‘Shameless con artist’ — an ex-advisor — gets 15 years for fraud

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A former Iowa investment advisor will spend the next nearly 15 years in federal prison after stealing $2.4 million from clients to fund bio-energy companies.

Darrell Smith, 62, pleaded guilty to one count of wire fraud and one count of aggravated identity theft in July 2017 and was sentenced to 175 months in federal prison on Oct. 5.Smith’s new prison term follows a 13-month sentence for payroll tax fraud he received in 2016.
“This sentence brought to justice a shameless con artist who preyed on the elderly and others,” U.S. Attorney Peter Deegan said in the Department of Justice’s press release.

From 2010 to 2013, Smith withdrew millions from 10 of his clients’ accounts without their consent and funneled the money into Energae, a partnership he had formed with another individual in 2008 to invest in bio-energy companies, according to court documents filed by the prosecution. Client funds were used to cover expenses for Permeate Refining, which ran a non-defunct ethanol plant in Hopkinton, Iowa, that Energea owned a 49% stake in.

Smith forged client signatures to withdraw funds and also used pre-signed, blank authorization forms without the client’s knowledge or consent, according to federal prosecutors. In one instance, he not only forged a client’s signature on a MetLife Variable Annuity form but also used that person’s Social Security number to transfer $30,000 to a bank account held in the name of Energae, court documents state.

Smith's attorney, F. Montgomery Brown, did not respond to requests for comment.

In 2013, Smith voluntarily surrendered his securities agent license and insurance producer license in Iowa, after a customer filed a dispute against him alleging he’d purchased investments without their authorization, according to court records. The previous year, Smith had also voluntarily resigned from Multi-Financial Services Corporation, now part of Cetera Advisors, where he’d worked since 2001, according to court records and his BrokerCheck records.

U.S. District Court Judge Linda Reade, who sentenced Smith, increased his prison term because, while the case was pending, Smith obstructed justice by enlisting a relative to help him try and dissuade one of his victims from seeking restitution and cooperating with the government investigation. While in jail awaiting sentencing, he also persuaded a fellow Iowa man to loan him $25,000, according the Department of Justice’s press release.

In addition to his federal prison term, Smith was ordered to pay $1,056,909.68 in restitution to his ten victims and cover the costs of prosecution, which total $2,947.35. At the end of his sentence, he will serve a three-year term of supervised release.

The case involved multiple government agencies: the FBI, the U.S. Postal Service Inspection Service, IRS, and the Office of Inspector General of the U.S. Department of Agriculture.

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Securities fraud Crime and misconduct U.S. Attorneys Office DoJ