A former Texas financial advisor, William Gallagher (“Gallagher”), was sentenced on November 3, 2021, to three life terms in prison for his role in orchestrating a $32 million Ponzi scheme. [1] The Ponzi scheme specifically targeted elderly Christian investors who believed they were investing their retirement funds with a trusted financial advisor, only to later learn that their savings had been decimated.
This sentencing comes after 80-year-old Gallagher pleaded guilty in Texas in August 2021 to three charges relating to the scheme, each bearing a life sentence.
Fraudulent investment schemes targeted at a particular audience such as this one are referred to as cases of affinity fraud. Affinity fraudsters often abuse their position as a trusted member of a particular community to draw in unsuspecting investors, ultimately bilking them of their hard-earned money.
In this case, Gallagher leveraged his presence as a long-time talk radio host on three radio channels in Texas – one being a Christian-talk station – to specifically appeal to a Christian audience. On all three channels, Gallagher hosted “retirement planning radio shows” with religious undertones. [2] During these shows, Gallagher routinely solicited listeners to call a retirement-planning company he owned and controlled, Gallagher Financial Group, Inc. (“GFG”), to schedule personal meetings with Gallagher himself regarding retirement planning and “advice about risk-free income.” [2]
During these personal meetings, Gallagher promised investors that he could generate 5-8% risk-free, guaranteed returns per year, and “retirement income you’ll never outlive.” [2] While Gallagher claimed that investor returns would by generated through a mix of five asset classes, including U.S. Treasury securities and publicly-traded stock, a 2019 SEC complaint stated that Gallagher had purchased only a single annuity from these supposed return-generating assets, worth just $75,000. [2]
Between January 1, 2015, and January 31, 2019, Gallagher amassed nearly $30 million from individual investors who had chosen to invest with him through GFG. Rather than utilizing these investor dollars to purchase return-generating assets as promised, Gallagher deposited the money into two bank accounts controlled by him and used the funds to pay “returns” to existing investors – the hallmark of a Ponzi scheme.
Meanwhile, Gallagher provided investors with phony account statements which purported to show profits earned, while continuing to attract additional new investors into the scheme. [2] Gallagher did all of the above while representing himself as a licensed investment adviser, despite blatantly lacking the required state license. [3]
While the SEC’s 2019 complaint against Gallagher served to stop his fraudulent activity in its tracks, Gallagher’s actions nonetheless appreciably harmed the lives of numerous investors. During court proceedings, victims reported fears of running out of money in retirement, resorting to selling their homes, and taking on part-time jobs in retirement to make ends meet. [4] Some of these victims lost their entire savings as a result of the scheme. [4]
This case offers an illustration of the unique dangers of affinity fraud. Here, Gallagher specifically aimed to appeal to Christians of retirement age. His radio shows and websites all included references to Christianity, and he even authored a book entitled “Jesus Christ, Money Master.” Gallagher then capitalized on the position of trust he held to lull unsuspecting investors into giving him their money.
Importantly, Gallagher’s offerings did include some suspicious language that prospective investors should always be wary of. Promises of “guaranteed” returns, as well as other promises that simply seem too good to be true are often signals that an investment opportunity is not legitimate.
Cases of affinity fraud are unique in their ability to draw in an audience of trusting investors. As a result, it is critical for investors to critically consider the legitimacy of their financial or investment advisors. The attorneys at Savage Villoch Law are equipped to help any investor who believes they may have been involved in an affinity fraud scheme.
Sources:
[2] https://www.sec.gov/litigation/complaints/2019/comp24420.pdf
[3] https://www.newsweek.com/author-jesus-christ-money-master-will-spend-rest-life-jail-over-ponzi-scheme-1645247
[4] https://www.nytimes.com/2021/11/02/us/william-neil-doc-gallagher-ponzi-scheme-sentenced.html