The Securities and Exchange Commission was scheduled to ask a federal
judge on Friday to extend an injunction against a Providence financial
advisor, who allegedly made $6 million in unauthorized transactions with
money belonging to clients.
Judge Ernest Torres had already issued a restraining order on Dec. 24,
prohibiting Todd J. LaScola, of Warwick, from engaging in fraudulent
conduct, freezing the assets of his investment advising firm, and
appointing a receiver for the same firm, according to a statement issued
by SEC officials. The restraining order also covered LaScola’s
investment advising firm CPI Investment Management, Inc., and his
brokerage firm CPA Network Advisors, Inc.
SEC officials were also expected to ask Torres to appoint a receiver for
CPA Network, which is the brokerage firm LaScola co-owns, according to
Allan Shine, the Providence attorney appointed by Torres to act as
receiver for CPI Investment. Shine said he has taken over control of the
company’s books and assets, but is not giving advice to LaScola’s
clientele.
“Because of the receivership of CPI, that business is not operating, and
is not likely to operate, and presumably will be liquidated,” Shine
said.
If Judge Torres agrees to the SEC’s request to appoint a receiver for
CPA Network, then Shine said his task will be “to investigate and pursue
efforts to recover funds for the benefit of CPA creditors and investors
who have been damaged.”
Shine said CPI clients can expect to receive a written report from him
within the next week that should address most questions, and until then
there is not much more clients could learn by calling him or other
officials involved in investigating the matter.
The civil complaint filed by SEC alleges LaScola used his position at
both CPA Network and CPI Investment to divert money from brokerage
accounts to repay money to an account held in a pension fund for the
International Brotherhood of Electrical Workers, Local 99. LaScola
allegedly moved funds in November 1998 from other client accounts to the
IBEW account, after union officials demanded he sell some highly
speculative and illiquid promissory notes they said they had not
approved of, according to the SEC complaint. IBEW officials told the SEC
they threatened to file a lawsuit against LaScola if he did not comply
with their request.
In addition, LaScola allegedly falsified documents for some clients to
explain where their money had gone.
“Due to the improper margin loans, investors are at risk of losing
several million dollars,” according to a statement issued by the SEC on
Dec. 30.
LaScola’s attorney, former Rhode Island Attorney General James E.
O’Neil, said last week “the matter of concern here is whether or not
investments were sound.
“Those notes are in existence, nobody has absconded with any money,”
O’Neil added.
Grant David Ward, who is in charge of the SEC’s investigation, said
there are several possible outcomes. If Judge Torres grants the request,
there could be a civil trial. LaScola could be subject to fines,
repaying any allegedly illegally obtained assets, and possibly being
censured or permanently barred from further work in the securities
industry, Ward explained.
“Our charge is investor protection and we brought this to assure that
other investors aren’t hurt in the future,” he said. “We’re prepared to
go all the way to trial. This action, if we find him liable in federal
court, could also be the basis for baring him from the SEC industries.”
Former Department of Business Regulations director Barry Hittner had
suspended LaScola’s license to practice as a securities dealer and
financial advisor in Rhode Island on Dec. 24. Hittner resigned his post
in November and last Monday was his final day on the job. DBR officials
are continuing to investigate the case in conjunction with several other
agencies, according to Maria Piccirilli, who heads DBR’s securities
division.
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Piccirilli said she could not speculate on what the outcome of the
agency’s investigation might be.
When DBR began its investigation it notified state police, the state
Attorney General’s office, as well as the Federal Bureau of
Investigations.
