The SEC charged a New York-based investment advisor with fraud in connection with a scheme to misappropriate funds from a charitable foundation. Separately, the SEC charged a New Jersey-based attorney and a New York-based accountant with securities violations for aiding and abetting the fraud.
The SEC claimed that John Rogicki, former principal of Train Babcock Advisors LLC ("TBA"), misappropriated more than $9 million from a charitable foundation established by an elderly philanthropist. Mr. Rogicki was an investment adviser and trustee for the foundation. He allegedly liquidated securities positions in the organization's advisory account to use for his own personal benefit. The SEC also alleged that Robert Gaughran, an attorney acting as a trustee for the foundation, accepted outsized fees for reviewing brokerage statements, and ignored obvious red flags that should have alerted him to Mr. Rogicki's theft. Mr. Gaughran was accused of aiding and abetting the fraud, for failing to make any affirmative efforts to stop the fraud, and for understating the Foundation's outlays. Accountant Kevin Clune was accused of ignoring "multiple and repeated red flags" concerning Mr. Rogicki's fraudulent scheme. Mr. Gaughran and Mr. Clune were also accused of providing an outside audit firm with false information concerning the organization's finances.
The SEC charged Mr. Gaughran and Mr. Clune with aiding and abetting TBA and Mr. Rogicki's violations of Advisers Act Sections 206(1) and (2), and Exchange Act Section 10(b) and Rule 10b-5.
TBA agreed to pay over $1.7 million and to withdraw its registration as an investment advisor.
In a parallel criminal action, Mr. Rogicki was sentenced to 30-90 months in prison and ordered to repay the charitable organization nearly $7 million.
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