$2.7M Scheme: Investment advisor based in Connecticut admits defrauding dozens of clients

Jonathan Vincent Glenn, age 54, of Greenwich, waived his right to be indicted and pleaded guilty late last week in Hartford federal court to defrauding investment clients through a "cherry-picking" securities scheme.

Through this scheme, Glenn defrauded over 45 clients a total of around $2.7 million, according to federal authorities.

Glenn's plea and details in the case were announced on Friday, Oct. 6 by Vanessa Roberts Avery, United States Attorney for the District of Connecticut, and Robert Fuller, Special Agent in Charge of the New Haven Division of the FBI.

"Cherry-picking" is a fraudulent practice in which the responsible individual executes trades without assigning those trades to a particular trading account until the individual determines whether or not it has become profitable or suffered losses.

The responsible individual then allocates the profitable trades to favored accounts – often the individual's own accounts – and assigns unprofitable trades to disfavored client accounts.

According to court documents and statements made in court:

Glenn-owned Glenn Capital LLC, also known as GlennCap LLC, an investment advisory firm headquartered in Greenwich, provided clients with portfolio management services including asset selection and asset allocation.

Glenn managed all of Glenn Capital's advisory clients' accounts and was authorized to make trading decisions on each client's behalf without seeking approval for each trade.

Glenn placed trades on behalf of advisory clients, himself, or family members by trading directly in the relevant individual account, or by placing block trades in Glenn Capital's omnibus account and allocating the block trades among the relevant individual accounts.

Glenn Capital's Code of Ethics required Glenn to determine and document the specific allocation of each block trade prior to the execution, and to allocate block trades to individual accounts at an average price.

In pleading guilty, Glenn admitted that he defrauded clients by retroactively allocating profitable omnibus-account trades to favored clients, family, and personal accounts, and unprofitable omnibus-account trades to non-favored-client accounts.

Notwithstanding the requirements set forth in the Code of Ethics, Glenn did not determine the allocation of block trades until after they were executed, when he knew if the trades were profitable in the hours following the execution.

When a block purchase of an equity security increased in value in the hours after the purchase, Glenn generally realized the profits by selling the security. He then allocated those profits to favored-client, family, firm, and personal accounts.

When a block purchase of an equity security decreased in value, Glenn generally allocated those block purchases to the non-favored-client accounts. Glenn did not inform his clients that he was "cherry-picking."

Instead, he gave the false impression that he allocated trades fairly and according to a pre-determined allocation methodology.

Glenn pleaded guilty to one count of securities fraud, which carries a maximum term of imprisonment of 25 years and a fine of up to approximately $5.4 million.

Glenn is released pending sentencing, which is scheduled for Thursday, Dec. 28.