SARANAC LAKE - A local investment banker and securities broker who ran for a seat on the village board earlier this year has been barred from the securities industry for defrauding his customers out of hundreds of thousands of dollars.
Mark J. Gillis, of Saranac Lake, and the financial management firm he co-owns, Hudson Valley Capital Management, have been expelled for using customer funds to cover losses caused by his improper day trading, according to a press release from the Financial Industry Regulatory Authority, the independent corporation that regulates the securities industry in the U.S.
FINRA said its investigation found that Gillis improperly day-traded millions of dollars of stock in July of this year. Gillis then manipulated the share prices of the stocks and withdrew the proceeds through accounts he controlled, FINRA said.
Mark J. Gillis
(Enterprise file photo)
"When Gillis' fraudulent trading caused significant losses in the firm's account, he covered those losses by making unauthorized trades involving customer accounts," the press release states. "Gillis purchased thousands of shares of securities in the open market in the firm's account and allocated these shares to customers at markups between 177 percent and 280 percent. Gillis also converted a customer's funds to pay for an unauthorized stock purchase and caused another customer to sustain a loss of approximately $400,000."
At one point in July, one of Gillis' customers confronted him about the unauthorized trading in his account. FINRA says Gillis lied to the customer, blaming the trades on errors made by Hudson Valley's clearing firm.
On Aug. 2, Gillis reported to the authority that his firm had recorded a $356,000 loss, which he reportedly said was due to "a few trade errors/corrections that were not noticed." FINRA says the deficit was actually created by Gillis' improper trading scheme.
In a Sept. 7 interview with FINRA staff, Gillis denied any intentional wrongdoing, only to recant that testimony 12 days later and admit that he intentionally marked up share prices to cover losses from his improper day trading, and that he intentionally manipulated stock prices in order to transfer money to his personal brokerage account. Cameron Funkhouser, executive vice president of FINRA's Office of Fraud Detection and Market Intelligence, said the authority moved quickly to address Gillis' misconduct.
"In this instance, FINRA fully investigated Mr. Gillis and Hudson Valley Capital Management within weeks of Gillis perpetrating his fraudulent scheme, and obtained evidence that led to the disciplinary action announced today," he said.
On Oct. 24, Gillis signed a settlement agreement with FINRA, consenting to Hudson Valley's expulsion from FINRA and barring him from association with any FINRA-registered firm, sanctions that are among the most severe the authority can issue. It was unclear whether FINRA's case against Gillis could lead to any criminal prosecution, as a FINRA spokesperson declined to answer additional questions about the case Friday.
Gillis waived his right to formally answer the allegations in writing, his right to defend himself in a disciplinary hearing and his right to appeal the decision against him. By signing the settlement, Gillis also agreed to not make any public statement denying, directly or indirectly, the findings or in any way giving the impression that the charges are without factual basis.
The Enterprise approached Gillis Friday at the microbrewery that he's in the process of launching on Lake Flower Avenue, in a former car wash building he's leasing from Carcuzzi Car Care Center owner and Harrietstown Supervisor-elect Bob Bevilacqua. Gillis said he couldn't speak on the record about the case against him because of the stipulations in the settlement agreement; however, he said he's trying to make amends.
"I'm in contact with the account that was affected from the beginning to make the account whole," he said. "The account involved is not a local account. I don't have a single local account.
"I've always done the right thing. I could run and hide from this and not make good on it, but I'm not doing that."
Originally from southeastern Massachusetts, Gillis moved to Saranac Lake with his family from Westchester County in July 2011 and opened up an office for his brokerage business on Academy Street. He quickly got involved in the community, volunteering as a youth sports coach and then deciding to run for one of two available seats on the village board this March.
In a vote that shocked many people, Gillis soundly defeated 10-year incumbent John McEneany for the endorsement of the village Republican Party caucus on Jan. 31. During the four-person campaign that followed, Gillis touted his financial background and business skills. He said he had worked with companies in biotech, high-tech, software and service-related fields, and believed those connections could benefit the village.
On Election Day, Gillis and fellow Republican Jeff Branch lost the race to Democrats Barbara Rice and Paul Van Cott.
In the months that followed, Gillis turned his attention to his new business venture, Blue Line Brewery, which received approval from the village Planning Board in August. Gillis said he plans to sell his homemade beer to local bars and restaurants, provide complimentary tastings and sell growlers of beer to the brewery's patrons.
When the Enterprise approached him Friday about the FINRA case, Gillis said he was worried about the timing of the newspaper's reporting on it, as he had just received his state Liquor Authority license and planned to open the business next week.
Bevilacqua, who said he's friends with Gillis, said he didn't know anything about the investigation until Gillis told him about it on Friday.
"Of course I'm surprised," he said. "Mark told me he wasn't fined. He said the one person affected was going to be made whole. It's an unfortunate thing to happen. He's embarrassed. He said something happened and he didn't catch it right away. He told me he's the one that alerted them to it."
Bevilacqua said it hasn't changed his opinion of Gillis, who had no prior record of improper activities with FINRA.
"He's always been - if you need something, he's right there," Bevilacqua said. "He immediately started helping out with coaching kids, and his wife's on the St. Bernard's (school) board. They're good people. It's an awful thing to have something like this come out and be reported in the local paper. It's a small town."
Contact Chris Knight at 891-2600 ext. 24 or email@example.com.