McGinn, Smith indicted in local fraud case

ALBANY -- Two longtime Capital Region investment brokers were indicted on Thursday on federal fraud charges.

Timothy McGinn and David Smith, co-founders of McGinn Smith, were indicted on 30 counts including conspiracy, fraud and filing false tax forms.

"This is a significant investor fraud case," said U.S. Attorney Richard Hartunian. "People have to be careful with who they work with, who they invest with. They have to do their homework, if you will. It's easy for people to trust investment advisors and generally I think most people are trusting but this case shows you have to be cautious and I think that's the lesson we draw from cases like this."

63-year-old McGinn and 66-year-old Smith are accused of taking money for seemingly sound investments that were actually very risky, and diverting some of the money to themselves, sometimes by disguising transactions as loans, in order to buy multiple homes and other properties in New York, Florida and Ireland. Among the properties on display at Thursday's news conference were Schuyler Meadows in Loudonville and the Saratoga Golf And Polo Club.

McGinn, Smith & Co. closed in December 2009, and was investigated by the Securities and Exchange Commission in April 2010.  The SEC filed a complaint, saying the company misused investor money to stay financially afloat.

CBS6 asked U.S. Attorney Richard Hartunian how much of the firm had been run in a legitimate manner.

"That's a hard question to answer in terms of percentage of the business." Hartunian said. "I think the business had some - I mean, we don't allege that the entire business was run illegally. The indictment focuses in on particular transactions. It focuses in on the trust funds that are the subject of the indictement and that's really where the allegations lay in this case."

Smith and McGinn are scheduled to be arraigned in federal court in Albany Friday at 2 p.m.