Howell Financial Adviser Gets 8.5 Years In $3.1M Fraud Scheme

TRENTON, NJ – A financial adviser from Howell has been sentenced to 8-1/2 years in prison for defrauding investment clients out of millions of dollars, U.S. Attorney Craig Carpenito announced.

Scott Newsholme, 43, of Howell, pleaded guilty in April 2018 and was sentenced by U.S. District Judge Anne E. Thompson in the case, in which Newsholme took more than $3.1 million from his investment clients, resulting in net investment losses of more than $1.8 million.

He then spent the money on personal expenses, including multiple vehicles, bedroom furniture, to gamble at casinos, bank transfers to Newsholme’s personal bank accounts, and ATM withdrawals, authorities said.

He admitted to wire fraud, aggravated identity theft, and preparing fraudulent tax returns in the long-running scheme to defraud investment clients out of millions of dollars, forging an attorney’s signature without authorization in connection with that scheme, and preparing false tax returns for his clients.

Between 2007 and 2017, Newsholme recommended to multiple clients that they invest their money with him, which he would use on their behalf to invest in various securities and other investments, including bonds issued by a private New Jersey country club, a bond investment in a video-game production company, and investments in the production of a movie. He also told them he would invest their money in more traditional securities, including mutual funds, annuities, life insurance policies, college education accounts, money market funds, and an escrow account for the purchase of a house.

Newsholme directed his investment clients to write checks to him or one of his companies so that he could execute the investments on their behalf.

Newsholme concealed his scheme by diverting incoming investment funds to pay other clients who had asked to withdraw funds from their investment portfolios. Newsholme also provided his clients phony account statements, security instruments, and other documentation that falsely represented to the clients the status of their investments.

In October 2017, Newsholme provided a letter to one of his investment clients from whom he had misappropriated approximately $62,000. The letter, which Newsholme represented had been prepared by an attorney, stated that the client’s funds were held safely in an escrow account established by the attorney. However, Newsholme fabricated the letter and forged the attorney’s signature without the attorney’s authorization, authorities said.

In addition to the wire fraud and aggravated identity theft charges, Newsholme also admitted preparing fraudulent tax returns on behalf of his clients. The fraudulent returns that Newsholme prepared claimed inflated deductions for unreimbursed employee business expenses, charitable donations, and medical expenses to which his clients were not entitled.

Judge Thompson on Tuesday sentenced Newsholme to three years of supervised release in addition to the prison term. In April, the Securities and Exchange Commission announced Newsholme agreed to be permanently prevented from further work as an investment adviser and to repay the money and civil fines in amounts that have not yet been announced.

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