A Securities and Exchange Commission administrative law judge has ordered former investment adviser Kent D. Nelson barred from the securities markets after he pleaded guilty to a felony in connection with a pay-to-play scheme involving the New Mexico treasurer's office.
Administrative law Judge Robert G. Mahoney issued the order Tuesday and it will become final if Nelson does not file a petition for review or a motion to correct the record, and the SEC issues an "order of finality."
In his order, Mahoney concluded Nelson's behavior "was egregious." After being appointed investment adviser to the New Mexico treasurer's office, he took kickbacks from brokers in return for steering them state investment business and then passed along almost half of those fees to state treasury officials.
Nelson is currently in prison at the Federal Correctional Institution in Lompoc, Calif. He was sentenced in September 2007 to three years in prison, followed by three years of supervised release, and ordered to both surrender his property interest in a condominium unit in Colorado and pay a penalty of $175,000. The sentencing came after he pleaded guilty in September 2005 to one count of mail fraud in a U.S. District Court.
He also pleaded guilty to one count of racketeering in a state court and was barred from associating with any broker-dealers or investment advisers in the state by the California Corporations Commission over the scheme.
Nelson was a registered representative associated with Linsco/Private Ledger Corp., which was registered as both a broker-dealer and an investment adviser, at the time he began participating in the scheme. He also was sole owner of Strategic Investment Services LLC, an investment adviser registered in California.
In 1999, Nelson was appointed investment adviser to the New Mexico treasurer's office where he helped invest state funds, including bond proceeds. Between June 2000 and March 2005, he received about $4.4 million of finders fees from brokers with whom he placed state funds. In turn, he passed along $2.9 million of those fees to cohorts of New Mexico treasury officials through checks that he mailed to former Treasurers Michael Montoya and Robert Vigil.