Michael Robert Drilling, 47, of Grand Marais pled guilty to one count of Securities fraud in U.S. District Court on Thursday, April 17. In his plea agreement, Drilling admitted to devising and executing a scheme to defraud his investment advisory clients. According to U.S. States Attorney Andrew Luger, Drilling used his company Financial Advisory Partners, LLC, to defraud several of his clients, stealing over $5.6 million of their investment funds.
According to Luger, from May 2009 to March 2014, Drilling convinced several of his clients, in Minnesota and throughout the United States, to entrust him with the management of their investment funds. Drilling told 13 of his clients he was placing their money in a larger pool of funds which could be managed more efficiently. Instead, Drilling diverted his clients’ funds for his own personal use.
According to court documents, Drilling created phony accounts for each of his clients at eMoneyAdvisor.com, which made it appear their funds had been invested appropriately. False information was entered, including investment holdings, balances and performance, which clients saw when they logged into the account. Some of Drilling’s victims lost their life savings.
Drilling’s defense attorney Allan Caplan said Drilling spent the money on himself and lost it in investments and at casinos. Caplan said his client “felt terrible” about his actions.
Before establishing his own investment firm, Drilling, formerly of Prior Lake, Minnesota, was a registered broker with National Planning Company from 2005 – 2009. He started his own company in May 2009.
“He had been legit for 20 years, then his life fell apart,” said Caplan. “He was lying to these people he had known for years. That’s why he turned himself in.”
After Drilling turned himself in, an investigation by the Federal Bureau of Investigation interagency Financial Fraud Enforcement Task Force was launched. The case is being prosecuted by Assistant U.S. Attorney Timothy C. Rank. Drilling was released on a signature bond of $25,000.
Drilling faces a maximum sentence of five years in prison, supervised release and up to a $150,000 fine and restitution. A sentencing date has not yet been set.
Drilling worked as outfitting manager at Voyageur Canoe Outfitters and was the successful bidder in the county’s auction of the tax-forfeited Tip of the Trail property on June 24, 2013. Drilling won the 4 1/2-acre property on Saganaga Lake with the minimum bid of $350,000, the appraised value of the property. At that time, he told the Cook County News-Herald he would be living at the property.
County Auditor Braidy Powers said Drilling made a $35,000 down payment. Subsequent payments are due annually with the first payment due December 31, 2014.
Drilling filed for a reduction in valuation with the county assessor’s office for a 2013 tax bill of $3,904. Because Drilling had purchased the property before July 1, 2013, County Assessor Betty Schultz recommended that the county rescind the bill, but he will be taxed on the property in 2014.
However, under his plea agreement, Drilling agreed to forfeit all real and personal property derived from proceeds traceable to the frauds. This could include the Tip of the Trail property as well as another property in Sedona, Arizona.
Auditor Powers said the FBI had contacted his office for information on the Tip of the Trail property, but added, “At this point we haven’t been given anything official on this.”
Leave a Reply