On Friday January 18, 2019, a Stark County jury returned a verdict finding former financial advisor Kimm C. Hannan guilty on all 53 felony counts of securities-related fraud he had been facing in connection to operating a Ponzi scheme. It took the presiding Judge roughly 30 minutes to read the individual verdict forms, which included multiple counts of false representations in the sale of securities, fraudulent conduct as an advisor, prohibited securities acts, and theft from an elderly individual, among others.
The verdict, delivered Friday afternoon after eight hours of jury deliberation, brings some closure to the five clients prosecutors say paid Hannan roughly $1.7 million between 2014 and 2017 under the belief that he would invest on their behalves. $800,000 of that came from one married couple.
The Scheme
As case records show, 67-year-old Hannan enjoyed great success over decades in the financial industry, but soon ran into financial problems. During closing arguments, Stark County Assistance Prosecutor Joe Vance drilled into the scope of Hannan’s scheme, telling jurors he perpetuated “nothing but a con” in which he abused investors’ trust, and used savings and retirement funds as his personal piggy bank.
In addition to funding failing business ventures, including two dry cleaner’s, a fledgling dog daycare, and an HR business, Hannan used his clients’ money on personal expenses, debts, alimony payments, and rent for an upscale apartment in downtown Canton. Evidence presented in the case also show Hannan used upwards of $100,000 in client cash to bankroll high stakes card games at local casinos.
Hannan is scheduled to be sentenced on Tuesday. He faces more than 300 years in prison.
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The Investigation
Hannan’s criminal indictment and conviction stem from an investigation conducted by the Ohio Division of Securities, which received a tip Hannan had been orchestrating a Ponzi scheme and paying off old investors with new clients’ funds. Attorney Inspector Janice Hitzman stated Hannan’s actions constituted clear violations of Ohio securities laws, including his:
- Failures to disclose important information regarding his investments;
- Failures to disclose financial losses associated with his businesses;
- Diversion of investors’ funds into personal accounts; and
- Bankrolling of casino trips and personal expenses with clients’ money.
Hitzeman said that even if client funds been paid as purported “loans,” they still constituted a security and investment under the Ohio Securities Act. During a recorded interview with investigators, Hannan also admitted to spending client money without their knowledge on personal expenses, and stated clients would have never trusted him had he informed them his businesses couldn’t make payroll, let alone profit. Hitzeman testified that during the interview, Hannan also pitched investigators to invest in his latest business venture as a means to repay investors. They didn’t accept the offer.
Criminal & Civil Cases: What They Mean to Wronged Investors
Criminal cases undoubtedly provide wronged investors with the sense of justice and accountability they deserve, but they are separate and distinct from civil legal actions. Though this particular advisor has been found guilty of committing crimes, and will be sentenced accordingly, that outcome does little to provide investors with any meaningful source for recovering their losses. In order seek such recoveries, investors can turn to the civil justice system and various claims related to investment fraud and misconduct – which focus on holding bad actors accountable for their wrongful conduct, and financially liable for the damages suffered by victims.
If you have questions about a matter involving investment fraud or misconduct, Meyer Wilson is available to help. Our lawyers represent clients nationwide and offer free and confidential consultations.
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