Stock Broker Defrauded Senior Citizens

MANHATTAN--Former stock broker Kevin O. Kelley has been sentenced in Manhattan federal court to 170 months in prison for defrauding his senior citizen clients of approximately $4.2 million over the period 1999 through 2004. In imposing sentence, U.S. District Chief Judge Kimba M. Wood called Kelley's crimes "egregious" and said that Kelley's conduct required a "substantial sentence" and that he "targeted weak people who had money he could use to feed a luxurious lifestyle." The judge said that Kelley had "spent years brazenly conning clients whom he knew were vulnerable. Even to this day, he appears callous and lacking in remorse." Kelley had "misappropriated" funds that his clients had intended to use for their "old age and medical care." On June 7, Kelley was convicted by a jury on all counts with which he was charged, four counts of securities fraud and three counts of wire fraud. According to the evidence presented at trial, Kelley defrauded investors in four separate investments. In two of the schemes, Kelley claimed to sell investors stock in two private companies, E-Tel, Inc. and AusAm Biotech, Inc. but instead stole the investors' funds and used them for his personal benefit, including to help support his lavish lifestyle in Greenwich, Conn. In a third scheme, Kelley sold securities in a partnership called First Venture Leasing in which he owned a controlling interest, without disclosing his personal ownership and involvement in that company. In the fourth scheme, Kelley bought investors stock in a publicly traded company, Coyote Network Systems, without authorization from the clients, and without disclosing that his consulting firm had entered into an agreement to provide consulting services in return for significant quantities of stock if the stock price increased to certain designated levels. The evidence showed that Kelley perpetrated these schemes by providing investors with false account statements that misled them about the true value of their investments in E-Tel, AusAm and FVL. For example, despite the fact that E-Tel had ceased to function, in 2004 Kelley sent to his clients bogus account statements representing that their investments were worth tens of thousands of dollars. Kelley also distributed account statements which reflected his clients' investments in AusAm to be worth tens of thousands of dollars when, in fact, he had not invested any of their funds into the company. The evidence at trial also showed that Kelley targeted his senior citizen clients in his schemes. Kelley, 50, has been detained without bail since his conviction, based, in part, on Judge Wood's determination that Kelley had committed perjury at trial by denying his criminal conduct and had shown a propensity to defraud others for his own pecuniary gain. 11-11-06