TRENTON – A Farmingdale man pleaded guilty to a long-time investment fraud scheme, taking millions from clients, and preparing phony tax returns, earning 102 months in prison, according to the US Attorney’s office.
Scott Newsholme, 43, was arrested and charged with wire fraud, aggravated identity theft, and preparing fraudulent tax returns. Newsholme pleaded guilty before US District Judge Anne E. Thompson on Nov. 20.
According to US Attorney Craig Carpenito, Newsholme had been “perpetrating a long-running scheme to defraud investment clients out of millions of dollars, forging an attorney’s signature without authorization in connection with that scheme, and preparing false tax returns for his clients.”
Going back to 2017, he was charged with mail fraud, wire fraud, and securities fraud. Newsholme was released on bail where he continued his criminal activity. Discovered again by law enforcement in October of 2017, he was charged in an amended criminal complaint with mail fraud, wire fraud, securities fraud, and aggravated identity theft.
Documents and statements made in court attest that Newsholme owned and operated three different financial advisory and tax return preparation businesses since 2002.
Between 2007 and 2017, Newsholme advised numerous clients to invest their fund with him so he could invest it on their behalf into various securities and other investments, such as “bond instruments issued by a private New Jersey country club, a bond investment in a video-game production company, and investments in the production of a movie,” as well as “more traditional securities, including mutual funds, annuities, life insurance policies, college education accounts, money market funds, and an escrow account for the purchase of a house,” according to a release from the US Attorney’s office.
When clients then wrote checks to Newsholme to execute their investments, he would cash or deposit the checks to use for personal means. Newsholme reportedly used client funds to expense multiple vehicles, bedroom furniture, debits at casinos, bank transfers to his personal bank accounts, and ATM withdrawals.
In an effort to cover up his scheme, Newsholme would use incoming funds from new clients to pay back other clients who wanted to withdraw their funds from their investment portfolios. He also prepared phony account statements, security instruments, and documentation that falsely represented to the clients the status of their investments.
In one case, Newsholme sent a letter to one of his clients in October 2017 which he represented had been prepared by an attorney. The letter stated that the client’s funds were held safely in an escrow account established by the attorney; however, Newsholme fabricated the letter and the attorney signature on the letter without permission. Newsholme misappropriated approximately $62,000 from this client.
Over the years, he misappropriated over $3.1 million from his clients, resulting in net investment losses of more than $1.8 million.
Not only this, but he also prepared false tax returns for his clients that inflated deductions for unreimbursed employee business expenses, charitable donations, and medical expenses to which his clients were not entitled, according to Carpenito.
Newsholme was sentenced to 102 months in prison and three years of supervised release.