What happened with the widow’s money? At least 44 times after a Marietta investment adviser was asked about it in a bankruptcy proceeding, he invoked the 5th Amendment right against self-incrimination, court documents say.
Now, Jay Costa Kelter — formerly known as Ignatius J. Costa III — is facing federal civil accusations that he bilked the 75-year-old widow, diverting more than $1.4 million for his own use. Two other retirees also fell victim, the government alleges, losing another $400,000 to his schemes.
The civil case isn’t the worst of his troubles now. Kelter also is facing a related federal criminal indictment, accusing him of 16 counts of mail fraud, five counts of wire fraud and one count of securities fraud.
With the retirees’ money, Kelter bought a $101,400 Bentley automobile, paid $30,000 to a Mercedes dealer and $10,000 to a Lamborghini dealer, bought $21,060 in custom jewelry, paid for a family vacation, covered his living expenses and paid off debts to other investors, according to the two federal cases. He lost much of the rest, the U.S. Securities and Exchange Commission says in the civil case, through risky trading.
Meanwhile, the three retirees, all from Tennessee, were out money they depended on for much of their income. Kelter promised to cover the losses but never did, court documents alleges.
Kelter should be fined and ordered to repay the money, the SEC says in its complaint, filed in federal court for the Middle District of Tennessee. In the criminal case, also filed in Tennessee, he faces up to five years in prison on each count.
Of note, the retirees’ complaints were not the first about his investment activities. SEC records show that in 2009, when he was working for a Johns Creek financial firm, a client alleged that he failed to follow customer instructions, resulting in $12,000 in damages. That case was closed with no action.
But in 2001, when he was working for another firm in West Palm Beach, Fla., he was found liable to a client who lost about $344,000. In that case, he was accused of breach of fiduciary duty, negligence and misrepresentation with annuities, the records show.
In recent years, Kelter was not registered as an investment adviser.
Government officials have warned that seniors are a particular target of investment fraud. Nearly half of all complaints filed with state securities regulators involve elderly people, according to the North American Securities Administrators Association.
In Georgia earlier this year, the CEO of Atlanta-based Summit Wealth Management was sentenced to eight years in federal prison for a multi-state investment fraud scheme. In that case, Angelo Alleca was accused of victimizing more than 300 people across the country, many of them seniors and retirees. Losses were put at more than $24 million.
And in August, the SEC filed fraud charges against four Alpharetta brokers in what the government alleged was a scheme targeting older federal employees. The government alleged that hundreds of employees were deceived into rolling over money from their retirement accounts into high-fee annuities. One of the men used some of the money to fund shopping sprees at luxury stories, the government alleges, and other funds to engage in day trading that resulted in more than $635,000 in losses.