SEC: Broker Ripped Off Elderly Nuns In New York; Paul George Chironis Targeted Sisters Of Charity In Churning Scam, Agency Says

A Long Island, N.Y.-based broker ripped off  “a congregation of mostly elderly nuns in the Bronx” in a churning scheme in which he repeatedly executed trades that eroded the value of two accounts held by the Sisters of Charity to line his own pockets, the SEC said.

Paul George Chironis, 58, of Melville, N.Y.,  has settled the SEC’s administrative action by agreeing to pay the Sisters of Charity $350,000. He further was barred from associating with with any broker, dealer, investment adviser, municipal securities dealer, transfer agent, municipal adviser or nationally recognized statistical ratings organization.

“Chironis took advantage of the trust placed in him by the Sisters of Charity and convinced the nuns to engage in a high turnover trading strategy unfit for their investment needs,” said George S. Canellos, director of the SEC’s New York Regional Office. “Chironis’s irresponsible actions virtually guaranteed the convent’s accounts would lose money due to the undisclosed and excessive costs being incurred while Chironis focused on generating substantial commissions for himself.”

Meanwhile, Chironis was barred from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter.

The Sisters of Charity used the investment accounts to pay “for the care of members of the Congregation living in assisted living facilities” and to support the Congregation’s charitable endeavors, the SEC said.

Chironis, who neither admitted nor denied the allegations as part of a settlement agreement, had a history of churning, the SEC said.

“Chironis has worked in the securities industry since 1981 and maintained Series 7 and 63 licenses since 1983,” the SEC said in administrative filings. “Prior to his association with Capital Growth [Financial Inc.,] Chironis received seven customer complaints filed with the NASD/FINRA, including complaints for churning and unsuitability.

“As a result of customer complaints, in January 2006, the Michigan Securities Division required that Chironis be placed on heightened supervision, and in March 2006 the Vermont Securities Division prohibited Chironis from soliciting investors in Vermont. Chironis was associated with Capital Growth from November 2005 until February 2008, when Capital Growth ceased business operations. Since March 2009, Chironis has been associated with another registered broker-dealer located in New York, New York.”

Capital Growth, which had offices in New York and Boca Raton, Fla., now is defunct, the SEC said.

Chironis’ scheme targeting the nuns occurred between Jan. 1, 2007, and Jan. 31, 2008, the SEC said.

Here is one example of how Chironis ripped off the nuns, according to the SEC administrative filing (emphasis added):

“Chironis frequently replaced one bond with a bond or bonds of similar duration and yield. For example, on July 24, 2007, Chironis sold a Ginnie Mae bond with a 6% coupon rate, a maturity date of 2033 and a principal amount of $258,504.43. The very next day, Chironis purchased a Ginnie Mae bond with the same 6% coupon rate, the same 2033 maturity date and a principal amount of $201,636.05, along with a second Ginnie Mae bond with a 6% coupon rate, a 2032 maturity date and principal amount of $199,956.51. Capital Growth, through Chironis, charged the Accounts approximately $18,352 in transaction fees – in the form of markups and markdowns – on these three transactions. On September 26, 2007, Chironis sold one of the two bonds he purchased two months earlier, and on October 24, 2007, he sold the second.”

During a 13-month period, the SEC said, the Sisters of Charity paid nearly 11 percent of the value of the nuns’ accounts to Chironis in the form of transaction fees.