A Los Angeles-based investment adviser who swindled $1.2 million from a well-known professional athlete and his wife was sentenced Friday to two and a half years in federal prison.
Jeremy Joseph Drake, 41, also was ordered by U.S. District Judge Christina A. Snyder to pay $1.2 million in restitution and serve three years of supervised release following his 30-month prison term. He was allowed to self surrender on July 19.
Drake robbed the couple — identified only as “Mr. and Mrs. S” in documents filed in Los Angeles federal court — by deceiving them about the investment advisory fees they were paying. Drake went to elaborate lengths to conceal his fraud, including creating and sending false documents and masquerading as another person to corroborate his lies.
The deception led his clients to pay $1.2 million more in management fees than they knew. As a result, Drake personally received about $900,000 of incentive-based compensation based on the fees paid by the clients during the course of his scheme, according to federal authorities.
“I think it’s a serious crime,” Snyder told a courtroom crowded with family, friends and victims of the defendant.
Snyder rejected defense attorney Lynn Neils’ efforts to persuade the judge to order probation instead of prison.
“Yes, he lied and he shouldn’t have,” Neils said, telling the judge that her client is “a good man who made some bad mistakes.”
Drake pleaded guilty last year to a federal wire fraud charge. While employed by Los Angeles-based HCR Wealth Advisors, he over-billed the victims for more than three years by telling the couple that they were paying a special “VIP” management rate of 15-to-20 basis points on their $35 million in assets when he was charging over 1 percent.
In June 2016, as the wife demanded an explanation about the fees, Drake created the persona of “Ron Stenson,” who purportedly corroborated Drake’s story. Upon discovery, Drake admitted to the woman that he had been lying and warned her that reporting his misconduct could result in bad publicity for her husband, court papers show.
A representative of the victims declined to address the court.
In a lengthy statement, Drake apologized for his actions, admitting that greed and fear that he could lose his clients were motivating factors for the fraud.
“I am completely ashamed that I lied to my clients and breached their trust,” he said.
The U.S. Securities and Exchange Commission sued Drake in August 2017, accusing him of violating the anti-fraud provisions of the Investment Advisers Act of 1940. According to the complaint, the couple entrusted over $35 million of their assets to Drake to manage.
Last year, Drake agreed to a consent judgment with the SEC, admitting that he defrauded the victims out of $1.2 million.