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Maryland Securities Division - Investor Education
Invest With Common Sense
The Case of Iris Rounsaville: Check out your Financial Adviser before you write the check
operated out of her home in Chesapeake Beach in Southern Maryland. She
claimed that she had worked in the past as a broker for E.F. Hutton and
PaineWebber, She persuaded investors from around the country to invest
in "EBI's", which she identified as "European Bank Instruments,"
and various other investments that she claimed to control. Rounsaville
told her clients that they would enjoy tax-free returns of between 100
and 350% on their investments. Ultimately, Rounsaville convinced 140 individuals
to invest nearly $4 million with her.
In fact, Rounsaville was not registered as an investment adviser or stockbroker in Maryland and had never worked as a broker at a prominent firm. Unbeknownst to her victims she had previously spent two years in a California prison for investment fraud. The "EBI's" were a fictitious invention of her own imagination. A savvy investor who had checked with the Securities Division on the registration status of Rounsaville and her securities would have been forewarned.
Rounsaville deposited her clients' funds into her personal bank accounts, located in various states and overseas. She used those funds to finance an extravagent lifestyle for herself and her boyfriend, including a luxury car and boat, frequent exotic vacations, and a $700,000 mansion. She often spent over $20,000 per month on credit card purchases. Ironically, Rounsaville's clients interpreted her lifestyle as a sign of her investment success, which they hoped to achieve by following her advice.
Some of Rounsaville's clients received sporadic "interest payments," which actually came from funds Rounsaville had obtained from other investors. Rounsaville used these payments to lull clients into believing they would make the handsome profits she had promised.
When the Securities Division learned that Rounsaville was acting as an investment adviser, it began an investigation which resulted in a Cease and Desist Order in August 1992 barring Rounsaville from further unlicensed activities. After Rounsaville violated the Cease and Desist Order, the Securities Division obtained a court injunction against her in April 1993 which also prohibited her from accepting funds for investments and from using previously-obtained funds for any purpose other than to repay investors.
The Securities Division referred the evidence against Rounsaville to federal authorities for a criminal investigation. Subsequently, Rounsaville was indicted by a federal grand jury on mail fraud charges. Rounsaville eventually pled guilty on September 7, 1993 and was sentenced to five years in prison.
Unfortunately, many of Rounsaville's victims refused to believe that her promises of grand profits were lies until after it was too late. Many had already invested their life savings, or funds that they had planned to use for their children's education or their retirement. Rounsaville consistently claimed that her investments were legitimate and that she would be able to repay everyone after completion of an unspecified deal overseas.
The unscrupulous solicitor who seeks to obtain investors' funds with get-rich-quick promises is unfortunately a familiar story. The Securities Division advises investors to investigate thoroughly before investing. If the deal sounds too good to be true, it probably is.
A person who offers securities or acts as a financial planner in Maryland must be registered with the Securities Division. In addition, securities must be registered with the Division, unless they are exempt from registration by law. To check on the registration status of a security or a person offering financial advice, investors may contact the Division at (410) 576-6360.
The Division also urges individuals to consult with a trusted attorney, broker, banker, financial adviser or other investment professional before investing, and to request and carefully read all prospectuses or other disclosure materials. If you think you have been a victim of investment fraud, contact the Division.
we're here to help!
Attorney General of Maryland 1 (888) 743-0023 toll-free / TDD: (410) 576-6372