A Southern New Jersey securities broker who operated a $1.8 million investment fraud scheme has been sentenced to more than eight years in prison.
Jeffrey Southard of Pittsgrove had pleaded guilty in June to charges of mail fraud and signing a false tax return.
The 44-year-old Mr. Southard — who was sentenced Friday to a 97-month term in federal prison — admitted that he induced about 14 clients to purchase bonds that did not actually exist and provided false monthly statements to the investors.
Mr. Southard spent the victims' money on mortgage payments, auto payments for his Lincoln Navigator and other vehicles, private schools for his five children, vacations and numerous other personal expenses, according to court papers
According to court documents, Mr. Southard stole the money from clients who believed they were buying tax-free bonds dubbed “Ohio bonds” and “Bank of America bonds” with guaranteed returns of 6% to 10%. In reality, the securities didn't exist. Mr. Southard also owes $112,534 in back taxes.
In 2003, Mr. Southard claimed taxable business income of $1,670 from his advisory practice, JD BAC Financial Services. According to case filings, however, that return did not include $245,042 in taxable business income Mr. Southard received when he diverted clients' money to buy the fictitious securities.
The rogue broker, who worked out of his home in Pittsgrove, N.J., was affiliated with Minneapolis-based Ameriprise, at the time called American Express Financial Advisors, from July 1997 to September 2003, when he was suspended and allowed to resign.
Mr. Southard became affiliated with GunnAllen of Tampa, Fla., in December 2003 to July 2008. At that time, GunnAllen was investigating him over the sale of non-existent investments through an undisclosed and unapproved outside business activity, according to the federal complaint, which was filed in December.
A month earlier, the New Jersey Bureau of Securities of Newark barred him because of the theft of $1.8 million from elderly clients.
Southard could have received a maximum sentence of up to 23 years in prison for flogging the bogus bonds. As part of his sentence, he also must make full restitution and serve three years of supervised release after being released from jail.
(The Associated Press contributed to this article)