. Bryant also is accused of forging other DTS employees’ signatures, according to the lawsuit.”

The suit states that Bryant fraudulently drew checks out of DTS accounts for a purported structural engineering firm and a purported law firm.   It goes further to say that Bryant used phony North Texas addresses and phone numbers, and phony letterheads, in documents supporting the payments.  The suit alleges that neither the law firm nor its listed lawyers belong to the State Bar of Texas.  Bryant “incorporated and controlled” the firms, the suit says.

A judge has granted DTS’ request to freeze certain Bryant bank accounts. A hearing is scheduled for Feb. 10.

WHERE FROM HERE?

The truth will set you free or convict you as the case may be.  If Rodney Bryant is found innocent then my guess is there are larger issues brewing at the Dallas Theological Seminary.  Rarely does an organization of this type press public charges without the full belief that those charges will be sustained.  Rarely does a judge freeze an individuals assets without feeling that there is due cause.

If, in fact, these allegations are true, then a civil suit is likely the least of Rodney Bryant’s worries.  As I have said – having been there before, I know that civil can be resolved and still there is the issue of potential criminal prosecution.

From personal experience, if there is guilt…admit it.  Do it now and begin today making choices that will allow for better outcomes in the future.  One can never escape the consequence of past choices.  We many not know how those choices will manifest, but they will manifest.  When the truth is revealed, either through the court system or by Mr. Bryant – the process of healing can being.

FINAL THOUGHTS:

In this case there is more to come.  Meanwhile, in a down economy fraud will become more rampant.  Ethical choices become skewed when economic pressure come to bear…so it is, now more than ever, important to take precautions to protect yourself and your companies.  As a fraud prevention expert if you want to know more contact me at chuck@chuckgallagher.com for a confidential conversation.

Meanwhile – if you have thoughts on Rodney Bryant and the charges by the Dallas Theological Seminary feel free to comment.  Your comments are welcome!