From U.S. Department of Justice, U.S. Attorneys Office, District of Maryland. Original Press Release found here.
Financial Advisor in Wealth Management Section of Global Investment Bank Used Stolen Victim Funds to Pay His Own Lifestyle Expenses, Including Country Club Membership Fees
Greenbelt, Maryland – Michael Barry Carter, age 47, of Potomac Falls, Virginia, pleaded guilty today to federal charges of wire fraud and investment adviser fraud, in connection with a scheme to steal more than $6 million.
The guilty plea was announced by United States Attorney for the District of Maryland Robert K. Hur and Special Agent in Charge Jennifer C. Boone of the Federal Bureau of Investigation, Baltimore Field Office.
“For over 12 years, Michael Carter perpetrated a brazen scheme that defrauded victim account holders whose investments he was supposed to protect,” said U.S. Attorney Robert K. Hur. “When his fraud was discovered, Carter repaid some victims by taking money from other victim accounts. The U.S. Attorney’s Office will do everything we can to ensure that justice is served by holding accountable financial advisers who defraud investors of their life savings.”
According to his guilty plea, from August 7, 2006 to April 29, 2011, and again from November 16, 2011 to July 29, 2019, Carter was employed by a financial institution and worked primarily out of the financial institution’s Tysons Corner, Virginia location. In 2012, Carter was promoted to financial adviser in the wealth management section of the financial institution and was registered to sell securities and act as an investment adviser in Maryland and Virginia, among other locations. Carter managed and had authority over multiple investment accounts maintained by Victims 1 through 5 with the financial institution, which contained a mix of assets including securities and cash deposits. As a financial adviser, Carter was required to manage the victim accounts in the best interests of his clients, consistent with their investment objectives, and not for his personal benefit.
As detailed in the statement of facts, from at least October 2007 to at least July 2019, Carter made numerous unauthorized transactions from the victim accounts for his personal benefit, defrauding Victims 1 through 5 of at least $5 million. To effect the unauthorized wire transfers, Carter caused the submission of an internal bank authorization form that falsely stated that Carter had received verbal client instructions from each victim authorizing the transfer at a specific date and time. Carter caused the wire transfers to be sent to his personal accounts and used the money to pay for his lifestyle expenses, including Carter’s mortgage, credit card bills, and country club membership fees.
Carter’s fraud was first discovered when Victim 1 and her adult daughter attempted to obtain a bridge loan from the financial institution to cover relocation expenses to an assisted living facility in Florida until the sale of Victim 1’s home in Columbia, Maryland, was completed. When they applied for the loan, Victim 1 and her daughter discovered that an $800,000 loan had already been obtained in Victim 1’s name, without Victim 1’s knowledge or permission. The financial institution determined that the disbursement of the loan proceeds went to Carter’s personal bank account and that Carter used his personal e-mail address in furtherance of the fraud. The financial institution then learned that Carter had transferred approximately $5 million in unauthorized funds associated with clients of the financial institution.
On July 29, 2019, Carter was fired from the financial institution. On August 2, 2019, during a call with employees from the financial institution, Carter admitted that he had defrauded the five victims over a period of years, that he had forged clients’ signatures on bank authorization forms, that he had created false financial statements to disguise his theft, and in some cases had mailed those financial statements. With respect to Victim 1, Carter further admitted that he met with the victim at her home and answered Victim 1’s phone in order to authorize the transactions, unbeknownst to Victim 1. Carter did this in order to overcome the financial institution’s multi-factor verification system required to execute the transactions.
According to the plea agreement, during the course of the scheme Carter made at least 53 unauthorized transfers from his clients’ accounts to his own accounts. In addition, Carter admitted that he embezzled over $50,000 from a non-profit sports organization located in Loudoun County, Virginia. In all, Carter stole at least $6,149,162.77. Prior to his offenses being detected, Carter caused $1,794,052.38 to be returned to the victims. After learning that his fraud had been discovered, in October 2019, Carter also repaid the non-profit organization for its loss. Of the total amount repaid, $1,118,318.52 was repaid through transfers Carter made from other victim accounts.
The net proceeds obtained by Carter was at least $4,355,110.39. As part of his plea agreement, Carter will be required to pay a money judgment in that amount.
Carter faces a maximum sentence of 20 years in federal prison for wire fraud and a maximum sentence of five years in federal prison for investment adviser fraud. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors. U.S. District Judge Paul W. Grimm has scheduled sentencing for November 9, 2020 at 1:00 p.m.
United States Attorney Robert K. Hur commended the FBI for their work in the investigation and recognized the Securities and Exchange Commission, which has filed a related civil proceeding. Mr. Hur thanked Assistant U.S. Attorneys Erin B. Pulice and Jennifer L. Wine, who are prosecuting the criminal case.