Often there is little new to discover and learn from in securities fraud charges. The fraudster may or may not have started with good intentions. Regardless, the fraudster takes the investors’ money and spends it on things it was not supposed to be spent on. But I could not help but take a closer look at the securities fraud case where the fraudster is identified as the “whale whisperer.”
At first, I thought the case might have involved JP Morgan’s London Whale who lost the firm $6.2 billion. But it turned out to be a much more colorful character.
Paul Gilman is a New Age composer, rock music producer, and filmmaker. He made a film about using music to communicate with ocean mammals. He apparently had some solid technical skills and upgraded the sound systems for the Houston Astros and the Texas Rangers at their stadiums. He leveraged that into convincing investors to give him more capital for more installations.
He had some idea that he could use sound to lower the viscosity of oil, allowing it to flow through pipelines more efficiently. (That sounds like a evil villain plan to gain entry to an industry, then decimate others with soundwave technology.) He convinced investors to give him capital to test and develop this purported technology.
I don’t know if Mr. Gilman thought he could expand his stadium sound business and develop his oil viscosity sound system or whether he started out intending to steal people’s money. He did not agree to the charges and pleased the Fifth Amendment.
Regardless of his original intent, he did what most frausters do in the end. He spent investors’ money on his own needs instead of the company needs. The SEC points out that he spend the investors’ money on designer clothing, travel and dining, rent and home furnishings, and cash withdrawals at casinos.
In the complaint, the SEC piles on and tells the stories of a nurse in Dallas, a church minister in Tennessee and psychology professor in Houston who “invested” money in Gilman’s enterprises.
Sources:
- SEC Charges “Whale Whisperer” Musician and His Companies for Defrauding Investors in Fraudulent “Soundwave” Investment Offerings
- SEC Complaint
- GilmanSound’s Black-Box Audio Processor Attracts NFL, MLB Attention by Dan Daley
- Partnership with GilmanSound was music to the ears of Maloof Sports by Don Muret,
- Conversations with Alena – Paul Gilman: The Whale Whisperer
- Paul Gilman’s Ocean Odyssey Trailer