Arnett L. Waters, the founder of a Braintree financial firm, has been charged with criminal contempt in a case involving the alleged misappropriation of nearly $800,000 in client funds.
The allegation – that Waters, his wife and various business entities defied a court order to disclose all bank accounts and freeze all funds – was filed by United States Attorney Carmen Ortiz in U.S. District Court in Boston on Friday.
Waters allegedly ignored all or part of a freeze order issued by the court on May 3, 2012 by not telling the Securities and Exchance Commission about an account held at the Blue Hills Bank containing at least $1,000 and controlled at various times by himself and his wife Janet T. Waters.
After May 3, Waters used funds in that account, also a violation of the court order, according to the filing.
Both Waters, 62, and his wife, 55, are residents of Milton. Also charged with contempt are A.L. Waters Capital LLC, Moneta Management LLC and Port Huron Partners LLP, corporate entities allegedly involved in the fraud case filed earlier this year.
Both the website for A.L. Waters Capital LLC and its phone system have been turned off. Previously reached for comment, Waters referred all questions to his attorney, who has not responded to an inquiry.
As part of the rouse to attract money to fictitious investment funds, the Waters allegedly created fake materials for clients, including pitch books, annual reports, subscription agreements and portfolio statements. In one example, a marketing brochure for "Port Huron Partners, LLP" showed a return of 800% between 1990 and 2007.
"Defendants accepted investors' money under the pretense that that money would be invested in the portfolio the funds' materials described," the previous complaint says. "Instead, the money was spent on the Waters' personal expenses."
One investor – an unnamed Boston-area church – provided $500,000 to A.L. Waters to invest in one of its fraudulent entities, according to the SEC, and instead of putting the money into securities as promised, bank statements show $100,000 going to the Waters' personal and business expenses. The SEC said Waters has admitted that the portfolio selected by the church does not exist.