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Oct 16, 2009 4:53 PMPublication: The Southampton Press

Quogue Mayor's investment firm pleads guilty to securities fraud

Oct 16, 2009 4:53 PM

Melhado, Flynn & Associates, the Manhattan investment firm headed by Quogue Mayor George Motz, pleaded guilty to one count of securities fraud in federal court in Central Islip on Thursday afternoon for its part in a “cherry-picking scheme” that illegally earned the company more than $2.2 million.

Mr. Motz, MFA’s codefendant in the case, pleaded guilty to the same charges in federal court on Tuesday. A trial was scheduled to begin on October 20.

Under the federal sentencing guidelines, MFA faces a fine of up to $184 million.

Prior to entering his guilty plea on Tuesday evening, Mr. Motz, who served as president and CEO of MFA, admitted to buying blocks of stocks and waiting until the end of the day to see if the trades were profitable. If the trades were profitable, Mr. Motz said he would assign them to the MFA proprietary account. If they were not, he assigned them to one of his clients’ discretionary accounts.

“MFA put its financial self-interest ahead of that of its clients and compounded its crime by not bringing this conduct to light once it became apparent,” United States Attorney Benton J. Campbell said in a prepared statement. “Such corporate misdeeds have no place in our securities markets and will be vigorously prosecuted.”

Prosecutors agreed to drop a second felony charge, of document alteration, that was filed against the firm in November 2008, when it was first indicted. Investigators had claimed Mr. Motz doctored paperwork in an attempt to cover up the fraud.

The indictment against Mr. Motz and MFA stated that from November 2000 until June 2005, Mr. Motz and MFA engaged in a fraudulent trade allocation scheme known as “cherry-picking,” a practice in which a person executes trades without assigning those trades to a specific trading account and later places the profitable trades in his own account. An independent investigation of MFA by the Securities and Exchange Commission between November 2003 and December 2003 alleged that during that time Mr. Motz altered documents, making it appear as though the trades in question were allocated earlier in the day than when they were actually processed, according to a copy of the indictment against him.

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Now it's a Quogue politico involved in fraud. First it was the East Hampton hanky-panky scheme, then George Guildi was indicted for doing the mortgage-mombo and finally Linda Kabot and the Republicans of Southampton got caught playing the teaberry shuffle with taxpayer money! When will it end??? THIS NOVEMBER FOLKS! It's time to put the honest people in charge of our local governments and get rid of the bums whose only concern was re-election and personal gain. WAKE UP SOUTHAMPTON...before ...more
By Dodger (161), Southampton Village on Oct 16, 09 10:29 AM
1 member liked this comment
Couldn't agree more. If you elect the "Same Old - Same Old" guess what you're going to get!
By foodie (74), Remsenburg on Oct 16, 09 11:19 AM
Deputy Mayor, Randy Cardo, stated for the record that he had served under 3 Mayors and that George Motz was without a doubt the finest. For those of us who know the truth, Randy told it like it is. All class, Randy. We are proud of you.
By quogue (12), southampton on Oct 16, 09 5:08 PM
1 member liked this comment
quogue: George Motz the finest? Uh, didn't he steal money from senior citizens? Shame.
By OTISFORDSUCKS (34), Quogue on May 15, 10 8:47 AM