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March 15, 2019 at 10:25 AM
The Securities and Exchange Commission charged Texas resident William Neil “Doc” Gallagher — the self-styled “Money Doctor” featured on three Dallas-area radio stations — in an emergency action to shut down a $19.6 million Ponzi scheme targeting elderly investors’ retirement funds.
The SEC also charged Gallagher Financial Group and W. Neil Gallagher, Ph.D. Agency Inc., two companies that Gallagher used to carry out the scheme.
The SEC’s complaint alleged that Gallagher made frequent religious references on his radio shows to establish his standing among a target audience of retired Christian investors. He repeatedly solicited listeners to call Gallagher Financial Group to schedule personal meetings with him to discuss retirement planning and obtain advice about risk-free income.
From December 2014 through January 2019, he raised at least $19.6 million from approximately 60 investors — ranging in age from 62 to 91.
Falsely claiming to be a licensed investment advisor, he offered an investment that he called a Diversified Growth and Income Strategy Account, and promised guaranteed, risk-free returns in their accounts ranging from 5% to 8% per year.
According to the SEC, Gallagher promised to acquire income-generating assets for his clients in five specified categories: U.S. Treasury securities, publicly traded stock, fixed indexed annuities, life settlements and mutual fund shares. In reality, except for one $75,000 annuity purchase, Gallagher purchased no assets in any of the five categories and no other assets to back the promised returns.
Instead, he exhausted virtually all investor funds on spending unrelated to the accounts. He used at least $5.8 million to make monthly Ponzi payments to investors. He also directly misappropriated investor funds, including nearly $3.2 million to pay personal expenses, payroll and radio expenses to attract new investors.
Despite raising at least $19.6 million — and as much as $29.2 million — from investors, the Gallagher-controlled bank accounts held a combined balance of only $821,951 as of Jan. 31, 2019.
To lull investors and conceal the scheme, Gallagher provided investors phony account statements showing false account balances.
A judge entered orders at the SEC’s request, freezing Gallagher and his companies’ assets and placing them into receivership and temporarily enjoining the defendants from further violations. The SEC is seeking preliminary, permanent and conduct-based injunctions as well as disgorgement, prejudgment interest and civil penalties against the defendants.
In a related case, the Dallas County District Attorney’s Office obtained an indictment against Gallagher for securities fraud and other criminal charges stemming from the scheme. Gallagher was arrested on those charges, which remain pending.
Wedbush Fined for Failure to Supervise
Wedbush Securities Inc. will pay a $250,000 penalty and has agreed to be censured to settle its failure to supervise charge in a pending administrative proceeding, according to an announcement from the SEC.
According to the SEC’s order instituting proceedings, Wedbush ignored numerous red flags indicating that one of its registered representatives was involved in a long-running pump-and-dump scheme targeting retail investors. Wedbush conducted two flawed and insufficient investigations into the registered representative’s conduct, and failed to take appropriate action, the SEC said.
The settlement acknowledges remedial measures taken by Wedbush since March 2018, including changes made to senior leadership, revised policies and procedures, improved electronic surveillance, and the allocation of additional resources to internal and audit controls groups.
