James K. Couture (“Mr. Couture”), 42, of Sutton, MA, a former investment adviser representative has entered into a plea agreement in Federal Court in Worcester for misappropriating $2.9 million from his investment advisory clients between 2010 and 2019.
Under a plea agreement signed with the United States Attorney, Mr. Couture will plead guilty to the charges contained in a criminal information charging him with three counts of wire fraud and one count of aggravated identity theft. Per the agreement, Mr. Couture will receive a prison sentence set by the judge between five and eight years, pay restitution, and forfeit $2,874,585.97.
$150 million under management until the discovery of misappropriations.
In 2010, Mr. Couture established a Massachusetts limited liability company, The Private Wealth Management Group, LLC (“Private Wealth”) at 11 Foster Street, Suite 200 in Worcester, MA. The purpose of Private Wealth was to provide investment advisory services and sell insurance products.
As of December 2019, Mr. Couture had $150 million in assets under management for investment advisory clients, who included both individuals and organizations.
Although Private Wealth had eight employees, Private Wealth itself had no registrations for acting as an investment adviser nor as insurance agent. Instead, Mr. Couture, acted an investment adviser representative and broker-dealer registered representative of LPL Financial LLC (“LPL”), a registered investment adviser and broker-dealer.
On June 17, 2020, LPL discharged Couture and reported his discharge to regulatory bodies as for cause including that Mr. Couture had: “Altered identifying information, account balances and distributions in customer account statement; maintained comingled customer funds; [and] use[d] an unapproved email address.”
Robbing Peter to pay Paul while taking a $2.9 million cut
Investigations initiated by FINRA the licensing body for investment advisers and the Securities Exchange Commission determined that between 2010 to 2020, Mr. Couture had systematically looted some of his clients’ accounts.
To conduct his fraud, Mr. Couture obtained when possible from clients “full authorization,” which allowed him to make changes regarding the management of their investment accounts. With these authorizations, he transferred portions of these clients’ security holdings to an entity outside the LPL approved companies to a company called “Legacy Financial Group.” Mr. Couture had formed Legacy Financial Group in 2009 and exercised ownership and control over the company and its bank accounts.
In a typical Ponzi scheme way, if certain clients sought to withdraw money from their accounts, Mr. Couture robbed another client’s accounts to make the payment to prevent the discovery of his defalcations. Of course, as the scheme progressed, Mr. Couture progressively siphoned off more of his clients’ monies to pay his personal and business expenses.
The Securities and Exchange Commission, which has sued Mr. Couture civilly alleges in its complaint that the money converted by Mr. Couture from his clients totals $2.9 million.
Plea agreement for a prison sentence of up to eight years and seven months to serve
On May 28, 2021, Mr. Couture entered into a plea agreement with the United States Attorney for Massachusetts whereby he agreed to plead guilty to an information charging him three counts of wire fraud and one count of aggravated identity theft.
Each count alleging wire fraud carries a sentence upon conviction of up to 20 years in prison, three years of supervised release and a fine of $250,000, or twice the gross gain or loss, whichever is greater. The charge of aggravated identity theft provides for a mandatory sentence of two years in prison that Mr. Couture would have to serve consecutive to any other prison sentence imposed by the court.
Not surprisingly, based on the documentary evidence against him, Mr. Couture, through counsel negotiated a plea agreement. The agreement provides, subject to the sentencing judge’s discretion, that Mr. Couture will receive a sentence of:
- incarceration for a total term across all counts of not less than 66 months and not more than 91 months.
- a fine consistent with the level of Mr. Couture’s offense under the Federal sentencing guidelines as agreed by Mr. Couture and the U.S. Attorney.
- 36 months of supervised release.
- a mandatory special assessment of $400, which Defendant must pay to the Clerk of the Court by the date of sentencing.
- restitution of at least $1,924,585.97, or as determined by the Court; and
- a forfeiture judgment of $2,874,585.97 in United States currency entered in the form of an Order of Forfeiture.
While the United States Attorney filed the criminal information on June 1, 2021, with the federal court, based upon Mr. Couture’s plea agreement, no date for Mr. Couture’s actual guilty plea to the charges has been set.
Federal officers involved in the investigation and prosecution of Mr. Couture
The announcement of the filing of the information against Mr. Couture identifies the federal officials involved in Mr. Couture’s case as the Acting United States Attorney Nathaniel R. Mendell; Ramsey E. Covington, the Acting Special Agent in Charge of the Internal Revenue Service’s Criminal Investigations in Boston; and Joseph R. Bonavolonta, the Special Agent in Charge of the Federal Bureau of Investigation, Boston Division. Also, the announcement stated the U.S. Securities & Exchange Commission provided valuable assistance with the investigation.
Assistant U.S. Attorneys Kriss Basil and Sara Miron Bloom of Mendell’s Securities, Financial & Cyber Fraud Unit are prosecuting the case.