Patrick O. Howard, of Dallas, Texas, along with two entities controlled by him, Howard Capital Holdings, LLC, and Optimal Economics Capital Partners, LLC, have been charged by the Securities and Exchange Commission (SEC) in a Complaint alleging that Howard and his firms committed securities fraud. Securities and Exchange Commission v. Patrick O. Howard, et al., No. 17-cv-00420 (N.D. Tex. filed Feb. 14, 2017).

According to the Complaint, since February of 2015, Howard and the firms engaged in the fraudulent sale of security interests in three private investment funds, in which $13,000,000.00 was accumulated from one-hundred and nineteen investors. Apparently, investors were told by Howard and the firms that they would receive annual returns ranging from twelve to twenty percent in return for investing in low risk funds.

Howard and the firms falsely stated to investors that interests in the revenue streams of portfolio entities would be acquired with the use of the customers’ funds, and that returns due to investors were insured. The SEC alleged that no more than $7,500,000.00 of the funds accumulated from investors were used for purposes of acquiring revenue streams of portfolio entities; the rest was used to cover business and personal expenses which Howard accrued.

The Complaint alleged that investors would be unable to receive guaranteed returns as promised because of the insufficient revenue generated from the portfolio entities. In order to conceal this information, Howard and the firms purportedly falsified account statements by stating inaccurate balances. Meanwhile, Howard was alleged to have solicited the reinvestment of the investors’ earnings. The SEC also claimed that investors funds had been used by Optimal Economics in a Ponzi-scheme type manner, in which funds received from new investors were utilized to pay off existing investors.

The Complaint alleged that the conduct of Howard and his firms was violative of Securities Exchange Act of 1934 Section 10(b), Rule 10b-5, and Securities Act of 1933 Sections 17(a), and 5(a) and 5(c). The SEC has sought relief including civil penalties, disgorgement, and permanent injunctions against Howard and his firms as a result.

FINRA Public Disclosure reveals that Howard was a stockbroker registered OneAmerica Securities, Inc. from March 26, 2010 to February 23, 2015, where Howard was terminated for failing to comply with OneAmerica’s policies governing his securities activity. Additionally, on March 11, 2015, a customer initiated investment related written complaint involving Howard’s conduct was settled for $3,500.00 in damages based upon allegations that Howard, while registered with OneAmerica Securities, Inc., misappropriated the customers’ funds intended for payment of a whole life insurance policy.

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