Regulator Takes Octogenarian to Task

Like most defendants charged by the U.S Securities and Exchange Commission, the 81-year-old tax preparer from Tinton Falls, N.J., neither admitted nor denied guilt.

"It's a long story," said Anthony O. DeGregorio Sr., declining a telephone interview. "I don't want to rehash it. It's settled now."

A long story indeed. It goes back to 1989. That's when DeGregorio started a foundation with a well-intentioned name: The Association for Betterment Through Education and Love, Inc.

A portion of ABEL's profits was to go to charities, which is where the betterment, education and love came in. But, according to the SEC, most of the education seems to have gone to DeGregorio's clients, while the betterment and love went to DeGregorio and his 82-year-old wife, Margherita, who was named as a relief defendant in the SEC's complaint.

In December, DeGregorio agreed to a federal court judgment ordering him to pay nearly $1 million in fines, interest and the disgorgement of profits from his alleged scheme.

The SEC had accused DeGregorio of selling $1.3 million in unregistered securities over the past 20 years, mostly to himself, family members, associates and elderly clients of his tax-preparation business.

DeGregorio didn't put up much of a legal fight. And the judgment is proof that while some cases may be too big for the SEC to handle, no case is too little. Here, even an elderly, self-employed tax preparer in a quiet town (population less than 18,000) does not escape the regulator's radar.

SEC officials stopped short of labeling ABEL a Ponzi scheme. In the complaint it filed in Federal District Court in New Jersey, it alleged: "At times, ABEL used the proceeds from new offerings of securities to make promised interest payments to earlier investors."

ABEL sold charitable gift annuities and certificates of deposits to a handful of investors. Its CDs offered returns of 6% to 8%. And a CD it offered in December 2010 was "fully guaranteed by the assets of ABEL Inc. as well as the total assets of the Anthony DeGregorio family," according to ABEL documents cited in the SEC's complaint.

The SEC alleged that investors' money was pooled in an ABEL account, primarily invested in options, and often transferred between other accounts in the DeGregorios' names.

In 2004, the DeGregorios propped up ABEL's assets when Margherita donated the family home to the foundation. The house became ABEL's largest asset, the SEC said, until 2009 when the DeGregorios bought it back from the foundation for $1.

Like many of America's many larger organizations making SEC headlines, ABEL may have suffered from sloppy bookkeeping. DeGregorio had never been a certified public accountant, the SEC complaint said.

He once held securities broker licenses, but in 2005, he was barred from the brokerage industry by the self-policing body now known as Finra, or the Financial Industry Regulatory Authority.

DeGregorio had been cited for recommending unsuitable private placement securities to his clients. He settled, of course, without admitting or denying guilt.

He was barred from the brokerage business for life--yet what is life when you are well into your 70s?

In 2005, DeGregorio also received notice from the New Jersey Department of Banking and Insurance that his charitable gift annuities didn't comply with state registration laws. He continued to sell them into his 80s, along with his "guaranteed" CDs, the SEC said.

The SEC has been getting a lot of flak of late for letting some of the biggest firms on Wall Street settle allegations without admitting or denying guilt. It's nice to know an octogenarian in Tinton Falls, N.J., can do it, too.

Never forced to admit or deny guilt, DeGregorio will be able to say "it's a long story," well into his 90s.

(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. Contact Al at al.lewis@dowjones.com or tellittoal.com)