Gregory A. White, United States Attorney for the Northern District of Ohio, today announced that an information was filed charging Richard A. Daniels with one count of securities fraud.

Daniels, age 57, resides at 17604 Eastbrook Trails, Chagrin Falls, Ohio.

According to the information, from in or about 1997, through in or about December 2005, Daniels, promoted and sold securities in the form of promissory notes, through his company, First Capital Group, Inc. (“FCG”), to investors, resulting in an overall investor and client loss of approximately $2,254,138. During this same time period, Daniels also worked as a securities representative at Lincoln Financial Advisors Corp. (“Lincoln”).

The information alleges that the securities were not registered with the SEC or the State of Ohio-Division of Securities. While Daniels sold securities and investments in the form of promissory notes, the investments did not have the represented purpose of generating a fixed return from between 4 percent to 7 percent, but rather had the purpose of promoting an illegal “Ponzi” scheme and supporting Daniels’ personal debts and expenses.

The information states that Daniels was the subject of previous enforcement action brought by the United States Securities and Exchange Commission (“SEC”) for his role in defrauding investors in Ohio and three other states when he and others sold investment contracts in the form of furniture and office equipment lease agreements; Daniels also sustained felony convictions in 1983 for two counts of mail fraud due to conduct relating to the SEC action.

After receiving investor funds, Daniels provided some investors a one-page FCG promissory note. Investors rarely received other written information regarding their investment. The FCG notes did not state any risk associated with FCG or financial information about Daniels or FCG. The notes were signed by Daniels on behalf of FCG. In some instances, Daniels forged the name of a non-existent individual,“Tom Massey,” on the notes, in order to both lend legitimacy to the scheme and conceal Daniels’ sole involvement in the investment fraud scheme.

Daniels is alleged to have provided investors fictitious account statements reflecting positive investment performance when, in truth and in fact, none of the money was ever invested as stated. In order to promote the scheme, Daniels would also embezzle funds from existing clients of Lincoln who had legitimate brokerage and mutual fund accounts directly with Lincoln on which Daniels was the sales representative of record. Daniels would forge the signature of these Lincoln investors on withdrawal requests and wire transfer authorizations and send funds to accounts he controlled.

For clients with existing IRAs and life insurance policies, Daniels set up accounts at Mid-Ohio/Equity Trust, a trust company located in Elyria, Ohio. Daniels would forge investors’ signatures on all of the account opening documents at Mid-Ohio/Equity Trust. In order to conceal the scheme, Daniels would list his own address as the address of record and his bank account information for the accounts. Daniels would then forge the investors’ names on fund transfer requests to have the investors’ money sent from their existing accounts to accounts he controlled.

Daniels would falsely represent that the investors were achieving returns on their investments, both orally and in writing, causing most investors to "roll-over" their existing investment and lull them into the belief that their investments were making money. Several of the investors did not realize that they were invested in FCG, due to the steps that Daniels had taken to conceal the scheme.

As part of the scheme, Daniels would also target some investors who maintained life insurance policies at various locations and would convince them to consolidate their policies and place them with Daniels at Lincoln. To consolidate their policies, Daniels urged investors to cash-out of their current life insurance policies and forward the cash to him. In at least one instance, Daniels forged an investor’s signature to a withdrawal application and caused the check to be sent directly to him. Daniels would then deposit the cash value of checks into accounts he controlled.

If convicted, the defendant’s sentence will be determined by the Court after review of factors unique to this case, including the defendant's prior criminal record, if any, the defendant’s role in the offense and the characteristics of the violation. In all cases the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.

This case is being prosecuted by Assistant U.S. Attorney Justin J. Roberts, following investigation by the Ohio Division of Securities.

An information is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.