Financial advisor admits to Ponzi scam
A Beverly Hills investment advisor accused of using millions of dollars from investors to bankroll girlfriends’ businesses and finance a movie pleaded guilty Wednesday to federal fraud charges that could lead to 20 years in jail.
Michael E. McCready, 47, admitted to swindling at least 25 clients out of $9 million in a Ponzi scheme in which new clients’ money was used to pay off other investors.
The plea agreement came on the same day a civil lawsuit was filed in Superior Court in Los Angeles by more than 20 of McCready’s purported victims. Many of them work in the entertainment business and considered themselves friends of McCready.
“These people feel personally and financially betrayed,” said Michael R. Leslie, a Los Angeles attorney representing McCready’s former clients. “Many are really left in the lurch.”
According to the plea agreement, McCready was a licensed securities broker and investment advisor operating in Beverly Hills. He ran the business under many names, most recently McCready & Associates.
In the filing, McCready said he told his clients he was investing the money in traditional securities, such as stocks, bonds, mutual funds and annuities. McCready also told his clients that he created and managed a hedge fund. He told clients the investments were “safe, legitimate and profitable,” the plea said.
But McCready never bought the securities, according to the plea documents. He sent false account statements that showed profits from the investments.
Starting in 2004, McCready began using clients’ funds as a personal bank account, according to the plea agreement. He spent the money on cars, girlfriends and a trip to the Super Bowl. McCready also used the money to run his advisory company and pay off other clients who were requesting money.
“McCready grossly abused his position as an investment advisor,” said Michael R. Wilner, assistant U.S. attorney and deputy chief of the major frauds section in the U.S. attorney’s office. “He took deliberate steps to take money that didn’t belong to him, cover that up and send out false statements.”
In the civil suit, McCready’s clients also accuse Anaheim-based Centaurus Financial Inc. of failing to fulfill its “supervisory obligations over the conduct of its registered broker.”
According to the lawsuit, Centaurus failed in its regulatory responsibilities to properly review McCready’s financial statements. Instead, Centaurus was “motivated by profits, the acquisition of investment clients, and the opportunity to line its own pockets,” the lawsuit said.
Centaurus couldn’t be reached for comment.
McCready wrote and directed the 2006 film “A Price to Pay,” according to online movie database IMDB.com. The plea agreement said the movie was financed through the Ponzi scheme.
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