The Securities and Exchange Commission has settled with Roberto Mejill-Tellado for his role in acting as an unregistered investment advisor for the City of Mayaguez, Puerto Rico, where he and six others were accused of defrauding the city of $9 million.
In June 2022, Mejill-Tellado pleaded guilty to one count of conspiracy to commit wire fraud and one count of engaging in a monetary transaction in property derived from specified unlawful activity and is awaiting sentencing. In this administrative proceeding brought by the Commission, he admitted the findings that he pleaded guilty to in federal court.
He is barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent or nationally recognized statistical rating organization.
Mejill-Tellado was a contractor providing financial and investment advisory services to the city. He was arrested in March 2021 along with Eugenio García-Jiménez, Stephen Kirkland, Steve Minger, Alejandro Riera-Fernández, Joseph Kirkland, Arnaldo J. Irizarry-Irizarry and indicted by a federal grand jury in the District of Puerto Rico on 33 counts of wire fraud and money laundering.
Jiménez was also charged by the Commission for acting as an unregistered investment advisor, and that action is still ongoing. His firm, LPL Financial, was also charged and without admitting or denying the findings, agreed to pay $4.1 million directly to the Mayaguez Economic Development Inc., as well as a civil penalty of $750,000.
The indictment alleged that from March 2016 to June 2018, all seven orchestrated a scheme to defraud Mayaguez, as well as MEDI, of money belonging to the city by falsely representing that the whole $9 million in principal belonging to Mayagüez and entrusted to MEDI for investment was invested and earning returns.
Minger represented himself as an executive for several of the shell entities used to defraud the city and MEDI, the DOJ said. Riera-Fernández was MEDI’s executive director. Joseph Kirkland was a financial advisor at Union Banc Investment Services, where the first account used in the scheme was opened. Irizarry was a contractor providing legal representation to Mayaguez.
Jiménez conferred with and procured from both Kirkland brothers documents that were sent to Mayaguez to make it seem that the $9 million would be invested at a high rate of return, authorities found.
The defendants transferred, distributed, and spent the money in ways inconsistent with the representations made to Mayaguez and MEDI, which included a marine vessel, jewelry, clothing, school tuition, restaurants, utilities, credit card payments, home decor, real estate improvements and payment of home mortgages, the Department of Justice said in a press release.
“Using multiple shell corporate entities and financial accounts, defendants collectively received hundreds of thousands of dollars belonging to Mayaguez, intended for investment, which defendants then used for personal expenses and purchases of personal and real property,” the DOJ wrote. “The use of shell corporate entities further served to conceal the scheme to defraud Mayagüez and MEDI and allowed defendants to lull Mayaguez and MEDI into believing that the nine million dollars was invested as falsely represented by defendants. Of the nine million dollars obtained from the municipality through material misrepresentations, the defendants only returned $1,800,000 to Mayagüez and in doing so, falsely represented that the $1,800,000 was a return on investment.”
All defendants thus far have either pleaded guilty or were found guilty by jury. All are expected to be sentenced in the next few months, according to federal court filings.
The charges carry with them a maximum statutory sentence of up to 20 years in prison, a fine of up to $250,000 for wire fraud and up to 10 years in prison for money laundering charges.