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Chief Executive Officer of New York Investment Firm
Pleads Guilty to Securities Fraud
Guilty Plea to Indictment Comes One Week Before Trial
George M. Motz, the president, CEO, and Chairman of the Executive Committee of
Melhado, Flynn & Associates (“MFA”), a broker-dealer and investment advisor registered with
the former National Association of Securities Dealers, pled guilty this afternoon to conducting a
long-running securities fraud. The proceedings were held before United States District Judge
Arthur D. Spatt at the federal courthouse in Central Islip, New York.
As part of his guilty plea, Motz admitted that he conducted a fraudulent trade allocation
scheme, known as “cherry-picking,” from approximately November 2000 through June 2005.
The scheme generated approximately $2.2 million in risk-free profits for MFA’s proprietary
trading account and two hedge fund trading accounts controlled by Motz, at the expense of MFA
discretionary clients.
Typically, Motz submitted large stock “buy” orders to the MFA trading desk in the
morning, without specifying the accounts to which those purchases should be allocated. Later in
the day—often shortly before the close of the market—Motz decided whether to sell the position
and book the profit in either MFA’s proprietary trading account or the two hedge fund accounts,
or to allocate the securities that depreciated in value during the day to MFA’s discretionary client
accounts. While Motz carried out his scheme, MFA’s discretionary account clients were falsely
assured that, to the extent MFA engaged in proprietary trading on the firm’s behalf, the firm’s
account would not be favored over the clients’ accounts.
When sentenced, Motz faces a maximum statutory sentence of 25 years’ imprisonment.
The government’s case is being prosecuted by Assistant United States Attorneys Roger
Burlingame and William Schaeffer.
The Defendant:
Name: GEORGE M. MOTZ
Age: 67
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