One of the key witnesses in the trial of two Capital Region brokers convicted of swindling millions from their investors was sentenced Wednesday to probation and fined $5,000.
Brian Shea, 54, of Niskayuna, was the chief financial officer for Albany-based McGinn, Smith & Co., which diverted about $4 million from investment trust funds to pay for personal expenses, including lavish homes, expensive country club memberships and race horses.
Partners Timothy McGinn and David Smith were convicted last month in U.S. District Court on multiple charges of mail, wire and securities fraud, as well as filing a false tax return. An appeal is expected in the case.
When Shea took over in April 2009, he noticed discrepancies in the books for the firm, which was being investigated by the Financial Industry Regulatory Authority. Smith told Shea to conceal transactions that could result in FINRA suspending its broker-dealer license.
On Nov. 2, 2009, Shea changed the books to hide from the Internal Revenue Service $130,000 that McGinn diverted from investors, allowing him to avoid paying $38,000 in taxes. McGinn created backdated promissory notes to conceal the money as loans and ordered Shea to send them to FINRA.
Shea pleaded guilty in July to one count of corruptly interfering with the administration of the Internal Revenue Laws as part of a plea agreement. He could have faced a sentence of 10 to 16 months and a fine of up to $30,000 under the sentencing guidelines. However, prosecutors argued for a lesser sentence because of his cooperation with authorities.
Shea met with federal officials more than three dozen times, made numerous telephone calls, spent additional time reviewing records and testified in the case, according to the sentencing memorandum. He is also cooperating with the Securities and Exchange Commission in its civil case against McGinn, Smith and continues to work for the firm under the management of its court-appointed receiver.
The U.S. Attorney’s Office also pointed out that Shea’s wife died in 2008 and he has two daughters.
“Although he was wrong to follow Mr. Smith’s instructions, Mr. Shea was put in a very difficult position of choosing between defying the orders of his employer and maintaining his employment and ability to provide for his daughters,” according to the memo.
Prosecutors recommended probation, one year of community service and no fine. However, U.S. District Judge David N. Hurd imposed the $5,000 fine and 100 hours of community service.
Assistant U.S. Attorney Elizabeth Coombe prosecuted the case. The U.S. Attorney’s Office had no comment on the sentencing.
Shea is the third associate in the firm to be convicted in the scheme. In November 2011, Matthew Rogers, a former senior managing partner, and accountant Ronald Simons each pleaded guilty to the misdemeanor charge of filing a falsified tax return on behalf of Smith and his wife.