Bank Fraud – William R. “Rusty” Beamon convicted of scheme to defraud Appalachian Community Bank

January 17, 2015

William R. Beamon, Jr., a/k/a “Rusty” Beamon, has been convicted by a federal jury of carrying out a scheme to defraud Appalachian Community Bank, in Ellijay, Ga.

bank fraud“Bank fraud is a critical problem throughout the United States, but it has hit Georgia especially hard,” said United States Attorney Sally Quillian Yates.  “Georgia leads the nation in bank failures since 2008, with 88 banks failing—including Appalachian Community Bank, the bank this defendant defrauded.  These failures have significantly affected the economy, making these cases important to safeguard the nation’s financial health.”

J. Britt Johnson, Special Agent in Charge, FBI Atlanta Field Office, stated: “Bank fraud comes in many forms but when it comes in the form of the bank’s own vice president, it becomes all the more intolerable.  Mr. Beamon, as a banking executive, should have protected his bank and its assets from fraud but instead he saw an opportunity to enrich his own bank account.  The federal sentencing handed down to Mr. Beamon will be not only the closing note to one man’s banking career but also to the bank that he caused to fail.”

“Beamon was convicted after a jury found him guilty of using his position at TARP-applicant Appalachian Community Bank to defraud the bank in order to line his own pockets,” said Christy Romero, Special Inspector General for TARP (SIGTARP).  “Beamon’s greed and self-dealing at the expense of the bank left holes in the bank’s books that the bank tried to fill when it applied for TARP funds.  SIGTARP and our law enforcement partners will ensure that justice is served for perpetrators of fraud related to TARP.”

According to United States Attorney Yates, the charges and other information presented in court:  Beamon was Vice President of Appalachian Community Bank in Ellijay, Ga.  Due to its poor financial condition, Appalachian was forced to close on March 19, 2010, and the FDIC was appointed receiver.

Beamon was in charge of the Appalachian’s foreclosure liquidation department.  In 2009, he represented to a real estate agent that he personally owned a house in Cumming, Ga.  Beamon hired that agent to market and lease the property on his behalf.  In truth, however, the property was owned by Appalachian and was part of the bank’s foreclosure inventory.  Beamon’s real estate agent found someone to lease the property and negotiated a lease on Beamon’s behalf.  Beamon then deposited into his personal bank account more than $20,000 in rent payments and security deposits that he obtained by leasing out the bank’s property as if he were the owner.  Beamon also caused Appalachian to sell bank-owned properties to his wife and to a shell company that he owned—all at prices that were substantially below what other buyers were ready, willing, and able to pay the bank.

William R. Beamon, Jr., a/k/a “Rusty” Beamon, 54, of Atlanta, Ga., was convicted on five counts of bank fraud.  Sentencing has not yet been scheduled.

Noah L. Myers Guilty of “Cherry-Picking” Securities fraud – Investment Advisor Unethical and Illegal Activity

January 16, 2015

NOAH L. MYERS, 43 was sentenced to 40 months of imprisonment, followed by three years of supervised release, for defrauding investment clients in a “cherry-picking” securities scheme.  MYERS also was ordered to perform 150 hours of community service.

securities fraud“Investors have a right to the fair and ethical management of their savings,” stated U.S. Attorney Daly.  “The sentence imposed today serves as ample warning that money managers who breach their clients trust in violation of federal securities laws will be prosecuted and risk losing their freedom and ill-gotten gains.  We thank the FBI and the SEC for their efforts in uncovering this cherry-picking scheme.”

“Cherry-picking” is a fraudulent securities trading practice in which the responsible individual executes trades without assigning those trades to a particular trading account until the individual determines whether or not the trade has become profitable or suffered losses.  The responsible individual then allocates the profitable trades to favored accounts – often the individual’s own account – and assigns unprofitable trades to disfavored client accounts.

According to court documents and statements made in court, MYERS was the sole owner of MiddleCove Capital, LLC (“MiddleCove”), a Connecticut limited liability company with its principal place of business in the Centerbrook section of Essex.  MiddleCove had been registered with the U.S. Securities and Exchange Commission (“SEC”) as an investment adviser since 2008, and MYERS was the portfolio manager and managed a number of client accounts with assets of approximately $129 million.  MiddleCove used Charles Schwab & Co., Inc. (“Schwab”) to trade securities and as the custodian of the investments held in client accounts.  As part of the trading arrangement with Schwab, MYERS was permitted to place block purchases and sales of securities through a master account with Schwab and then, later in the day, allocate the purchases and sales to various accounts, including his personal accounts and various client accounts, all held by Schwab.

Between April 2009 and November 2010, MYERS engaged in “cherry-picking” at MiddleCove by purchasing the leveraged exchange traded fund (ETF) ProShares UltraShort Financials, otherwise known by its ticker symbol “SKF,” as well as other securities.  MYERS then disproportionately allocated trades that had appreciated in value during the course of the day to his personal and business accounts and allocated trades that had depreciated in value during the day to the accounts of his advisory clients.  As a result, MYERS gained as his clients suffered commensurate trading losses.

For example, in August 2009, on the nine days when MYERS purchased SKF in block trades in the master account and the security was sold as a day trade, MYERS allocated between 9 percent and 32 percent of the profitable block trades to his personal accounts.  On three of those days he allocated between 27 percent and 31 percent of the profitable day trades to his personal accounts.

In addition, on September 2, 2009, MYERS purchased SKF in a block trade in the master account and, after the investment increased in value, sold the shares in a day trade and allocated more than 31 percent of the investment to his personal accounts.  In sharp contrast, MYERS undertook four additional block purchases in the master account of SKF on September 3, 4, 16 and 28, 2009.  On each of these days, when the SKF investment declined in value by the close of trading, MYERS allocated no more than 5 percent of the block trade to his personal accounts and instead allocated the remaining 95 percent of the shares to his clients’ accounts.

In filings with the SEC in April 2009 and March 2010, MYERS and MiddleCove represented that batched trades would be allocated fairly and not unduly favor MYERS or MiddleCove.

On January 16, 2013, the SEC issued an order revoking the registration of MiddleCove as an investment adviser and barred MYERS from the securities industry.  MYERS also was ordered to pay $462,022 disgorgement, $26,096 in prejudgment interest, and a civil penalty of $300,000.

On October 20, 2014, MYERS waived his right to indictment and pleaded guilty to one count of security fraud.