Financial adviser gets 6 years in prison
Simanski convicted of defrauding clients of $4.5 million
JOHNSTOWN — A former investment adviser for an Altoona brokerage firm was sentenced Wednesday to 78 months in a federal prison for defrauding clients, many of them elderly, out of $4.5 million.
Douglas P. Simanski, 54, was a representative of NEXT Financial Group Inc., but in 2002, unbeknownst to his company, he began offering some clients Tax Free Investment contracts and certificates of deposit in which he guaranteed rates of return of 5 percent or 10 percent — if the clients would give him their money for a period of two years.
Any money over the percentage of return, it was understood, would be his.
He deposited the money in an E*Trade account using his wife’s name and eventually moved it to an account controlled by him.
While the government contended he used some of the money for personal expenses, including enhancements to his $400,000-plus home in Lilly, he maintained he invested the money.
His attorney, Assistant Federal Public Defender Christopher B. Brown, told U.S. District Judge Kim R. Gibson during the sentencing hearing, “He did invest a lot of money and he lost a lot of money.”
Simanski related to Gibson that one of his investments was in a coal mine that closed after only six years in operation.
Gibson described Simanski’s attempts to cover up the losses as a Ponzi Scheme in which he used money from new investors in an attempt to pay those who lost money.
Simanski was able to keep what he was doing from being discovered for 14 years, until May 2016, when a client asked that his money be returned and Simanski admitted did not have enough to cover the request.
He went to his employer and related what he had done. He gave NEXT a list of the 31 clients that were victims of the scheme.
According to the defense memorandum in the case, he was fired because he was not permitted to pursue investments outside of his scope of employment.
NEXT officials contacted authorities and an investigation ensued.
The Internal Revenue Service and United States Secret Service, the agencies that conducted the investigation, also added three counts of filing false income tax returns for the years 2012, 2013 and 2014 to those of securities fraud and wire fraud.
For instance, Simanski reported income of $26,076 for 2012. The government contended his taxable income for that year was $533,823.
He paid only $12,894 in taxes, but the government contends he owed $143,082.
Simanski choked up when he spoke to Gibson, stating one of the hardest things he faced during the investigation was that he was not permitted to reach out to the clients he defrauded and apologize.
He apologized Wednesday as at least two of the clients looked on, and he admitted he made a serious mistake.
“I lost their trust,” he said.
Those clients told the judge how Simanski’s scheme affected them.
Danny Travis, a retired truck driver from the Harrisburg area who lost a portion of his retirement fund — after 60 years of working — said he and his wife now have to pinch pennies, and he said his wife is having a hard time even understanding how they got involved in this situation.
Travis said he wanted Simanski to know what he had done to their lives.
Then came Dave Seymore, an official from the Ashville VFW, who gave Simanski $157,000 to invest so that the organization could continue to provide $3,000 month for programs that included sports for school children, veterans programs and other community projects.
Simanski’s father had been the VFW commander at one point, and Seymore stated, “What is disturbing (about the case) is the fact that you have so darkened and dishonored your own father’s service as commander of the John Lipple Post; I’m not sure where there is a road of redemption for you.
“Our organization is put together as a place that those who have fought and bled for this country can come together. It’s a bond created by unspoken understanding. We fought to make our world safe for our families and communities, only to be betrayed by someone who was allowed into the folds of our club.”
The defense lawyer argued for leniency and home detention, pointing out that Simanski came forward and admitted his scheme. He also noted that the case was different from others where embezzlement occurred, in that Simanski did not live a lavish lifestyle.
Assistant U.S. Attorney Stephanie L. Haines replied to the defense that he had no other alternative but to admit his fraud because when he couldn’t repay the money of the one client who asked for its return, he knew, she said, “he was caught red-handed.”
She also scoffed at the defense suggestion that he be permitted home detention — in his $400,000 home, which, Haines said, reflected his lavish lifestyle.
Haines stated that while some of the money was returned, more than $3 million is still unaccounted for.
The standard sentencing range for the fraud and income tax violations was 78 to 97 months. Gibson imposed a 78-month sentence while recommending Simanski be incarcerated as near as possible to Lilly.
The judge also imposed three years of supervision to follow his prison sentence.
Simanski has a wife, and three children who are attending college.
The judge received 10 letters on behalf of Simanski, including one from a friend who related Simanski’s love for his family. He called Simanski “a giving person” and a “hard worker.”
Mark Simanski related how his uncle was “a positive for my life growing up.”
Douglas Simanski, who until Wednesday worked in construction, will be required to pay restitution, but the amount will be decided during a hearing scheduled for July 12.
Federal marshals took Simanski into custody after the hearing.