A lawsuit has been filed against a Princeton husband and wife who allegedly scammed more than $5 million from investors – including three investors who they counted among their Princeton social circle – by the New Jersey Bureau of Securities in Mercer County Superior Court.
The lawsuit was filed Jan. 29 against Ford F. Graham and his wife, Katherine B. Graham, alleging that they engaged in a Ponzi scheme by taking money from investors and assuring them that they would earn as much as a 20-percent return on their investment.
Instead, the Grahams allegedly used the money to pay for vacations, summer camp, private school tuition, country club dues and personal expenses. Graham made payments to earlier investors by using money invested with him by later investors, according to the lawsuit.
“Investors tend to lower their guard when someone they know socially or professionally offers them an opportunity to invest in a ‘sure thing,’ as happened here,” said Christopher W. Gerold, chief of the New Jersey Bureau of Securities.
“This case illustrates the importance of vetting the person offering the investment – and the investment itself – before handing over your hard-earned money,” Gerold said.
The lawsuit claims that Graham raised more than $5 million through a series of loans and fraudulent sales of unregistered securities from investors in at least five states. It includes at least $1.9 million of unregistered securities to New Jersey investors – all of whom Graham knew through his Princeton social circle.
Graham, who is a Princeton University graduate who holds a law degree and a master’s degree in business administration from Tulane University, has never been registered with the New Jersey Bureau of Securities, according to the report. Registration is needed to handle securities, which also must be registered.
Katherine B. Graham is a Vanderbilt University graduate who also holds a law degree from Tulane University and who has never been registered with the New Jersey Bureau of Securities, according to the report. Registration is needed to handle securities, which also must be registered.
Graham created several gas and oil companies, but did not register the securities with the New Jersey Bureau of Securities, the lawsuit claims. He allegedly sold the unregistered securities to investors, representing them as low-risk, high-reward investment opportunities in gas and oil projects, between 2012 and 2014.
In one instance, a Princeton resident invested $1.5 million with Graham, who promised that the money would be used to buy an interest in another company that had filed a claim against British Petroleum worth $7 million to $9 million. The investor would be entitled to an almost immediate return on his investment – but the claim against British Petroleum was never filed, the lawsuit claims.
Instead, Graham used at least $233,689 to pay another investor on his investment. He also transferred at least $380,000 to the personal account of one of his business associates, and at least $16,917 to his wife’s bank account to be used to pay for personal expenses, the lawsuit said.
An additional $376,882 of the $1.5 million was transferred from one company’s account to another company’s account – both of which were controlled by Graham, the lawsuit said. Of that amount, $9,601 was transferred to earlier investors.
At least $90,940 was transferred to Katherine Graham’s bank account and used to pay $16,945 for a vacation at the Carlisle Bay resort in Antigua; $6,316 to pay the Bedens Brook Club in Montgomery Township, where the Grahams were members; for summer camp and private school tuition for their child; and for purchases from retailers, the lawsuit said.
Graham also approached another investor to whom he had just made a $30,000 payment and requested that the investor ask his “wealthy” friends to invest in Graham’s projects, the lawsuit said.
The investor, encouraged by the return on his investment and eager to keep investing with Graham, told others in the Princeton area about the investments he believed were successful, the lawsuit said.
Among the seven counts in the lawsuit, the New Jersey Bureau of Securities claims that the Grahams misrepresented how the money would be used – to pay for earlier investors’ principal and interest; diverted to other companies that Graham controlled; and diverted to pay for personal expenses.
The lawsuit also claims that the securities issued by Graham’s assorted companies were not registered, nor was Graham registered to act as an agent to sell the securities.
And the lawsuit also claims that the Grahams were “unjustly enriched with the investor funds to which they had no legal right.”
Finally, the lawsuit seeks to have the Grahams repay the investors and to give back any profits they may have made, and also assessing civil monetary penalties against them. They would also be permanently banned from working in New Jersey’s securities industry in any capacity.