The founder and principal owner of a group of investment advisory companies, including a mutual fund that marketed financial services to professionals such as veterinarians, dentists and physicians, was convicted in federal court of committing $15 million in securities fraud and obstructing justice.
Daniel Thibeault, president and CEO of Massachusetts-based Graduate Leverage, LLC, pleaded guilty to both charges on March 3 in U.S. District Court in Boston. According to the U.S. Attorney’s Office, Thibeault admitted to a scheme that involved using mutual-fund money to issue fictitious loans, as well as making numerous false statements to Securities and Exchange Commission staff members during an investigation.
Thibeault, 41, is scheduled for sentencing June 16 in U.S. District Court.
Under a plea agreement, the U.S. Attorney’s Office will recommend that Thibeault be incarcerated in federal prison for up to 15 years; face 36 months of supervised release; pay a restitution of $15.3 million; and accept a fine to be determined by the court.
He also will be required to forfeit all funds in 17 brokerage and personal bank accounts; a 2011 Mercedes JetVan; three land parcels in Dorchester, New Hampshire; all shares and holdings in Graduate Leverage, LLC, held in his name or in the name of wife, Shawnet Brooks Thibeault; and any tax refunds or bankruptcy settlements acquired since 2013.
Documents provided to the VIN News Service by the U.S. Attorney’s Office state that Thibeault, while attending Harvard Business School, founded Graduate Leverage, LLC, a financial advisory and asset management firm. Thibeault graduated from Harvard in 2004 and went on to create numerous affiliated businesses, most with names that incorporated the parent firm’s initials “GL.”
In March 2012, Thibeault launched a mutual fund called GL Beyond Income Fund. SEC documents state the majority of the mutual fund’s assets came from individual variable-rate consumer loans. Thibeault solicited investments in the fund by tellings investors their money would be pooled to make or purchase consumer loans. Interest and returns paid on the loans would then lead to returns for GL Beyond Income Fund investors.
Marketing materials for the mutual fund claimed it would reduce default risk by issuing loans to people who were “less susceptible to economic downturns such as medical doctors, dentists, veterinarians, attorneys and business owners.” The fund claimed its individual loans to these professionals would range between $20,000 to $50,000.
But in February 2013, the mutual fund, under Thibeault’s guidance, began issuing loans valued at hundreds of thousands of dollars, according to documents from the U.S. Attorney’s Office. The loans were issued in the names of people who were friends or associates of Thibeault, but none of those people had ever applied for loans from the mutual fund, knew their names had been used or received the proceeds.
Instead, Thibeault directed the money from the fictitious loans to Graduate Leverage, LLC, to pay for operating expenses, along with diverting money to cover personal expenses. Some money went directly into his personal accounts. By December 2014, the mutual fund held roughly 40 fictitious loans with a combined value of approximately $16 million, amounting to almost 40 percent of the fund’s assets.
In its early days, Graduate Leverage, also known as GL Advisor, was popular among veterinarians looking for assistance managing repayment of their student loans and other financial services. But many found that the quality of service deteriorated over time, according to a VIN News Service report in 2015.
The SEC began investigating the fund in late 2014, and on Dec. 8 that year, SEC officials paid an unannounced visit to Graduate Leverage offices in Waltham, Massachusetts. Thibeault was arrested soon after, although he was freed after posting $700,000 bail.
In the original indictment, Thibeault was charged with three counts of wire fraud, three counts of aggravated identity theft, one count of securities fraud and one count of obstruction of justice. In the plea bargain, he admitted only to securities fraud and obstructing justice.
Even with Thibeault’s arrest and recent conviction, it appears that the Graduate Beyond Income Fund has continued to operate. A May 2015 article by MarketWatch columnist Chuck Jaffe reported that as of last spring, the mutual fund was being managed by trustees, and that shareholders felt trapped by attempts to reclaim investments locked up in the fund.
Bloomberg.com reported that shares in the fund were trading for $4.93 on Thursday. The business site lists the fund’s value at $22.97 million.
The fate of Graduate Leverage appears murkier. A recent call to the headquarters in Waltham, Massachusetts, went directly to a recording that stated, “You have reached a number that is not currently set up to receive calls. Please try again later.”
As for Thibeault, his fate will be determined soon. His prison term will begin at some point after his June sentencing. Until then, Thibeault remains free on bail.
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