Former McGinn, Smith & Co., Inc. employee sentenced to probation

ALBANY, N.Y.—Matthew Rogers, of Miami, Florida, a citizen of the
United Kingdom and a resident alien of the United States, who worked for
McGinn, Smith & Co., Inc. as a senior managing director from 2007 until
2009, was sentenced today to one year of probation and ordered to pay a $10,000
fine.

The sentence follows Rogers' November 29, 2011 guilty plea to
filing a false income tax return related to his failure to declare $948,000 in
fees that he had received between 2006 and 2009 in connection with private
placement offerings sold by McGinn, Smith & Co., Inc.

In 2009, Rogers executed backdated promissory notes regarding some
of the transactions to make it appear that they were loans.

According to officials, Rogers knew that these backdated
promissory notes would be submitted to FINRA. In addition, on his 2009 return,
Rogers falsely declared that $873,000 of the $948,000 was income in 2009 for
“forgiveness of indebtedness” when he knew that this was false because the
money was never a loan and was received over several tax years.

Rogers admitted the following details in connection with his
guilty plea:

The 2006 Fees

On September 29, 2006, Timothy M. McGinn, David L. Smith, and
Matthew Rogers formed TDM Cable Funding LLC. That same day, TDM Cable Funding
LLC purchased $2.6 million of cable contracts related to two Florida housing
developments. The McGinn, Smith & Co., Inc. broker-dealer then raised over
$3.5 million from investors seeking to invest in those cable contracts. In
2006, Rogers received $385,000 in fees from TDM Cable Funding LLC in connection
with the September 2006 offering. His partners, Timothy M. McGinn and David L.
Smith, received similar fees.

On January 10, 2007, Rogers submitted a personal financial
statement to Mercantile Bank in Boca Raton, Florida requiring him to list all
sources of income and all liabilities for 2006. Rogers concealed the $385,000
in fees that he had received in 2006 by failing to include it as income that he
had received in 2006. Rogers also did not list the fees as “loans.”

In the fall of 2007, when Rogers gathered materials to prepare his
2006 federal income tax return, he called Timothy M. McGinn, who told him that
the $385,000 of fees were “loans,” and said “that's the way it is.”

On October 15, 2007, Rogers signed the 2006 joint U.S. Individual
Income Tax Return prepared for himself and his wife under the penalty of
perjury knowing that the total income of $196,566 reported on line 22 of the
return was false because it did not reflect the $385,000 in fees that he had
received. The return was filed on October 18, 2007 at the Atlanta, Georgia
service center.

The 2007 Fees and Return

During 2007, Rogers received $278,000 in fees in connection with
three McGinn, Smith & Co., Inc. offerings which raised more than $10
million from investors.

On November 13, 2008, Rogers filed the joint 2007 U.S. Individual
Income Tax Return prepared for himself and his wife under the penalty of
perjury, knowing that the total income reported was false because it did not
reflect the $278,000 in fees that he had received in 2007.

The 2008 Fees and Return

During 2008, Rogers received $285,000 in fees in connection with a
McGinn, Smith & Co., Inc. offering that raised more than $3 million from
investors.

On January 20, 2009, Rogers submitted a personal financial
statement to Mercantile Bank in Boca Raton, Florida, requiring him to list all
sources of income and all liabilities for 2008. Rogers concealed the $285,000
in fees that he had received in 2008 by failing to include it as income that he
had received in 2008. Rogers also did not list the fees as “loans.”

On October 19, 2009, Rogers filed the joint 2008 U.S. Individual
Income Tax Return prepared for himself and his wife under the penalty of
perjury knowing that the total income reported was false because it did not
reflect the $285,000 in fees that he had received.

The 2009 Fees

On June 10, 2009, Rogers received $25,000 in fees in connection
with a McGinn, Smith & Co., Inc. offering which raised more than $1 million
from investors.

The Execution of Backdated Promissory Notes

In November 2009, Timothy M. McGinn pressured Rogers to sign
promissory notes in connection with several of the fee transactions involving
TDM Cable Funding LLC. When Rogers learned about the promissory notes, he
called McGinn. McGinn told Rogers that FINRA needed the notes and that Rogers
had to sign them. Rogers, who did not want to be required to repay the fees
that he had received, obtained a November 13, 2009 letter from McGinn, as
managing member of TDM Cable Funding LLC, stating that the “debt” related to
those fee transactions would be “forgiven” over four years. After receiving
this fraudulent “forgiveness-of-debt” letter, Rogers executed the promissory
notes. The only date on the promissory notes was the date of each transaction.
Although Rogers knew that the promissory notes would be provided to FINRA,
Rogers did not date his signature, and the promissory notes did not reveal that
Rogers signed them in November 2009, more than two years after the transactions
had actually occurred.

The 2009 Return Falsely Declaring $873,000 as “Forgiveness
of Indebtedness”

On October 15, 2010, after Rogers became aware of the federal
criminal investigation, Rogers filed his 2009 income tax return declaring
$873,000 of the $948,000 of fees that he had received from 2006 through 2008 as
income. Rogers falsely described the $873,000 as “forgiveness of indebtedness”
despite knowing the fees had never been a loan and that he had an express
agreement with McGinn that he would not have to repay the fees.

The total amount of loss is the tax loss resulting from Rogers's
failure to declare the $948,000 that he received in fees.

The investigation was conducted by the Criminal Investigation
Division of the Internal Revenue Service and the Federal Bureau of
Investigation. The case is being prosecuted by Assistant United States
Attorneys Elizabeth C. Coombe, Richard D. Belliss, and Wayne A. Myers of the
United States Attorney's Office for the Northern District of New York.

 

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