On July 24, 2014, a jury in Manhattan federal court found James Tagliaferri (“Tagliaferri”), a 75 year old former investment advisor and former president of TAG Virgin Islands (“TAG”), guilty on twelve (12) of fourteen (14) counts including investment adviser fraud, securities fraud, multiple counts of wire fraud, and multiple counts of violating the Travel Act in connection with his scheme to defraud his investment advisory clients. Prior to opening TAG in 2007, Tagliaferri offered investment advisory services through another company he owned called Taurus Advisory Group, which was based in Connecticut. According to the Superseding Indictment and evidence presented at trial, beginning in 2007, when Tagliaferri opened TAG, Tagliaferri executed a multi-faceted scheme in order to defraud TAG investment advisory clients.
One part of Tagliaferri’s scheme involved placing client funds in certain companies in order to earn undisclosed fees. For example, Tagliaferri earned at least $1.6 million in undisclosed fees in exchange for investing some of his clients’ funds in the securities of a horse-racing company. Tagliaferri also received at least $1.75 million in undisclosed commissions in exchange for investing some of his clients’ funds in several companies affiliated with one of his associates. These fees were in addition to the investment advisory fees he was charging his clients. On many occasions, Tagliaferri directly used his clients’ money to finance these undisclosed payments to TAG. He transferred clients’ funds to an attorney trust account in New York, and then a portion of those funds, which were the undisclosed fees, were diverted from the attorney trust account to a TAG account in the Virgin Islands controlled by Tagliaferri. Through this structure, Tagliaferri was able to receive undisclosed fees with no record of such fees appearing on the monthly account statements the TAG clients received.
Second, Tagliaferri improperly used client funds for purposes such as making payments to other TAG clients demanding their money, and making payments on behalf of companies he was affiliated with, such as payments for premiums on horse insurance. Tagliaferri was able to make these payments be orchestrating a complex series of transactions between and among TAG client accounts.
The third part of Tagliaferri’s fraudulent scheme involved placing fictitious securities titled “sub-notes” in client accounts. The sub-notes purportedly obligated a certain company located in Pennsylvania to make payments to TAG clients based upon an alleged promissory note between TAG and that company. There was in fact no promissory note between TAG and the Pennsylvania company, and the sub-notes were therefore fictitious.
Lax & Neville currently represents investors defrauded by Tagliaferri in a civil action against Tagliaferri and others, and has extensive experience in successfully prosecuting claims on behalf of other customers who have suffered losses as a result of their investment advisory relationships. Additionally, Lax & Neville LLP has nationally represented small broker-dealers, financial services professionals and securities industry companies in regulatory matters and securities-related and commercial litigation. Please contact our team of attorneys for a consultation at (212) 696-1999.