Tuesday, July 23, 2002

Ex-broker Donahue pleads guilty to fraud

By Amy Higgins, ahiggins@enquirer.com
The Cincinnati Enquirer

        As former clients and employees watched, Stephen G. Donahue pleaded guilty Monday to a federal fraud charge in a scheme that authorities say bilked 123 investors out of more than $6 million.

[photo] Stephen G. Donahue arrives at court Monday.
(Steven M. Herppich photo)
| ZOOM |
        Mr. Donahue, the former president of brokerage Donahue Securities and financial planning firm S.G. Donahue & Co., faces up to five years in prison, fines and restitution. Senior Judge Herman J. Weber scheduled a sentencing hearing for Oct. 23.

        In the plea agreement entered Monday, Mr. Donahue acknowledged that over 12 years he took clients' money and spent it on his business and himself, instead of investing it in a money market or tax-free bond fund.

        Mr. Donahue was thinner and grayer than his one-time colleagues and clients remembered him. At his first public appearance since his scam was discovered 15 months ago, Mr. Donahue told the court he now takes regular medication for high blood pressure and anxiety.

        Mr. Donahue's once-prominent downtown financial network was shuttered in March 2001 after federal investigators discovered that Mr. Donahue operated a bogus tax-free bond fund. Instead of investing clients' deposits, authorities say, Mr. Donahue spent the money on his businesses and himself - including paying his taxes, making investments in his name and buying a Florida condo and Clermont County land.

        Federal authorities spent the next 14 months attempting to repay investors. Federal prosecutors say they waited on the criminal charge until they were confident it would not jeopardize former Donahue clients getting paid back.


Peoples Bank may go on block
A midsummer flight's dream
- Ex-broker Donahue pleads guilty to fraud
Former DJ resigns as radio exec
P&G again buys back own stock
June not a winner for riverboats
Business Digest
Tristate Summary
What's the Buzz?