Three charged by FBI, SEC in $60M fraud case
by Peter Burke
Jan 03, 2013 | 3369 views | 0 0 comments | 11 11 recommendations | email to a friend | print
Two more men have been tied by the FBI and Securities Exchange Commission to the $60 million investment fraud case that came to light in Scotts Valley in May.

In addition to John Geringer of Scotts Valley, Christopher Luck of Scotts Valley and Keith Rode of Franklin, Wisc., are accused of defrauding 90 investors of $60 million.

The three men were indicted Dec. 20 by a federal grand jury in San Jose on 38 criminal charges of mail fraud, wire fraud, securities fraud, money laundering and conspiracy to commit mail and wire fraud through their investment firm Geringer, Luck and Rode.

According to the FBI, if convicted of all charges, each of the three men could face a maximum of 90 years in prison; $5 million in fines for securities fraud; $1 million in fines — or twice the gross gain or gross loss — for mail fraud, wire fraud and illegal transfers of money; and 15 years of supervised release from prison.

The men are scheduled to be arraigned together at 11:30 a.m. Jan. 17 by Judge Howard R. Lloyd in U.S. District Court, Northern California Division, in San Jose.

Separate from the criminal charges, the original complaint filed by the SEC on May 24 against Geringer, a Scotts Valley investment adviser, alleges that he raised more than $60 million from individual investors beginning in 2005 by claiming false gains of 17 to 25 percent, despite actual losses.

When some investors withdrew their investments, the SEC alleges, Geringer paid them dividends with money from other investors, in a manner resembling a Ponzi scheme.

The commission filed charges Dec. 20 against Luck and Rode, both partners in the firm, as part of the civil matter, alleging that they chose to participate in the fraud.

“Luck and Rode knew Geringer had squandered millions of dollars in investor funds and were uniquely positioned to stop the fraud in its tracks,” said Marc Fagel, director of the SEC’s San Francisco Regional Office, in a statement. “Rather than expose Geringer, they instead chose to join forces and pretend it was business as usual, further concealing the fraud from investors.”

The commission alleges that in April 2009, Geringer told Luck and Rode that he had been lying to them about the balances in his fund’s trading accounts.

Knowing this, according to the SEC complaint, Luck continued to solicit investors for the fund by touting Geringer’s trading ability and providing false marketing materials that showed annual returns of 17 to 25 percent in every year Geringer’s fund was in existence.

The SEC alleges that Rode, a certified public accountant, continued to mail account statements to investors that contained grossly inflated cash balances that deceived investors about the fund’s liquidity.

The SEC is asking for all ill-gotten gains to be returned, plus interest and civil penalties.

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