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William M. Malloy III, who says his fortune goes back to the early 1800s, has been sued in federal court for his alleged role in a Ponzi scheme that is rocking the state of Oregon. In March of last year, the Securities and Exchange Commission filed suit against Aequitas, a Portland firm allegedly running a scheme that bilked 1500 investors of $300 million.

Malloy, from a 2012 San Diego Metro feature story called "40 under 40."

Aequitas told clients that their money would be placed in safe healthcare investments. However, that was not true. Aequitas was actually putting money into student debt related to Corinthian Colleges, one of the most scandalous for-profit institutions that was hit with federal and state charges and ultimately collapsed.

Malloy's company, La Jolla-based MWM, sold Aequitas-related investments to Thomas Neal Sterchi Jr. and Kristine Sterchi, who together lost $300,000. MWM and Mehta are being sued, along with Malloy, in a suit moved to federal court from state court May 30.

According to the suit, Malloy and Mehta solicited Sterchi to invest his money through MWM. "Sterchi was extremely hesitant," according to the suit, because he had recently been skinned by another investment advisor. Malloy and Mehta said they were investment experts, according to the suit, and MWM was a large organization. Actually, the firm only consisted of Malloy, who wasn't licensed, and Mehta had only had a license since 2012, says the suit.

Through MWM, the plaintiffs' money went into Income Opportunity Capital. They were told it would pay 8 percent year. But according to the suit, the money was diverted to Aequitas and into the deeply ailing Corinthian. According to the suit, Malloy's firm gave the plaintiffs false information.

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Comments

Cassander June 3, 2017 @ 1 p.m.

I have never understood the logic of tougher sentences for theft versus fraud. Fraud invariably involves larger sums of money, many more victims, and does greater injury to people's feelings of trust and security. Which would one rather lose: your wallet or your retirement?

And while not excusing either, it's fair to say in general the motive for theft is need but that for fraud is greed. But alas, society's sense of justice is not piqued by this elephant in the court room, and we continue to judge people as less deserving of punishment so long as they "look respectable" and flash Pepsodent smiles while bilking little old ladies—or taking down the entire economy.

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shamus June 4, 2017 @ 10:13 a.m.

You answered your own question in the second sentence. Larger sums of money mean larger connections to the political system and that is where the decision to prosecute gets made, in the political system, not a hall of justice. Madoff stole multiple billions for over a decade by not executing trades for some of the largest, wealthiest investors in the world. Do you really believe these wizards of finance could be fooled for a decade in the very business that made them rich? I don't. Yet Madoff went away by himself and the rest of the people who got rich in his scheme had to give the money back at worst. No prosecution. That wasn't because they were innocent. We have evolved a system of justice that mirrors our political system and it is run by money, i.e., political contributions. It is a system of legal bribes that protects the well heeled from our justice system. Until we clean up that mess of cash floating around the system we are going to have what we have got right now. Leaders that do not respond to the voters as much as to the donors. It dominates both political parties and is why the things that matter to the working class don't get any attention but the donors wish list is at the top of both parties agenda. And the rich tend to want the same thing whether they are Democrats or Republicans so we end up with the same outcome. That is the logic of sending petty thieves to jail and the billion dollar criminals get sent home.

1

Don Bauder June 4, 2017 @ 11:35 a.m.

shamus: So true. The largest financial institutions have the most clout with politicians and regulators. It is difficult to fight them. Best, Don Bauder

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Don Bauder June 3, 2017 @ 3:06 p.m.

Cassander: It's certainly better to bilk old ladies than to take down the entire economy. Right now, I am worried that the old ladies are getting off easy. Best, Don Bauder

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Don Bauder June 3, 2017 @ 3:15 p.m.

Cassander: The motive for theft is not always for need, although the motive for fraud is usually greed. Many times I call a fraudster a thief. Best, Don Bauder

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SportsFan0000 June 4, 2017 @ 5:18 a.m.

Wow! San Diego seems to be loaded with these fraudsters.

OR maybe it has better reporters that expose the fraudsters and don't give them a free pass without the public finding out this important information...unlike some other communities and cities..

1

Don Bauder June 4, 2017 @ 7:56 a.m.

SportsFan0000: If you want to follow San Diego's many fraudsters, read the Reader. Best, Don Bauder

2

Visduh June 4, 2017 @ 9:24 a.m.

No matter how many of these investment scams are exposed, and Don has exposed many of them, they keep coming along. So, Sterchi had already been burned, and he was looking for a legitimate investment venue. How, one might wonder, did he end up picking these grifters? Was he perhaps trying to double down and make up previous losses? It isn't all that hard to find a stock brokerage operation that is a member of all the exchanges and fully regulated. While that's no iron-clad guarantee of competence and total honesty, it goes a long way in that direction. No, the folks who fall for these deals are looking for too-good-to-be true returns immediately, something that just cannot be promised.

If I felt burned by an investment advisor or other scamster, I'd take the portfolio back and handle it myself, at least for a few years. Managing your investments ain't that hard, folks.

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Don Bauder June 4, 2017 @ 11:32 a.m.

Visduh: One can always plunk money in Vanguard mutual funds. It has low charges and lots of funds to choose from. Best, Don Bauder

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Visduh June 4, 2017 @ 4:24 p.m.

Or often even better from an expense standpoint, there are exchange traded funds, many tied to stock indexes that have an excellent track record of beating the managed funds.

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Don Bauder June 4, 2017 @ 8:29 p.m.

Visduh: Yes, ETFs can be good. Best, Don Bauder

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SportsFan0000 June 6, 2017 @ 7:04 a.m.

Don, I am sure you and other savvy posters have heard of "the dart board test"

Years ago, some financial investors did their own test of the success rates of Wall St Brokerage Firms versus just blindly tossing darts onto a dart board of investments... The Dartboard beat the major Wall St Investment Houses for Returns lol!

So either find an investment house with a great track record, low fees and low loads and an unimpeachable reputation for honesty and integrity OR if you have the extra time, then just manage your investment portfolio yourself.

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Don Bauder June 6, 2017 @ 9:32 a.m.

SportsFan0000: You don't have to toss darts at a list of socks. Buy mutual funds from an organization charging low fees and featuring good analysts. I consider Vanguard the best. Or buy a fund that tracks the S&P 500. Or exchange traded funds (ETFs), as Visduh suggested. Best, Don Bauder

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Flapper June 6, 2017 @ 9:11 a.m.

How about exposing the "Socker-It-to-Em" fraud of empty promises and the political sleight-of-hand that was the crock of dire tears vote that the mayor will veto and squander $6,000,000 of the taxpayer's money for a "special (interest) election" to support a greenwashed scheme that is full of escape clauses, ad nauseam?

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Don Bauder June 6, 2017 @ 9:34 a.m.

Flapper: I agree. If the mayor vetoes the council's vote nixing the special election, he should be voted out of office ASAP. Your description of SoccerCity is also apt. Best, Don Bauder

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Flapper June 6, 2017 @ 8:29 p.m.

Ok, I'm gonna hold my breath until you write the piece.

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Don Bauder June 7, 2017 @ 5:53 a.m.

Flapper: Matt Potter of the Reader is doing an excellent job covering SoccerCity. Best, Don Bauder

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