Couple accused of fraud
Bureau of Securities alleges investors lost $2.26M in illegal investment scheme
A Jaffrey couple, one of whom was previously convicted and served time for bank stock manipulations, are alleged to have fraudulently operated an investments firm, costing their investors — including some from the Monadnock region — hundreds of thousands of dollars. The N.H. Bureau of Securities has issued an order calling for them to stop their illegal activities, repay their investors and pay the state up to $200,000.
It is estimated that investors lost a little under $2.26 million in allegedly bad investments and consulting fees.
The Bureau of Securities Regulation issued a press release Thursday, announcing that it has issued a consent order against Charles H. Howard III and his wife, Carolyn Howard, alleging that through their jointly owned company, Howard Interests, the couple gave investment advice and engaged in broker-dealer activities, despite being unlicensed to do so. The activities allegedly took place between October 2002 and December 2012.
The Securities Bureau is seeking a permanent cease and desist, a permanent bar from licensure and fines of $200,000 as well as restitution to victims in a to-be-determined amount, the release said. The Bureau’s Staff Petition for Relief alleges that the Howards charged several hundred thousand dollars in fees, and that their illegal activity resulted in several hundred thousand dollars in losses for investors.
According to Jeff Spill, deputy director of the Department of State Bureau of Securities Regulation, the Howards will have 30 days to contest the allegations via a hearing. “If he doesn’t request a hearing, the matter would be found as true, and the sanctions imposed by the bureau would remain,” said Spill. If the Howards do request a hearing, a contested hearing will be held where both sides present their cases, and a hearing examiner will make a determination.
In a response to requests for comment, Charles and Carolyn Howard, through their lawyer, declined to comment on the issue outside of legal proceedings.
“We have just learned of the complaint filed by the New Hampshire Bureau of Securities Regulation,” a statement from the Howards’ reads. “The complaint raises complex legal issues under state and administrative law and we are consulting with our lawyers, as we enter into this legal thicket.”
From 2002 to 2012, Charles Howard allegedly gave investment advice, and charged fees for that advice, to at least nine investors. Among the investments he put his clients’ funds in were Video Display Corporation, a publicly traded company in Tucker, Ga., and MDU Communications International, Inc. According to the Bureau of Securities petition for relief, both Carolyn and Charles Howard were affiliated with those companies. Carolyn Howard has been a director of Video Display Corporation since 2001, and received a director’s fee of $1,000 per month and stock options. Since July 2005, she has also been a director of MDU Communications, receiving $1,500 as a director fee per month. Charles Howard was also working for Video Display Corporation, receiving $2,500 per month to cover expenses for services including sales of real estate, investor relation services, surplus inventory dispositions, researching potential purchasers and other advisory services. He was also contracted by MDU Communications to provide services relating to business and investor relations.
Over the course of 2002 to 2012, Charles Howard approached investors, several of whom were longtime acquaintances of the Howards, and began to manage their brokerage accounts. Under Charles Howard’s advice, these investors put large percentages of their investments into MDU Communications and Video Display Corporation. According to the Bureau of Securities petition, in an phone interview the Bureau of Securities conducted with Ronald Ordway, the CEO of Video Display Corporation, Ordway stated that Charles Howard was being paid to generate interest and answer questions about the company, as well as to promote the company’s stock.
In the early to mid-2000s, the stock for Video Display Corporation did well, resulting in gains for Howard Interest’s investors. The stock plummeted in 2009, however, resulting in hundreds of thousands being lost by some investors who had nearly the entirety of their portfolio invested in the company.
The petition alleges that Charles Howard never disclosed to any of the investors that he was not licensed to accept fees to give investment advice, or that he had previously been barred from any association with investment advisers.
Among the nine victims detailed in the petition, three are from the Monadnock region. The first, from Peterborough, and identified as Investor #1 in the petition, began investing with Charles Howard in 2002. Charles Howard was granted power of attorney over the investor’s brokerage account. In the first year, Charles Howard began day trading for the investor, and began to purchase and hold a large quantity of stock in Video Display Corporation, as well as stock from MDU Communications. Over the course of five years, the Peterborough investor paid approximately $39,350 in fees to Charles Howard, and lost approximately $100,000.
Another investor, identified only at Investor #6 in the petition, is from Rindge and has known Charles Howard since childhood. He was first approached by Charles Howard in 1999, when he recommended investing in Video Display Corporation. The Rindge investor began buying Video Display Corporation stock in margin, and also began buying stock from MDU Communications, also on Charles Howard’s advice, according to the petition. The investor was not paying a fee for this advice, until the mid-2000s, but over time paid approximately $22,000 in fees to Charles Howard.
Another investor, identified as being from Jaffrey and another acquaintance who has known Charles Howard since childhood, maintains that sometime in 2011, Charles Howard offered to take care of his portfolio free of charge. The investor gave her username and password for online brokerage accounts to Charles Howard. The investor maintains that Charles Howard accumulated a large position in Video Display Corporation via her account. The investor estimates her losses to be approximately $100,000.
Other investors have reported losses up to $800,000.
Spill noted that he believes that the bureau has identified all of the investors who invested with Howard Interests. “It’s possible that there are others that haven’t come forward, but we don’t have any indication that there are others,” he said.
Carolyn Howard has been connected with several nonprofits in the Monadnock region. In 2010, she was named president of the Board of Directors for the Sharon Arts Center, moving into that position from a vice-presidency. Howard is no longer listed on the Sharon Arts Board of Directors. She has also previously served as president of the Jaffrey Civic Center in the late 2000s, and has served on an advisory board for the Jaffrey Park Theatre.
In the early 1990s, Charles Howard was convicted in the U.S. District Court of Massachusetts for conspiracy to commit obstruction of justice, in connection with a U.S. Securities and Exchange Commission investigation. The charges relate to stock manipulations by Howard, which was a factor in the downfall of at least two of New Hampshire’s largest banks at the time, Amoskeag Bank and Dartmouth Bank. At that time, Charles Howard was sentenced to a year in prison, and served six months of that sentence.
In 1993, Charles Howard was further sentenced to five years in prison on one count of felony bank fraud and one count of conspiracy, involving insider trading, bank bribery and bank fraud in the U.S. District Court. He was also sentenced to another two years, with the sentence suspended, and five years of probation on a second count of conspiracy to commit insider trading, bank bribery and fraud. Charles Howard served 30 months of that sentence before being released.
The Howards have 30 days to contest the Securities Bureau’s allegations by requesting a hearing. Anyone with information on these activities is encouraged to contact the Bureau at 271-1463.
Ashley Saari can be reached at 924-7172 ex. 244, or firstname.lastname@example.org. She’s on Twitter @AshleySaari.