Jail time for fraud
Jaffrey couple barred for life from securities
Jaffrey resident Charles H. Howard III will spend three and a half years in jail after pleading guilty last week to a felony count of conspiracy to commit investment adviser fraud and a felony count of securities manipulation. His wife, Carolyn Howard, pleaded guilty to a misdemeanor charge of acting as an unlicensed investment advisor. Under a plea agreement, she was sentenced to a 12-month jail term, which is deferred for a year, contingent upon her cooperation with an ongoing state investigation of their practices.
The couple have also agreed to pay $600,000 to the N.H. Bureau of Securities Regulation, with $570,000 of that amount to be used to reimburse victims of the couple’s investment scheme.
The Howards ran an unlicensed investment advisement business known as Howard Interests from 2002 until early 2009, according to the N.H. Attorney General’s Office. During that time, Charles Howard concealed from clients the fact that he was not licensed to act as an investment advisor or broker, and did not disclose that he had been barred for life from the securities industry as a result of previous convictions. He also failed to note that he was being paid to promote the stock of Video Display Corporation, one of the companies whose stock he was encouraging investors to buy, according to the Attorney General’s Office.
The securities manipulation charge resulted from Howard’s attempted to boost the price of VIDE stock.
“Howard failed to disclose that he, with the help of others, was using the investors’ brokerage accounts to manipulate the market price of VIDE stock through dominating the trading in this thinly traded security, and through coordinated end of day trading (“marketing the close”) designed to artificially inflate the reported price of the stock,” said a statement about the guilty pleas released last week by Attorney General Joseph Foster. “Howard’s wife, who was a director and a major shareholder of VIDE, substantially benefited from this manipulation, as did [Howard’s] investment advisory clients and other substantial holders of VIDE shares. However, as a result of VIDE’s inability to attract significant other investors and the general stock market decline in late 2008 and early 2009, Howard’s multi-year efforts to artificially inflate and support the market price of VIDE shares finally failed and VIDE shareholders suffered significant losses.”
As part of the settlement, both Charles and Carolyn Howard will be barred from the securities industry in New Hampshire for life, according to the Bureau of Securities Regulation. Carolyn Howard also agreed to resign as a director of both Video Display Corporation and MDU Communications Inc., a second company that had been paying Charles Howard up to $10,000 a month for consulting services, according to a consent agreement that the Howards signed with the Bureau of Securities Regulation.
In the early 1990s, Charles Howard was convicted in U.S. District Court in Massachusetts on charges of 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 were a factor in the downfall of at least two of New Hampshire’s largest banks at the time, Amoskeag Bank and Dartmouth Bank.
In 1993, Howard was convicted 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 in New Hampshire.
Howard served a total of three years in federal prison on the charges from the 1990s, according to the Attorney General’s Office. Foster’s statement said the activities that lead to the current state charges against the Howards began shortly after Charles Howard was released from probation on the earlier federal charges.
The consent agreement describes Howard’s dealings with 10 different investors, none of whom are identified by name.
A Peterborough woman, identified as Investor No. 1, lost approximately $100,000 between October 2002 and September 2007, after she gave Charles Howard power of attorney over her brokerage account. The Peterborough woman paid $37,850 in fees to Charles Howard and Howard Interests during that time period.
Howard engaged in considerable day trading with the woman’s account, according to the consent agreement, and also purchased large amounts of Video Display Corporation and MDU Communications stock.
“Many of the trades executed by [Charles Howard] were speculative and not suitable for Investor No. 1,” the consent agreement reads. “The sale of Investor No. 1’s Centrix bank stock to obtain proceeds to buy VDC was particularly unsuitable and had no reasonable basis.”
A resident of Rindge, identified as Investor No. 6, had known Charles Howard since childhood. He said he bought Video Display Corporation stock on margin and purchased MDU Communications stock as well on Howard’s advice. Initially, he was not charged a fee by Howard, but he was later asked to pay fees after the Video Display Corporation stock began to rise in value. Investor No. 6 reported paying Howard $22,000 in fees. The consent agreement states that Howard never notified Investor No. 6 that he was not licensed to provide investment advice and had been barred from association with any investment company by the Securities and Exchange Commission. The agreement does not state whether Investor No. 6 ultimately lost money.
Investor No. 7 from Jaffrey, another childhood friend, estimated she lost about $100,000, after Howard accumulated a large amount of Video Display Corporation stock in her account. She also said she had never been notified that Howard was barred from the investment industry.
A husband and wife from Marion, Mass., who had known Charles Howard since the 1970s, lost most of the $760,000 worth of Video Display Corporation stock that Howard had purchased for them when the stock crashed in 2009. The investment represented approximately 95 percent of their portfolio, according to the consent agreement. After they met with the Howards, they received an email from Carolyn Howard, who wrote, “I live with [Charles’s] distress over hurt friendships and the loss of income, daily. Everyone has lost financially in this and it weighs deeply on his shoulders.”
Two investors reached settlement agreements with Howard after threatening to sue, according to the consent agreement. Howard paid a Southington, Conn., man $75,000 and the man also recovered $65,000 through a settlement with Wachovia Securities, according to the agreement, after the man estimated he lost $800,000. An investor from Hamilton, Mass., who reported losing between $600,000 and $700,000, settled for a $60,000 payment from Howard.
According to the Attorney General’s Office, Howard agreed to a seven to 20 year jail sentence. He will serve 3 1/2 years in state prison and then will serve the balance on “electronically monitored administrative home confinement.”
Charles Howard is free while awaiting sentencing, according to Assistant Attorney General Robert Adams. Adams said Monday that part of the plea agreement is that Howard will cooperate with the Attorney General’s Office in their ongoing investigation. Howard’s sentence could be reduced by six months if he provides substantial cooperation, at the discretion of the Attorney General’s Office.
The $600,000 payment to the state will be made through an escrow account. Charles and Carolyn Howard are to deposit $100,000 within the next 10 days, deposit the annual $32,000 proceeds from an annuity Charles Howard has, and deposit his annual Social Security payments of about $22,000 per year until the full amount is paid.
The money probably will not be enough to fully compensate victims for all their losses, according to Jeff Spill, deputy director of the Bureau of Securities Regulation. “We will bring in victims one at a time and interview them, to determine the extent of their losses,” Spill said on Monday. “There are two components — fees unlawfully collected and losses due to bad investments. We have to meet with all the victims.”
Charles Howard also agreed not to accept payments of any kind from any publicly held company for the rest of his life.