Greenwich Investment Advisor Admits Defrauding Clients Of $2.7M: Feds

GREENWICH, CT — A 54-year-old investment advisor from Greenwich pleaded guilty this week to defrauding investment clients out of millions of dollars through a "cherry-picking" securities scheme, according to federal authorities.

Jonathan Vincent Glenn waived his right to be indicted in Hartford federal court on Thursday, United States Attorney for the District of Connecticut Vanessa Roberts Avery, and Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation Robert Fuller said on Friday.

"Cherry-picking" is a fraudulent securities trading practice in which the responsible individual executes trades without assigning those trades to a particular trading account until the individual determines whether or not the trade has become profitable or suffered losses, Avery and Fuller said in a joint news release.

The responsible individual then allocates the profitable trades to favored accounts – often the individual’s own accounts – and assigns unprofitable trades to disfavored client accounts.

Through this scheme, Glenn defrauded more than 45 clients out of a total of more than $2.7 million, Avery and Fuller said.

Glenn pleaded guilty to one count of securities fraud, which carries a maximum term of imprisonment of 25 years and a fine of up to approximately $5.4 million. Glenn is released pending sentencing, which is scheduled for Dec. 28.

According to court documents and statements made in court, Glenn owned Glenn Capital LLC, also known as GlennCap LLC, an investment advisory firm headquartered in Greenwich.

Through Glenn Capital, Glenn provided clients with portfolio management services including asset selection and asset allocation. He managed all of Glenn Capital’s advisory clients’ accounts and was authorized to make trading decisions on each client’s behalf without seeking approval for each trade, Avery and Fuller said.

Glenn placed trades on behalf of advisory clients, himself, or family members by trading directly in the relevant individual account, or by placing block trades in Glenn Capital’s omnibus account and allocating the block trades among the relevant individual accounts, Avery and Fuller said.

Glenn Capital’s Code of Ethics required Glenn to determine and document the specific allocation of each block trade prior to the execution, and to allocate block trades to individual accounts at an average price.

In pleading guilty, Glenn admitted that he defrauded clients by retroactively allocating profitable omnibus-account trades to favored clients, family, and personal accounts, and unprofitable omnibus-account trades to non-favored-client accounts, Avery and Fuller said.

Notwithstanding the requirements set forth in the Code of Ethics, Glenn did not determine the allocation of block trades until after they were executed when he knew if the trades were profitable in the hours following the execution, Avery and Fuller said.

When a block purchase of an equity security increased in value in the hours after the purchase, Glenn generally realized the profits by selling the security, Avery and Fuller added. He then allocated those profits to favored-client, family, firm, and personal accounts.

When a block purchase of an equity security decreased in value, Glenn generally allocated those block purchases to the non-favored-client accounts, Avery and Fuller said, noting that Glenn did not inform his clients that he was "cherry picking."

Instead, Avery and Fuller said that Glenn gave the false impression that he allocated trades fairly and according to a pre-determined allocation methodology.

This matter has been investigated by the Federal Bureau of Investigation with the assistance of the U.S. Securities and Exchange Commission, which has settled fraud charges with Glenn and GlennCap LLC.

This case is being prosecuted by Assistant U.S. Attorney Heather L. Cherry.