Army financial counselor pleads not guilty to defrauding Gold Star families

An Army Reserve major who served as a financial counselor with the Army's Casualty Assistance office and who has been accused of defrauding two dozen Gold Star families over five years pleaded not guilty Thursday.

Caz Craffy, 41, of Colts Neck, N.J., is charged with six counts of wire fraud and one count each of securities fraud, making false statements in a loan application, committing acts furthering a personal financial interest and making false statements to a federal agency, according to a news release from the office of U.S. Attorney Philip R. Sellinger.

Craffy faces similar charges in a complaint filed by the Securities and Exchange Commission. Both cases are in the U.S. District Court for the District of New Jersey.

In addition to receiving the not guilty plea, Judge Georgette Castner granted the government a protective order for disclosure material that "affects the privacy and confidentiality of individuals [and] would impede, if prematurely disclosed, the government's ongoing investigation of uncharged individuals," the order reads.

Judge Castner's scheduling order calls for the defense to file all pretrial motions by Sept. 29, and the government's response to be filed by Oct. 27.

Advising Gold Star families

When a member of the Armed Services dies during active duty, his or her surviving beneficiary, now a member of a Gold Star family, is entitled to a $100,000 death gratuity and the soldier’s life insurance of up to $400,000.

These payments are disbursed to the beneficiary in a matter of weeks or months following the servicemember’s death. To assist the beneficiaries in this time of need, the military provides a number of services to the servicemember’s family, including the assistance of a financial counselor.

From November 2017 to January 2023, Craffy was a civilian employee of the U.S. Army, working as a financial counselor with the Casualty Assistance Office, the U.S. Attorney's office said in a news release. He was also a major in the U.S. Army Reserves, where he has been enlisted since 2003.

Craffy was responsible for providing general financial education to the surviving beneficiaries. He was prohibited from offering any personal opinions regarding the surviving beneficiary’s benefits decisions, the release said. Craffy was not permitted to participate personally in any government matter in which he had an outside financial interest. However, without telling the Army, Craffy simultaneously maintained outside employment with two separate financial investment firms.

Craffy used his position as an Army financial counselor to identify and target Gold Star families and other military families, the government alleges. He encouraged the Gold Star families to invest their survivor benefits in investment accounts that he managed in his outside, private employment.

Based upon Craffy’s false representations and omissions, the vast majority of the Gold Star families mistakenly believed that Craffy’s management of their money was done on behalf of and with the Army’s authorization, the release said.

High commissions

From May 2018 to November 2022, Craffy obtained more than $9.9 million from Gold Star families to invest in accounts managed by Craffy in his private capacity, the release said. Once in control of this money, Craffy repeatedly executed trades, often allegedly without the family’s authorization.

These unauthorized trades earned Craffy high commissions. During the timeframe of the alleged scheme, the Gold Star family accounts had lost more than $3.4 million, the government said, while Craffy personally earned more than $1.4 million in commissions, drawn from the family accounts.

The SEC's complaint charges Craffy with violating the antifraud provisions of the federal securities laws and Regulation Best Interest. The SEC is seeking permanent injunctions, disgorgement of allegedly ill-gotten gains, plus interest, and civil penalties.

Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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