Cambridge Capital Group Advisors, its president Phillip Timothy Howard, and previously barred investment adviser Don Warner Reinhard are now the subject of a Securities and Exchange Commission (SEC) case accusing them of defrauding 20 investors, the majority of whom are retired National Football League players. Howard, who is also an attorney, represented the NFL retirees in a class action lawsuit over brain injuries they sustained while playing the game.
The investors invested about $4.1M in two proprietary hedge funds, the Cambridge Capital Partners and Cambridge Capital Group Equity Options Opportunities. According to the SEC, even though Howard knew that the former NFL players whom he represented lack proper brain function, employment capacity, credit, or capital, he and Reinhard still allegedly persuaded them to invest in the two funds. The regulator said that more than half of players who invested used their retirement money.
Among the false claims and misrepresentations that the defendants allegedly made while soliciting investors were that:
- The Funds had a diverse portfolio that included investments in private debt securities, mortgage-backed securities, asset backed securities, and litigation settlements.
- No Cambridge affiliate had pled guilty to a felony crime or been enjoined in a domestic court for activities involving investments for the past 10 years.
The truth is that the Funds were mainly used to pay ex-NFL players settlement advances related to the NFL Concussion Lawsuit. 18 of the plaintiffs in that case were investors in the two Funds. Also, Reinhard previously pleaded guilty to a felony crime for an unrelated investor fraud case. The SEC then barred him from being affiliated with any investment adviser. This information, however, was kept from Fund investors.
The Cambridge funds continued to offer and sell securities to investors until at least early 2017 when Reinhard was arrested for child abuse. He was found guilty and is once again behind bars.
The defendants are also accused of misappropriating about $973K of investor money that they used as payment fees for their services and for Howard’s home mortgages.
Pro Athletes Have Lost Millions to Fraud
Unfortunately, the defrauding of professional athletes is not uncommon. According to a recent analysis by EY Forensic & Integrity Services, between 2004 and 2017, pro athletes allegedly lost about $494M to fraud. The analysis found that 41% of these victims were football players, 15% were baseball players, 10% were hockey players, and 5% were boxers and soccer players.
Common reasons for why professional athletes are a favorite target of fraudsters:
- Large net worth from lucrative pro contracts and endorsements
- Not enough time to manage their own money
- Lack of financial education
- Impairment due to injuries from the job
- Trusting the wrong people with whom they have previously established relationships
- Inexperience in investing
Losses from fraud for professional players can prove catastrophic. Many athletes can’t play past a certain age and additional income to support themselves and their family after their pro careers are over–especially when injury or impairment is a factor–can prove extremely limited. At Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm), we represent professional athletes and their families in recouping losses the suffered due to investor fraud.
Contact SSEK Law Firm today.