Finra critic held liable in 'sham' money fund sale

A federal judge has found vocal Finra critic Richard Goble guilty of SEC charges filed against him nearly three years ago
MAY 01, 2011
A federal judge has found vocal Finra critic Richard Goble guilty of SEC charges filed against him nearly three years ago. The Securities and Exchange Commission alleged that Mr. Goble engaged in an improper customer reserve transaction in an attempt to keep his struggling firm, North American Clearing Inc., afloat in 2008. The SEC shut down the firm in May that year. In a decision issued last week, Judge Mary S. Scriven of the U.S. District Court for the Middle District of Florida in Orlando permanently barred Mr. Goble from the securities industry and ordered him to pay a $7,500 fine. The SEC had been seeking a $130,000 fine. A bench trial before Ms. Scriven was held in May 2010. “The judge found [Mr. Goble] didn't touch any of the money,” said his attorney, Robert Sirianni of the Brownstone PA law firm. Mr. Sirianni said that he is considering an appeal. The guilty finding involved just one transaction, from May 13, 2008, he said. The SEC had alleged that Mr. Goble and his firm engaged in a series of improper money fund transactions. Ms. Scriven said that he was involved with the May 2008 transaction, which she called a “sham” sale of $5 million in customer money market funds. The sale freed up $3.4 million from North American's customer reserve account, which Mr. Goble then wired to the firm's settlement account, she said. “Even as late as the trial in this matter, Goble insist[ed] that he is blameless and denies the import of his conduct vis-à-vis the patently fraudulent May 13, 2008, transaction,” Ms. Scriven wrote in her decision. “Although his licenses have all expired and the likelihood of his acquiring future licensing is slim, the court finds that a court-imposed injunction would provide a further disincentive for Goble to attempt to secure a license or attempt to engage in the securities business under the licenses of others.” “We're pleased the judge agreed with [our complaint], that Goble violated the securities laws, and saw fit to enjoin him and ban him from holding a securities license,” said Robert Levenson, one of the SEC attorneys in Miami who prosecuted in the case. Mr. Goble is a well-known critic of regulators. An industry group he co-founded, the Financial Industry Association, had some success in running independent candidates for the board and district committees of the Financial Industry Regulatory Authority Inc. In 2007, Mr. Goble himself won a spot on the Finra board. After the SEC charged him in May 2008, he resigned his board seat. A court-appointed receiver later liquidated North American, which at one time cleared trades for about 40 small broker-dealer firms.

SECLUDED RENDEZVOUS

The court case revealed the chaotic events leading to the demise of Mr. Goble's clearing firm. Finra examiners were already on the premises of North American when the suspect money fund sale transpired in 2008. Their presence led Mr. Goble and his staff to take steps to keep the transaction under wraps, Ms. Scriven said. On May 14, North American financial and operations principal Timothy Ward parked his car down the street from the firm's premises and entered the office building undetected, she said, in order to hide his presence from the Finra examiners and avoid sharing with them the updated and fabricated reserve account balance. The “secret, clandestine rendezvous” kept the false balance hidden from Finra examiners until the next day, according to the court decision. SEC examiners were brought in, and the agency shut down the firm and sued Mr. Goble on May 27, 2008. Mr. Ward and Bruce Blatman, North American's former president, testified that they had objected to the sham $5 million transaction but were bullied into it by Mr. Goble. In a court filing, Mr. Goble accused his former employees of pointing the finger at him “in an attempt to deflect attention away from their own wrongful conduct.” Both Mr. Blatman and Mr. Ward were co-defendants in the case. They both consented to permanent injunctions against future wrongdoing, and Mr. Blatman paid a $25,000 penalty. The SEC said Mr. Goble strained his troubled company further by using funds from North American to pay personal bills, including $100,000 worth of tile for his home, a $93,000 Mercedes automobile and $100,000 for Orlando Magic basketball tickets. But Mr. Goble claimed that the case against him came in retaliation for his outspoken criticism of regulators, and he accused the court-appointed receiver of destroying evidence in his favor. Indeed, Mr. Goble showed up at the first day of his trial with 10 trash bags of shredded documents he claimed would have shown his innocence. Judge Scriven appeared not to be impressed. She said the testimony of Mr. Blatman and Mr. Ward, along with the wire transfer and evidence that Mr. Goble unsuccessfully sought a loan on May 13, 2008, was sufficient evidence of his guilt. E-mail Dan Jamieson at [email protected].

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