Massachusetts man pleads guilty to federal charges.
Elio is a former chairman of the Retirement Law Commission of the Commonwealth of Massachusetts and, for years, a stock broker for and investment advisor to approximately 20 county and municipal contributory retirement systems in the Commonwealth of Massachusetts. The federal indictment charges that Elio engaged in a scheme to defraud these retirement systems by recommending that they purchase investment products and securities offered by Aetna life Insurance Co. ("Aetna Life") without disclosing to the systems that he would earn substantial commissions from Aetna Life on these same sales and that he was serving as a paid consultant to Aetna Life.
Specifically, the federal mail fraud counts allege that Elio, and others known and unknown to the grand jury, defrauded these retirement systems of $805,913 in insurance commissions. According to the indictment, the insurance commissions were paid by Elio's clients -- the retirement systems -- to two insurance agents selected by Elio -- Robert Mongillo and WQM Insurance Agency. Former State Senator William Q. MacLean is the president and sole shareholder of WQM Insurance Agency. These agents did not perform any services of any kind in connection with the sales on which they received these commissions and they kicked back approximately 50 percent of what they were paid to Elio.
The federal indictment further alleges that defendant Elio concealed material information from the retirement systems, notwithstanding his legal obligation to disclose this information -- most importantly the fact that he was receiving the kickback of these commissions on the very sales which he was recommending to the systems. In addition, the evidence would show that Elio concealed the facts that the insurance agents were not performing any services, that ELIO had selected the agents, and that payment of the commissions to these agents was designed to benefit ELIO.
ELIO pled guilty to the federal mail fraud charges before United States District Judge Douglas P. Woodlock. He tendered his plea to the two mail fraud counts in the indictment pursuant to a plea agreement with the U.S. Attorney's Office. In the agreement, the defendant and the U.S. Attorney's Office have agreed that a sentence of 15 months' incarceration on the two mail fraud counts is an appropriate disposition of the case. Under the agreement, the U.S. Attorney's Office agreed to drop a parallel wire fraud count and four money laundering counts arising out of ELIO's dealing with these Massachusetts retirement systems.
United States Attorney Stern said that the federal indictment against ELIO grew out of the same joint investigation which, in August, 1993, led to the filing of civil enforcement actions and administrative proceedings against two affiliates of Aetna Life by the United States Attorney, the Massachusetts Attorney General, the Massachusetts Secretary of State and the United States Securities and Exchange Commission. As part of those civil enforcement actions and administrative proceedings, the Aetna Life affiliates paid an additional $5.2 million in fines and restitution, bringing the total amount paid as fines and restitution by Aetna Life and its affiliates to $14.7 million, or twice the amount of the gross revenues that they took in on these transactions. As part of the settlement of those civil enforcement actions, the Aetna Life affiliates agreed to cooperate with the ongoing grand jury investigation. ELIO was indicted by the grand jury in November, 1993.
In announcing the plea to the federal mail fraud charges, Stern said: "The boards of these contributory retirement systems were not experts in managing large funds and understandably reposed special trust and reliance in ELIO. ELIO purported to be an expert and to be acting in their interest. ELIO violated their trust by hiding from the local retirement systems his personal financial interest in these investments and receiving substantial kickbacks. This office will prosecute people in such positions who unlawfully conceal such conflict of interests from their clients."
On the federal charges, ELIO faces a maximum penalty of 5 years in prison and a $250,000 fine on each of the two mail fraud counts, but under the plea agreement, he may withdraw his plea of guilty if the Court rejects the 15-month sentence set forth therein. Judge Woodlock deferred his acceptance of the plea agreement until he had had an opportunity to review the pre-sentence report to be prepared in connection with sentencing. The Judge scheduled sentencing for Feb. 14, 1995.
Scott Harshbarger announced that ELIO signed a plea agreement with his office in which ELIO agreed to plead guilty to a pending state conflict of interest charge arising out of payments made by ELIO to State Senator Henri S. Rauschenbach. The state plea agreement provides that ELIO will plead guilty in state court to the state conflict of interest charge one week after he is sentenced on the federal charges. Under the state plea agreement, the Massachusetts Attorney General's Office will recommend a suspended two-year sentence. Harshbarger noted that his office would have recommended a period of incarceration on the state charges, but for the facts that ELIO would be serving 15 months on the federal charges and that his office was cooperating with the federal authorities in resolving all outstanding criminal charges against ELIO. Harshbarger said, "ELIO's plea to the state charge verifies the factual basis of the state allegations in this matter. These resolutions are a
good example of federal-state cooperation producing a significant penalty for violation of the public trust."
The federal case was investigated by special agents of the Federal Bureau of Investigation and the Internal Revenue Service. It was prosecuted by Alexandra Leake and S. Theodore Merritt, both members of the Public Corruption and Special Prosecutions Unit in Stern's office.
The state case was investigated by Massachusetts State Police officers assigned to Harshbarger's office. It was prosecuted by Assistant Attorney General David J. Burns, Chief of the Special Investigations Unit in Harshbarger's office.
CONTACT: Internal Revenue Service
Peggy Riley, 617/565-1638
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|Date:||Dec 13, 1994|
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