Authorities have filed civil and criminal charges alleging that a Texas man who referred to himself as “The Money Doctor” was actually running a $19.6 Ponzi scheme that targeted retired Christian investors. William Neil “Doc” Gallagher, and his companies Gallagher Financial Group, Inc. (“GFG”) and W. Neil Gallagher, Ph.D. Agency, Inc. (“PHD Agency”), were charged by the Securities and Exchange Commission in an emergency enforcement action seeking various remedies including injunctive relief, civil monetary penalties, and the appointment of a receiver. Gallagher was also indicted by the Dallas County Attorney’s Office for securities fraud and other charges and was arrested last week. As noted below, the case is an unfortunate reminder that conducting due diligence might have persuaded many victims from entrusting their funds to Gallagher, as the SEC alleges numerous red flags in Gallagher’s past that should have given investors pause.
Gallagher’s career in the securities industry began in 1985 when he associated with Dean Witter Reynolds as a registered representative. He would eventually affiliate with six other broker-dealers during his sixteen-year career as a registered representative, leaving his final broker-dealer shortly after he was censured in 1999 by the Texas Securities Board for various violations of the Texas Securities Act including falsifying check-receipt books and falsely claiming he was a registered investment adviser.
Gallagher began operating GFG and PHD Agency in or around the mid-1990’s. Beginning no later than December 2014, according to the Commission, Gallagher used his two entities to market an investment product he called the Diversified Growth and Income Strategy Account (“DGI Account”). Gallagher hosted at least three weekly retirement-planning radio shows that often invoked religious references in an effort to target a Christian audience. This religious theme continued on GFG’s website which tout’s Gallagher’s book, titled Jesus Christ, Money Master: Four Eternal Truths That Deliver Personal Power and Profit, and lists GFG’s mission statement as
“Our mission is to be a vehicle of God’s peace and comfort to as many people as possible, helping first with their financial peace of mind, then also with their spiritual, emotional, and family well-being.”
According to the Commission, these were part of Gallagher’s larger effort to target a Christian audience.
Gallagher allegedly used his regular radio appearances to encourage listeners to schedule in-person meetings where he would solicit investors to open and fund an investment account at GFG, the DGI Account. Those potential investors were provided with documentation allegedly containing misleading information about Gallagher’s status as an investment advisor and broker, including claims that he was a “fully-licensed” “Wealth Manager” and “independent adviser.” Those documents also demonstrate that GFG and Gallagher were functioning as investment advisers, claiming that they would control the DGI Account on the investor’s behalf. One document assured investors that:
“In many ways when you hire me it’s like hiring a Master Captain for your ship. It’s your ship…so you can come up to the bridge anytime, but don’t touch anything! It’s my job to get you safely through the storms and into port.”
Potential investors were told that they could expect guaranteed, risk-free returns ranging from 5% to 8% annually through a mix of various asset classes. In total, Gallagher received over $30 million in investor funds from January 2015 to January 2019, including nearly $20 million from DGI Account investors. According to the Commission, the “overwhelming majority” of the funds raised by Gallagher came from individuals rolling over or transferring in retirement funds from IRA or 401(k) accounts.
“A Classic Ponzi Scheme”
The Commission’s Complaint alleges that Gallagher operated a massive Ponzi scheme that made a number of misrepresentations to investors. For example, Gallagher failed to purchase any of the various asset classes he claimed were integral to his strategy and instead used existing investor funds to make monthly (and other) payments to investors in classic Ponzi scheme fashion. Investors were also provided with fake account statements claiming to show continued earnings in their DGI Accounts and the safety of their invested principal.
In addition to paying investment returns with investor funds, Gallagher is also accused of siphoning away millions of dollars in investor funds for unauthorized uses. This includes nearly $6 million in payments to investors, $1 million for radio and website expenses, over $2 million in payroll and bonuses, and $633,000 in legal expenses. By the end of January 2019, Gallagher had less than $1 million on hand of the $30.3 million he had raised from investors.
Both the Complaint and a quick Google search show that Gallagher continued to solicit investors into 2019, with the Commission alleging that at least $500,000 was raised from new and existing DGI Account investors in January 2019 alone. In a press release that was apparently carried on a Naples, Florida ABC 7 affiliate in December 2018, Gallagher invited people to join him for a “Polar Plunge” on January 1, 2019 and described himself as:
Neil Gallagher has worked in the financial field for more than two decades, managing over one billion in assets and serving over one thousand clients world-wide. In addition, he also hosts weekly radio programs covering financial communication, the psychology of investing, wealth creation, family enrichment, and the importance of estate planning. He was recently awarded the Best of Los Angeles Award - "Best Financial Planner - 2018", according to Aurora DeRose, award coordinator for the Best of Los Angeles Award community.”
It begs further questioning how and why Gallagher received the Best of Los Angeles Award for Best Retirement Financial Planning 2018, a post which remains on the group’s Facebook page as of the time of this article.