For Immediate Release
August 21, 2014
Robert F. Adams, Assistant Attorney General
Attorney General Joseph A. Foster announces that Charles H. Howard, III ("Howard") of Jaffrey, pleaded guilty yesterday in Cheshire County Superior Court to one felony count of conspiracy to commit investment adviser fraud and one felony count of securities manipulation. His wife, Carolyn C. Howard pleaded guilty to one misdemeanor count of acting as an unlicensed investment adviser.
The charges stem from a joint investigation by the Attorney General's Consumer Protection and Antitrust Bureau and the Bureau of Securities Regulation ("BSR") into the defendant's fraudulent investment activities. The case was prosecuted by the Attorney General's newly formed Financial Fraud Unit, which is enabling the State to bring more sophisticated criminal financial fraud cases. The prosecution received invaluable assistance from the Financial Industry Regulatory Authority's Criminal Assistance Prosecution Group in Washington, D.C.
Charles H. Howard, III was previously convicted in federal court in Massachusetts of obstruction of an investigation by the U.S. Securities and Exchange ("SEC") in 1990. He was also convicted in federal court in New Hampshire of insider trading and bank fraud in 1993. Howard collectively served three years in federal prison on those charges. The conduct which is the subject matter of today's State charges is unrelated to his prior conduct and began shortly after Howard was released from probation on the prior federal charges.
The investigation revealed the following: From at least 2002 through early 2009, Howard and his wife, doing business as "Howard Interests," operated as unlicensed investment advisers and broker dealers in that they charged various individuals to give them investment advice, and in some instances Howard had authority to use the investor's user names and passwords to actively trade the investor's online brokerage accounts. Howard, however, defrauded and deceived his investment advisory clients by concealing material information from them and by making material misrepresentations to them. Among other things, he concealed from his investment advisory clients that he was in fact not licensed to act as an investment adviser or broker. He did not disclose that as a result of his prior convictions he was subject to a lifetime bar from the securities industry previously imposed by the SEC. He concealed from his clients that one of the securities, Video Display Corporation ("VIDE"), that he advised his clients to heavily purchase, was simultaneously compensating him to promote the purchase of the 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 ("marking the close") designed to artificially inflate the reported price of the stock. Howard's wife, who was a director and a major shareholder of VIDE, substantially benefited from this manipulation as did his 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.
Carolyn C. Howard, who was Howard's administrative assistant at or about the time of his prior convictions, assisted him in operating the business of "Howard Interests" by assisting the investment advisory clients with documentation and record keeping with respect to their accounts, as well as receiving their payments. Her position as a shareholder and director of VIDE also lulled many investment advisory clients of "Howard Interests" into believing that their investment in VIDE was safe.
Pursuant to the fully negotiated plea agreement, Howard has agreed to a 7-20 year sentence. However, he will serve 3½ years in state prison with the balance of his seven year minimum served on electronically monitored administrative home confinement. At the discretion of the Attorney General the period of his incarceration may be reduced by an additional six months, if he provides substantial cooperation in the State's ongoing investigation. He has also agreed to disgorge $600,000 to the State, which will be disbursed to victims at the direction of the BSR. He further agreed not to accept remuneration from any publically held company for the rest of his life, and to divest himself of certain securities which he had promoted to his investment advisory clients, including VIDE.
Pursuant to her plea agreement, Carolyn Howard was sentenced to 12 months in the House of Corrections all of which will be deferred for one year conditioned on her cooperation with the State's continuing investigation. Charles Howard's sentencing will be set at a later date so that he may assist in the State's ongoing investigation before being incarcerated.
Both of the Howards simultaneously consented to Cease and Desist Orders issued by the BSR prohibiting them from acting as investment advisers or brokers. Charles Howard also consented to an administrative bar issued by the SEC prohibiting him from being in the securities industry.
New Hampshire Department of Justice | 33 Capitol Street | Concord, NH | 03301