Collateral Damage: SEC Sanctions “Varsity Blues” Parent
Douglas Michael Hodge was born in New York City in 1957, but subsequently moved to the Boston suburbs and then to Connecticut. He was apparently well-off and bright, earning admission to Dartmouth, from which he graduated in 1979 with a degree in Economics. Five years later he completed an MBA at Harvard University’s Business School. He went to work for Salomon Brothers as a bond trader and stayed there for five years, leaving in 1989 to join the then Bill Gross-led Pacific Investment Management Company (“PIMCO”) as an account manager. This is the same PIMCO later acquired by the German insurance and asset management giant Allianz Versicherung, SE.
Varsity Blues
Hodge was quite successful at PIMCO, rising to become, by 2002, the Asia-Pacific Regional Manager, and by 2009, PIMCO’s Chief Operating Officer. While his annual income is not publicly available, it can reasonably be assumed that he was well compensated for his efforts on behalf of America’s leading bond investing and trading house. He had settled in Greenwich, Connecticut, with his wife and their three children. In 2014, Hodge was made Chief Executive Officer of PIMCO and received a bonus that year of $45 million. He was on the boards of both PIMCO and Allianz Asset Management and on the executive committee of the Securities Industry and Financial Markets Association. He retired from PIMCO in 2017.
As his children approached college age, Hodge apparently became concerned about where they might be able to go to school. He became involved with a “college admission counselor” named William Singer, and paid $525,000 to “facilitate the admission of two of his children to a private research university located in California.” The university involved, USC, admitted the two on the basis of falsified athletic credentials, with the payments going to USC athletic department employees.
SEC Sanctions
In the subsequent federal prosecutions in Boston, which were dubbed the “Varsity Blues” prosecutions, Hodge pled guilty and was sentenced to serve nine months in federal prison, two years of supervised release, 500 hours of community service, and payment of a $750,000 fine. This was by far the most severe sentence imposed on the “Varsity Blues” parents. One can only wonder if the judge was particularly affronted by this wealthy, successful father engaging in criminal bribery to get his children into the desired college.
It also must be noted that Hodge was a person registered with the U.S. Securities and Exchange Commission (“SEC”) with a succession of registered broker-dealers affiliated with PIMCO, having obtained his Series 7 and 63 in 1991 and his Series 65 license in 1996. On Tuesday, August 3, 2021, the SEC instituted Administrative Proceedings against Hodge and imposed sanctions to which he agreed; namely, barring him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. He was also barred from being involved with any offering of a penny stock. Hodge has now lost both his reputation and his career. So much for parental hubris.
If you have any questions about this post or any other related securities or general business law matters, please feel free to contact me at pdhutcheon@norris-law.com.