Former Advisor Gets Home Detention, Fine for Obstructing SEC Investigation
U.S. Attorney’s Office, District of Massachusetts
v. John W. Rafal
Overview of Allegations:
In 2011, Rafal made a deal with an attorney in which Rafal’s former broker-dealer, Essex Financial Services, would pay the attorney a $50,000 referral fee for referring a wealthy client even though Rafal knew that this undisclosed payment violated federal and state regulations. After Rafal had already paid a portion of the fee, his company discovered the payments, stopped them, and directed Rafal to have the attorney return the money that had already been paid. Unbeknownst to the company, however, Rafal then secretly paid the referral fee to the attorney from his private checking accounts.
In testimony on May 2015 at the SEC’s office in Boston, Rafal repeatedly described the referral matter as “cured,” “reverse[d],” “undo[ne],” or “fix[ed]” in an effort to prevent the SEC from learning about his secret payments to the attorney. Rafal never mentioned the checks he had written to the attorney out of his personal accounts. At the close of his testimony, the SEC asked Rafal whether he was aware of any other information that might be helpful to the SEC’s investigation. Rafal answered, “I’m not aware of any other information.”
Rafal was sentenced to one year of probation with four months to be served in home detention and a fine of $4,000. Rafal has also entered into a separate agreement with the SEC, which bars him for life from working in the securities industry and imposes a $600,000 penalty.