A Massachusetts man who plays the tuba for the Quincy Symphony Orchestra was sentenced to serve a 17-year prison term for defrauding investors out of millions of dollars in a Ponzi scheme that purported to deal in gold and rare coins Arnett Waters, 63, received the sentence from United States District Judge Denise L. Casper after pleading guilty in November 2012 to seven counts of securities fraud, six counts of mail fraud, two counts of money laundering and one count of obstruction of justice. Judge Casper also imposed restitution and forfeiture obligations in the amount of over $9 million.
According to authorities, Waters operated A.L. Waters Capital, LLC ("AWC"), which was a registered broker-dealer and a member of the Financial Industry Regulatory Authority ("FINRA"). Waters also operated Moneta Management, LLC ("Moneta") with his wife, Janet, who also served as AWC's chief compliance officer. Beginning in 2009, Waters began pitching two investment funds, Port Huron Partners, LP ("PHP") and Port Huron Partners II, LP ("PHP II"), advertising the funds on AWC's website as specializing in trading in rare coins and gold. Based on these representations, AWC raised nearly $1 million from investors, including $500,000 from his own church. Additionally, Waters operated two rare coin dealerships, Moneta and Windsor Park Corp., that sold coins to investors at grossly inflated prices.
However, Waters did little to no investing, but instead used investor funds to make a variety of unauthorized purchases, including luxury travel, hunting club dues, medical appointments and even classical sheet music for Arnett's hobby as a longtime tuba player for the Quincy Symphony Orchestra.
When SEC officials began an investigation in April 2012, the Waters made a variety of misrepresentations designed to conceal their scheme from regulators, including statements that they were not engaged in securities-related activities, and that no one had invested in either the PHP or PHP II funds.
When the SEC initiated a civil enforcement action in May 2012, Waters failed to disclose the existence of a hidden bank account that he used to launder nearly $200,000 until the SEC caught wind of the account. Waters was later charged with obstruction of justice as a result.
After Waters pled guilty to criminal charges, the plea agreement contained covenants by the SEC not to appeal any sentence of at least 97 months as well as Waters' agreement not to appeal any sentence less than 188 months. Because a 17-year sentence equates to a 204-month sentence, Waters technically has the opportunity to appeal.
A copy of the SEC's complaint is here.