An adviser received a three-and-a-half year prison sentence for allegedly telling clients he would invest their money in a hedge fund but instead diverting the funds to his business partner and other members of her family who spent it on personal expenses, the SEC said.
Gregg Caplitz of Wilmington, Mass., was also ordered to pay $1.89 million in restitution to victims he defrauded and more than a dozen victims lost retirement savings as a result of the fraud, according to the SEC.
Caplitz pled guilty to conspiracy, investment adviser fraud, making a false filing with the SEC and wire fraud in April 2014.
He and his business partner, Rosalind Herman, were indicted in March 2012. The indictment alleged that Caplitz fraudulently induced clients to entrust their savings and other funds to him by falsely representing that funds would be invested and managed for the clients' benefit, yet he diverted client funds to benefit himself and Herman.
Caplitz's attorney, Jane Peachy of Boston's Federal Defender Office, pushed for a much lighter sentence, arguing that Caplitz assisted the government in prosecuting Herman, with whom he had been romantically involved. Peachy also noted that Caplitz had significant medical problems, including a form of multiple sclerosis, which would be costly and difficult to treat in prison.
"While he accepts that there still must be punishment from this court for the harm he has caused, Gregg Caplitz has done everything he could to change his life and cooperate with the government in order to atone for his crimes," she wrote in a sentencing memorandum.
When reached, Peachy declined to comment further.
Herman was convicted of conspiracy, investment adviser fraud, wire fraud and a tax-related charge in April.
In March 2013, the SEC filed a civil injunctive action and obtained an asset freeze against Caplitz and Insight Onsite Strategic Management, Herman's investment advisory firm. Herman and Herman's two sons and daughter-in-law were named as relief defendants in the SEC's action. The SEC alleged that instead of using investor funds as represented, Caplitz transferred control of the clients' money to Herman and her family and a company called Knew Finance Experts.
The SEC's litigation continues against Caplitz and the Hermans.