January 9, 2017

Connecticut-based investment advisor John W. Rafal will pay more than $575,000 to settle charges that he defrauded a client and then compounded his scheme by attempting to mislead SEC investigators while lying to other clients about the status of the SEC’s investigation. According to the SEC’s order, Rafal secretly paid a lawyer, Peter D. Hershman, to refer one of his clients to Essex Financial Services, an investment advisory firm founded by Rafal. Rafal failed to disclose the referral fee arrangement and instead disguised the payments as payments for legal services purportedly provided by Hershman’s firm. After other Essex officers discovered and stopped Rafal’s payment arrangement, he continued to pay Hershman using other accounts he controlled. The SEC’s order further found that while the SEC’s investigation was on-going, Rafal sent numerous emails to Essex clients falsely stating that the SEC had “fully investigated all matters” and “issued a ‘no action’ letter completely exonerating” him and Essex. Finally, Rafal tried to throw SEC investigators off track by concealing the additional payments he made to Hershman and testifying that Hershman had returned all money paid to him. The U.S. Attorney’s Office for the District of Massachusetts announced a criminal case against Rafal for obstructing the proceedings of a federal agency. Hershman will pay more than $90,000 to settle charges against him related to the payment scheme. Essex will pay more than $180,000 in disgorgement and interest to settle charges related to Rafal’s conduct. SEC

Tagged in: Financial and Investment Fraud, Misrepresentations,