Former RI House Leader Patricia Morgan Appealing “Insider” Designation in $21M Ponzi Scheme
Monday, February 04, 2019
The receiver in the federal court receivership proceeding to recover $21 million in the ponzi scheme orchestrated by Patrick E. Churchville, the owner and president of ClearPath Wealth Management, LLC, has filed a motion to include former employee -- and former House Minority Leader -- Patricia Morgan as an "insider."
In an interview with GoLocalProv.com, Morgan, a former Republican gubernatorial candidate, said she is appealing the motion.
In March 2017, Patrick E. Churchville, the owner and president of ClearPath Wealth Management, LLC, which had offices in Providence and Barrington, was sentenced to 84 months in federal prison for orchestrating a $21 million dollar Ponzi scheme that deceived more than 110 investors.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTChurchville stole $2.5 million dollars of investors’ funds to purchase a waterfront home and he failed to pay more than $820,000 in personal federal income taxes.
Morgan, who worked at the firm more early 2009 to the end of 2010, was named in a motion by receiver Stephen Del Sesto to designate her as an "insider" due to her status of an employee at ClearPath at the same time that Churchville was conducting the fraudulent investment scheme.
"I was an employee — [but] I've appealed [that designation as an insider],” said Morgan.
In an interview with GoLocal, Morgan confirmed that she made client introductions to Churchville. “Yes, I did,” said Morgan.
“It would be saying that because I sold somebody a mutual fund that I was an insider to the mutual fund company. I was presented info by Churchville — part of the problem is I tried to verify it and that led to the hostile work environment,” said Morgan, “He [Churchville] gave data and sheets and presentations and it turns out it was all falsified. No one tells you they committed a crime. I kept asking questions.”
Morgan lost in the GOP primary to Cranston Mayor Allan Fung in September of 2018. Fung lost to Governor Gina Raimondo in the November election.
“No one tells you that they're lying. I had no insider information — I did not participate in any decision-making,” she added.
"I'm involved currently in the [legal] process," said Morgan. "I don't think he [Churchville] got enough years in prison."
The Fraud
According to the investigation by the FBI, IRS Criminal Investigation, U.S. Postal Inspection Service and the United States Attorney’s Office determined that from the spring of 2008 through October 2011, Churchville and ClearPath, on behalf of their client investors, invested approximately $18 million dollars in JER Receivables, an entity incorporated in Maryland. At the time of his guilty plea, Churchville admitted to the court that in June 2010, he became aware that the investments with JER were no longer producing returns and that ClearPath had been subjected to fraudulent and misleading representations by the principals of JER. He failed to notify his client investors that he had lost millions of dollars of invested funds.
In his guilty plea, Churchville admitted that in order to hide the fact that he had lost millions of dollars of client investor funds through his dealings with JER Receivables, and to continue to operate his business and reap his investment fees, he misappropriated approximately $21 million dollars of investment money.
Churchville admitted that he misused investor money already under his control and obtained new investor funds. He used this money to pay back the JER investors and told them, falsely, that the money was the return on their investments. Churchville admitted to inducing new investments to carry out the schemes, he lied and told investors that ClearPath’s previous investments with JER Receivables had been successful and produced high rates of return.
Hostile Work Environment Alleged
"I believed that they were sound investments at the time. [Churchville] presented us with data. He then kept making statements and they didn't add up....and I so kept asking him and that's what led to the hostile work environment. I just wanted out. I'd try to go to the meetings, but I wasn't invited. I said, oh, I guess I missed the email," said Morgan to GoLocal.
Sentencing for Churchville
At sentencing, U.S. District Court Chief Judge William Smith also ordered — beyond the 84 months in federal prison — Churchville to serve 3 years supervised release and to perform 2,000 hours of community service upon completion of his prison term. Churchville pleaded guilty on August 4, 2016, to five counts of wire fraud and one count of tax fraud.
“Mr. Churchville betrayed his investors’ trust, stealing their savings and leaving them with uncertain financial futures for his own personal greed. This behavior destroyed the financial security of hard-working individuals all over the country and the FBI hopes this case will serve as a reminder to executives everywhere that honesty and integrity are more important than the bottom line,” said Harold H. Shaw, Special Agent in Charge of the Boston Field Office of the FBI in July of 2016.
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