In a parallel action, the U.S. Attorney’s Office for the Eastern District of Pennsylvania announced criminal charges against Donnelly relating to the same misconduct.
Donnelly agreed to settle by admitting to defrauding his clients and consenting to a final judgment that permanently enjoins him from future violations of the antifraud provisions of the federal securities laws. At the same time he agreed to disgorge his ill-gotten gains of $1.9 million with prejudgment interest of $365,723. This will be deemed satisfactory upon the entry of an order of restitution in the parallel criminal case. Donnelly also consented to an SEC order permanently barring him from the securities industry.
According to the SEC, Donnelly took funds from elderly and unsophisticated investors and instead of investing it as promised, used it to pay for his own expenses, including rent, car payments, golf club membership dues, and his children’s private school tuition.
He concealed his scheme by providing investors with false account statements, trade confirmations, and other bogus information that allegedly reflected their investment holdings and repeatedly told investors that their fictitious “investments” were performing well. The scheme ran from 2007 through August 2014.
Sharon B. Binger, Director of the SEC’s Philadelphia Regional Office, said:
Donnelly stole from his clients over a period of several years and then repeatedly lied to cover up his theft. We will aggressively pursue and prosecute industry professionals like Donnelly who abuse their positions of trust to take advantage of their unsuspecting clients.
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