On December 26, 2017, the Securities and Exchange Commission announced that it had charged a New York-based investment advisor, a New Jersey-based attorney, and a New York-based accountant in connection with a fraudulent scheme to steal more than $9 million from a charitable foundation. John Rogicki, who was Train Babcock Advisors LLC’s former principal, is accused of leading a scheme to steal from his advisory client, a charitable foundation created by an elderly widow to donate her estate to education and health causes.
Train Babcock Advisors, TBA, is currently in the process of winding down its operation. TBA has agreed to settle the SEC’s charges by paying more than $1.7 million in disgorgement, interest and penalties. The firm has also agreed to be censured and to withdraw its registration with the SEC. The SEC has also filed a complaint against attorney Robert Gaughran and accountant Kevin Clune. The SEC alleges that these defendants were trustees of the foundation and aided and abetted the fraud carried out by TBA and Rogicki.
The SEC accuses Rogicki of taking advantage of his roles as investment adviser and trustee of the foundation by liquidating securities positions between 2004 and 2016. He is accused of misappropriating more than $9 million from the foundation for his own personal benefit. Clune and Gaughran are accused of aiding and abetting the scheme. Gaughran allegedly accepted outsized fees and ignored obvious signs of Rogicki’s theft.
Clune was responsible for performing tax work for the estate that created the charitable foundation and the charitable foundation as well. Clune is also accused of ignoring red flags that could have pointed to Rogicki’s fraudulent scheme. Both men are accused of concealing the theft by providing false information to an outside audit firm during a surprise inspection of the charitable foundation in 2014.
Additional details about the charges can be found here.