Investment Firm CEO Gets 5 Years in Prison for Securities Fraud

The CEO and co-founder of a New York-based investment firm has been sentenced to five years in prison for securities fraud, investment adviser fraud, and wire fraud as part of a misappropriation scheme.

According to an unsealed indictment filed in the Southern District of New York, L-R Managers CEO Donald LaGuardia solicited approximately $6.4 million from investors for funds that purportedly focused on markets in Latin America, Central and Eastern Europe, the Middle East, Africa, and Asia.

However, LaGuardia allegedly misappropriated more than $1.2 million of investors’ funds to finance L-R Managers’ payroll, pay rent for its Park Avenue office in New York City, and pay hundreds of thousands of dollars in charges on the firm’s credit card, among other unauthorized expenses. And at least $191,000 went directly to, or for the benefit of, LaGuardia personally.

“Donald LaGuardia pitched his clients on frontier market investments, but the Frontier Funds turned out to be a front for fraud,” US Attorney for the Southern District of New York Audrey Strauss said in a statement. “LaGuardia betrayed his clients’ trust by diverting millions to other uses, including his own personal and business expenses.”

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

As an example, the indictment cites a time in 2013 when LaGuardia solicited $800,000 in the Frontier Funds from an investor. When one of his employees emailed him for approval to forward the $800,000 to the Frontier Funds, LaGuardia allegedly said no and then transferred $390,000 of the investment to accounts held by the firm, rather than the fund the investor intended the money to go to. LaGuardia allegedly used approximately $52,000 of that money to pay himself and the rest for various other personal and business expenses.

LaGuardia is also accused of accepting a $2 million investment in the Frontier Funds during the firm’s waning days when it was near insolvency and unable to support even payroll and mission critical services. The indictment alleges LaGuardia agreed to take in the investment even though he was warned by a principal that doing so would be “ethically troubling.”

In addition to the five-year prison sentence, LaGuardia, 54, was also sentenced to three years of supervised release and ordered to forfeit nearly $2.6 million and pay more than $4 million in restitution to victims.

Investment Firm Owner Guilty of Insider Trading, Fraud Scheme

PE Firm Founder Pleads Guilty to $58 Million Manhattan Real Estate Fraud

Tags: Audrey Strauss, Donald LaGuardia, Frontier Funds, investment adviser fraud, L-R Managers, Securities Fraud, Southern District of New York, Wire Fraud

Recession, we hardly knew ye. The folks who determine when economic downcycles begin and end ruled on Monday that the pandemic recession was the shortest in US history, just two months, from February to April 2020. The same day that announcement came out, fears over the rise of the Delta variant prompted the S&P 500 to fall 1.6%.

But do we really have to worry about a second economic crunch, should the latest version of the coronavirus lead to a deadly toll? Not unless governments overreact and shut down commercial activity again, said Brad McMillan, CIO for Commonwealth Financial Network, in his blog. “With the Delta variant spreading, there are real medical risks coming back in play,” he wrote. “But as we learned from the two-month recession, what really matters are the policy risks.”

McMillan noted that the chances of widespread government-mandated lockdowns are not large. Restrictions likely will be sporadic and localized, he stated.

“Shutdowns will be much more limited and likely of shorter duration than earlier in the pandemic,” he predicted. “The infections, this time, are unlikely to lead to economically damaging policy changes.”

For more stories like this, sign up for the CIO Alert newsletter. 

In Los Angeles County, for instance, residents are again required to wear masks indoors, regardless of their vaccination status, as cases mount, but no other strictures are in the wings.

The National Bureau of Economic Research (NBER), the nonprofit organization that declares when recessions start and stop, also made the point that the 2020 downturn was not an “economic recession,” but rather an artificial event that government policy brought on. Today, McMillan observed, “Companies are hiring, people are working and spending, and we are steadily growing.” And that will continue, he cautioned, “absent a revival of the shutdowns.”

While it was happening, the recession and its aftermath were harrowing. Last year’s second quarter featured a 31.4% drop in gross domestic product (GDP), according to the Bureau of Economic Analysis, a federal agency. But then came a torrent of Washington aid with the start of re-openings, and GDP bounced back 33.4% in the third period.

A typical recession is popularly defined as two consecutive quarters of negative GDP growth, a condition that the 2020 slump met with 2020’s first quarter dip of 5% and the second one’s deeper plunge. The NBER underscored the uniqueness of this past cycle, saying that normally a recession lasts “more than a few months.”

On Tuesday and Wednesday, the stock market turned around from its Monday pessimism and gained, which analysts attributed to the realization that severe lockdowns are unlikely. And as long as the new case surge doesn’t get out of hand, most expect that situation will persist. Economic dislocations still are around of course: Although most economic indicators have returned to pre-pandemic levels, employment has not. There are still 7.1 million fewer Americans at work than before the virus’s onset.

“While the medical risks are rising, their effect on the economy is not likely to be significant,” McMillan said, regarding the variant. “The medical risks and the economic risks have decoupled. And that is an interesting conclusion.”