Former state GOP chairman barred from financial industry in Mass.
A former broker and ex-chair of the Arizona Republican Party has been censured, barred and fined $15,000 for alleged violations of Massachusetts securities laws, according to a consent order from the state’s securities regulator.
Robert Shaw Graham denies the allegations against him, stating this was only a settlement. “I wouldn’t admit to those violations any day of the week, ever,” he says.
The alleged victim of Graham’s dealings was a 67-year-old artist in Massachusetts, who had little financial experience, according to the consent order. She had invested $400,000 out of two trusts set up for her disabled brother and elderly mother. The first investment was made in 2012 in the form of two promissory notes.
To date, the investor has lost every dollar, according to the Commonwealth of Massachusetts. She was not named in the consent order.
In total, Graham solicited around $1.8 million in capital for a project known as Groveton, the consent order said.
Groveton was an entity owned and controlled by Green Steel, a business venture started by Graham and his partner Eric Wnuck, a local businessman who, in 2010, waged an unsuccessful campaign to represent Arizona’s 5th congressional district.
The project was to pull apart a paper mill, says Graham. It sat on 107 acres of land in New Hampshire, and they were working with vendors, as well as city and state authorities, to demolish the building and harvest the steel, copper and wood, he says.
But the project ultimately failed.
“As a result of mismanagement by Graham and his business partners,” all of the investors’ funds were lost, the Commonwealth of Massachusetts said in a press release.
Graham, however, says that weather and commodity prices played a role in the project’s failure, and that he ultimately had to pay vendors out of his own pocket. The paper mill is now owned by the demolition company, according to Graham.
He says the risk involved was disclosed up-front and that not all of the funds raised came from clients of his RIA, RG Capital.
“Every pinch of possibility of risk, from weather to market conditions, to management operations, anything was disclosed,” Graham says.
Graham notified his broker-dealer, Capital Investment Group, about Green Steel and his own personal investments. However, he allegedly did not notify the firm of solicitations of his clients to invest in the company, according to the consent order. This information came to the attention of CIG’s chief compliance officer approximately one month later.
“It is time that [Graham] finds a new [broker-dealer],” the compliance officer wrote in an email used in the Massachusetts consent order upon discovering the dealings. While he recommended the firm terminate Graham, he was not involved in the final decision, which was to approve the investments, according to the state securities regulator.
Ron King, who has worked as CIG’s chief compliance officer since 2007 according to his LinkedIn profile, declined to comment on the matter.
Graham, speaking of his company, RG Capital, says that “CIG and I go back and forth a bit on this, because we believe that we did disclose it to them, clearly.”
The consent order states that CIG did not have knowledge or give approval when the solicitations began.
CIG, which admitted to violating Massachusetts law, ended up approving the investments after it came to the firm’s attention, but only under the condition that Graham’s clients receive and sign a letter that acknowledged CIG was not officiated with the investments and was not involved in resulting profits or losses, according to the Commonwealth of Massachusetts.
The artist in Massachusetts signed that letter.
However, under FINRA regulations, broker-dealers are obligated to supervise all approved transactions as if they were executed on the firm’s own behalf, according to the Commonwealth of Massachusetts.
Graham says he was under the impression that CIG would only oversee the broker-dealer business.
The Commonwealth of Massachusetts determined that Graham’s conduct was unlawful and that CIG did not adequately supervise Graham and the performance of his client’s investments.
“This is the classic example of a firm shutting its eyes to the violations of their agents who are either big producers or have some type of name recognition within the community,” William Galvin, Massachusetts secretary of state, said in a statement.
As a result of the order, Graham has been permanently barred from the industry in the state of Massachusetts and ordered to pay an administrative fine of $15,000. CIG must pay a $50,000 administrative fine to the Commonwealth of Massachusetts, offer restitution to the investor and review its policies and procedures accordingly.
Green Steel is still operating, says Graham, and is in the process of managing the development of an apartment complex in St. Paul, Minnesota. If he starts another project, he plans only to use personal capital, he says.
Graham was registered as a broker until 2014, according to FINRA BrokerCheck, with 15 years of experience in the field at eight firms. He currently serves at the CEO of ROI Global Partners, according to his LinkedIn profile.
Graham served as the chairman of the Arizona Republican party from 2013 to 2017. He also served as a senior advisor to Donald Trump’s presidential campaign in 2016, according to his company biography.
The Arizona Republican party did not respond to request for comment.
Kelly Richards is the current president of RG Capital, which he purchased from Bloomfield Hills Financial in December 2017, Richards says. He declined to comment on the consent order.