Atlanta CEO Sentenced to Jail for Securities Fraud | USAO-NDGA
ATLANTA – Richard J. Randolph, III was convicted of securities fraud he committed while he was CEO of Randolph Acquisitions, Inc.
“Business executives like Randolph are supposed to defend investors’ money, not take advantage of their position in a company to defraud them,” Acting US Attorney Kurt R. Erskine said. “Instead, this defendant let his greed get the better of him and now he is facing a significant federal prison sentence.”
“Fraud is fraud, no matter how complex,” said Special Agent in Charge Steven R. Baisel, US Secret Service – Atlanta Field Office. “The accused in this case employed several machinations in order to cover up his criminal acts. Ultimately, his efforts failed under the scrutiny of law enforcement professionals tasked with unraveling his schemes. “
According to Acting U.S. Attorney Erskine, Charges and Other Information Presented to Court: Richard Randolph was the CEO, Chairman of the Board of Directors and majority shareholder of Randolph Acquisitions, Inc., a company headquartered in Atlanta, Georgia , which has publicly filed its financial statements with the Securities and Exchange Commission. He also controlled Gallagher Management Group and other related entities. In 2017 and 2018, Randolph sold over $ 1 million of Randolph Acquisition shares to various investors.
In 2017, Randolph began to prepare the merger of Gallagher Management Group into Randolph Acquisitions and sold the shares of Randolph Acquisitions to several investors. Gallagher Management also engaged an accounting firm to audit its 2016 financial statements. As part of this audit, Randolph provided false and fraudulent information regarding the assets of Gallagher Management Group which were then reflected in the balance sheet of the 2016 financial statements:
- Randolph falsely valued the property at $ 10.5 million without any associated liability. In fact, Gallagher Management Group purchased the property in September 2016 for $ 1.1 million with a $ 1.1 million mortgage secured by the property. It was sold in August 2017 for $ 1.2 million.
- Randolph falsely claimed that Gallagher Management Group owned two buildings valued at $ 10 million combined. In fact, neither Gallagher Management Group nor Randolph has ever owned these properties.
- Randolph falsely valued another $ 4.5 million property that was acquired in January 2016 for $ 425,000 by an entity controlled by Randolph and was transferred to Gallagher Management Group in March 2017. In April 2018, the property was transferred to Gallagher Management Group. was auctioned for $ 687,500 after Gallagher Management Group defaulted on a $ 500,000 loan.
- Randolph provided a fake bank statement showing a balance of over $ 2.5 million. The actual balance in this account was $ 58,198.78.
The audited financial statements included other misrepresentations:
- They falsely stated that Gallagher Management Group “has consistently maintained over $ 50 million in assets under management per year.”
- They falsely stated that Gallagher Management Group “provides a wide range of investment banking services to a diverse group of companies, financial institutions, investment funds and governments.”
- They falsely stated that Gallagher Management Group “provides investment management services and offers[s] investment products (primarily through separately managed accounts, such as mutual funds and private equity funds) across all major asset classes to a diverse set of institutional and individual clients.
Gallagher Management Group hired a consultant to prepare a business valuation for the merger which relied on Gallagher Management Group’s 2016 audited financial statements, additional information on the valuation of false properties provided by Randolph and false projections provided by Randolph. The report valued Gallagher Management Group at $ 31.3 million based on enterprise value and $ 33.8 million based on equity value.
As part of the proposed merger between Randolph Acquisitions and Gallagher Management Group, Randolph Acquisitions filed several documents with the Securities and Exchange Commission which attached the false and fraudulent 2016 audited financial statements of Gallagher Management Group. Randolph directed investors to these documents.
In addition to these documents, Randolph made other false and fraudulent statements to potential investors:
- Randolph falsely claimed that Randolph Acquisitions was set to secure a variety of large public and private contracts in the US Virgin Islands, including hurricane repair contracts and a deal to manage the US Virgin Islands public pension fund . Randolph Acquisitions never won any of these contracts.
- Randolph falsely claimed that Randolph Acquisitions owned EF Block. On the contrary, Randolph Acquisitions did not own EF Block.
- Randolph falsely claimed that Randolph Acquisitions was listed on the Pink Sheets. Randolph Acquisitions has never been listed on the stock exchange.
Using these false claims, Randolph prompted 14 victims to invest more than $ 1.6 million in Randolph Acquisitions.
Richard J. Randolph, III, 40, Atlanta, Ga., Was sentenced to six years and six months in prison followed by three years on probation and ordered to pay restitution in the amount of $ 1,602,200 to its victims. Randolph was convicted of the charges on April 9, 2021, after pleading guilty.
This matter was investigated by the United States Secret Service, with the assistance of the United States Securities and Exchange Commission. In a related civil case, the United States Securities and Exchange Commission filed a lawsuit indicting Randolph and he consented to the entry of a judgment against him.
Assistant US Attorney Christopher J. Huber, deputy head of the Complex Fraud Section, continued the case.
For more information, please contact the US Attorney’s Office of Public Affairs at [email protected] or (404) 581-6016. The Internet address of the United States Attorney’s Office for the Northern District of Georgia is http://www.justice.gov/usao-ndga.