It's every retiree's nightmare.

Instead of enjoying the comfortable $1.26 million retirement they thought they had socked away, a married couple from Maryland unknowingly spent years whittling down their nest egg to $165,000 through principal withdrawals, thanks to a long-running deception on the part of their former adviser.

According to the SEC, former RIA and broker Richard G. Cody of Spring Lake, New Jersey has spent years lying to clients about their accounts. The regulator has sued to stop Cody from what it describes as an ongoing fraud. The case is filed in district in Massachusetts, where the commission says Cody used to live and work and where some of his alleged victims reside.

In recent years, Cody, 42, has been defrauding clients out of his RIA, Boston Investment Partners, which he launched in 2009, one year after FINRA filed a complaint against him, according to the SEC complaint.

BANNED, THEN BACK AGAIN

The complaint says that FINRA ultimately banned Cody from the industry for one year in 2013 after it found Cody gave clients statements that were "false or misleading because they substantially overstated the value of [their] accounts and/or listed securities or positions that did not exist," among other transgressions.

Cody, and his ex-wife Jill Cody, a former broker named in the suit as a related party, did not immediately respond to attempts to reach them.

Neither did the SEC or FINRA immediately respond to inquiries as to why FINRA suspended Cody for only a year after the discovery of his alleged transgressions and, then, why the SEC subsequently allowed him back into the industry as an RIA. Cody is no longer registered as an adviser nor licensed as a broker.

Cody continued and expanded the scope of the very kind of transgressions that FINRA found him guilty of committing in 2008, according to the complaint.

The Maryland couple, identified in the lawsuit as "Carol and Ray B.", first gave Cody a combined total of $985,000 in 2002 and 2003, the SEC says. Each had cashed out of their retirement savings from their longtime employer Verizon to move the money to the broker, the complaint says.

All of Cody's alleged victims named in the lawsuit retired from careers at Verizon.

'IRREPARABLY DAMAGED' FINANCIAL SECURITY

"The sheer duration of Cody’s deception deprived these clients of any opportunity to take measures to decrease or to stop their losses or even to work longer to make up those losses," the complaint says. "With their prime working years now well behind them, Cody’s deceptive scheme has irreparably damaged their financial security, causing immense anxiety and fear and creating the real possibility that they may suffer further dire consequences."

Three other Verizon retirees are named in the lawsuit as victims of Cody's scheme , which included fabricating financial statements and IRS forms. Cody also met with clients to discuss their falsely inflated savings multiple times a year, often in their homes and in local restaurants, the SEC says.

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Cody attended the weddings of some of the children of another pair of married victims, Paul and Maureen M., according to the complaint.

After Paul M. died, Cody told his widow that the distributions she was taking from her retirement account came from investment returns when, in actuality, they were decreasing her principal savings, the SEC says.

FROM $498K TO $43

By the time she discovered the fraud in September, her accounts were "virtually empty," the lawsuit says.

Another victim, Kenneth E, gave Cody $498,000 to invest in 2002. Like his other victims, Kenneth stayed with Cody as he moved from brokerage to brokerage, and then to his RIA, according to the SEC.

By this spring, after years spent unknowingly taking principal withdrawals from his accounts, Cody told Kenneth he still had $489,000, when in fact the real number had fallen to $43, the ] alleges.

By the fourth quarter of 2015, Cody was managing approximately 100 accounts with over $14 million in assets under his management, the complaint says. At the end of 2015, Cody earned a quarterly investment adviser fee of approximately $44,913 for managing these accounts.

During his one-year FINRA suspension, Cody arranged for his wife Jill Cody to maintain his clients while she was a broker licensed with Concorde Investment Services, according to the lawsuit.

"Cody orchestrated this arrangement," the complaint says, "to avoid any break in his
dealings with his clients – which would have revealed his massive deceptions about the value of their retirement accounts."

'OUR SERVICE INSTILLS TRUST'

After an internal review by Concorde, the broker dealer terminated the registrations of Jill Cody and Rich Cody, who had become registered with Concorde after his FINRA suspension came to an end. He then became registered at another BD, IFS Securities, which terminated him four weeks later.

According to the complaint, at the outset of his fraud, Cody worked for: BDs Leerink Swan & Company from 2001 to 2005; GunAllen Financial from 2005 to 2010; Westminster Financial Securities from 2010 to 2013; Concorde Investment Securities from 2014 to 2016; and, finally, IFS Securities this] .

The SEC is seeking a court-ordered asset freeze against Cody and his RIA, as well as "disgorgement of ill-gotten gains," plus interest and penalties, and permanent injunctive relief. The commission also is seeking a jury trial in the case.

At the time that the SEC filed the complaint, Boston Investment Partners' website still claimed that the firm "treats our clients with courtesy and integrity…. Our consistent track record of uncompromising customer service instills confidence and trust."

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Ann Marsh

Ann Marsh

Ann Marsh is a senior editor and the West Coast Bureau Chief of Financial Planning. Follow her on Twitter at @Ann_Marsh.