Securities Newsroom

Investment Adviser Charged with Fraud, Reports U.S. Attorney

Tuesday February 22, 11:05 am ET
BOSTON, Feb. 22 A North Andover man was indicted Thursday, February 17, 2005, in federal court with investment adviser fraud, securities fraud, and wire fraud.

United States Attorney Michael J. Sullivan; Walter G. Ricciardi, District Administrator of the Boston District Office of the Securities and Exchange Commission; and Kenneth W. Kaiser, Special Agent in Charge of the Federal Bureau of Investigation in New England, announced that BARRY J. GOODMAN, age 41, of North Andover, Massachusetts, was charged in an indictment with three counts of investment adviser fraud, three counts of securities fraud, and five counts of wire fraud.
 
The Indictment alleges that between February and August 2000, GOODMAN obtained and then misappropriated $700,000 through two fraudulent investment schemes offered through his investment advisory business, New England Capital Advisory Group, LLC.

The first scheme involved a fictitious "initial public offering pool" (the "IPO Pool"). GOODMAN collected $500,000 from two investors after falsely representing that he would use their funds to obtain stock in initial public offerings underwritten by five investment banks during a specified period. GOODMAN falsely claimed that his firm would and had opened accounts at each of the five investment banks and that because of his special relationship with each investment bank, the accounts would receive allotments of shares in the IPOs the banks underwrote. GOODMAN told the investors that he would be able to sell the IPO shares immediately at a profit, with minimal risk. In fact, neither Goodman nor his firm established any such accounts with the investment banks, and when he received the funds from the investors, he did not invest the funds in IPOs. Instead, he used the funds to engage in day trading, to pay other clients, and to pay himself.

The second scheme involved a false "arbitrage" opportunity in the Internet company, Lycos, Inc. ("Lycos"). In that scheme, GOODMAN falsely represented to one of the IPO Pool investors that he has created an investment strategy in which New England Capital would buy stock in Lycos and use options to minimize the risk that Lycos stock would decline in value. GOODMAN collected an additional $200,000 from that investor. GOODMAN, however, did not invest the money as he represented. He had no "arbitrage" strategy. He did not even buy Lycos stock with the investor's $200,000. Instead, as he had done with the IPO Pool funds, he used the funds to pay other clients and to pay himself.

If convicted, GOODMAN faces a maximum sentence of 10 years' imprisonment and a $1 million fine on each of the three counts of securities fraud; 5 years' imprisonment and a $10,000 fine on each of the three counts of investment adviser fraud; and 5 years' imprisonment and a $250,000 fine on each of the five counts of wire fraud.

The case was investigated by the Federal Bureau of Investigation. It is being prosecuted by Assistant U.S. Attorney Jack W. Pirozzolo of Sullivan's Economic Crimes Unit and SEC Senior Trial Counsel R. Daniel O'Connor, who has been designated a Special Assistant United States Attorney for this matter. The United States Attorney specially thanks the Boston District Office of the Securities Exchange Commission, which conducted the original investigation of this matter, for its cooperation.

The details contained in the Indictment are allegations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law