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Essex Financial founder to face home confinement

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The founder and former chief executive of Essex Financial Services faces four months of home confinement, four months of probation and a fine of $4,000 for lying to Securities and Exchange Commission investigators looking into an illegal referral payment.

John W. Rafal, 66, of Old Lyme, one of the top financial advisers in the country until state and federal investigations revealed improper payments he made to a Branford lawyer for steering a client to him, has agreed to plead guilty to attempting to hide the referral payments, according to a release from the U.S. Attorney's Office in Massachusetts.

Rafal is scheduled to plead guilty to the charge of obstructing an SEC investigation during a U.S. District Court hearing Jan. 20 before Judge Nathaniel M. Gorton.

"Today's charge underscores our determination to investigate and prosecute those who impede SEC examinations and enforcement," U.S. Attorney Carmen M. Ortiz said in a statement released Monday. "The SEC depends on the provision of accurate, truthful information from the people and entities it regulates. When those people choose to mislead the SEC, my office will act to ensure that the truth comes forth."

According to a timeline provided by the U.S. Attorney's Office, Rafal made a deal in 2011 with an attorney, previously identified as Peter D. Hershman of Branford, to pay him about $50,000 for referring the business of a wealthy widow to his firm. Essex Financial, owned by Essex Savings Bank, directed the payments to be returned once they were revealed, but Rafal continued to pay the referral fee out of his own personal accounts, according to an investigation.

In 2015, Rafal underwent questioning for the SEC investigation, repeatedly indicating that the referral fee had been returned, never revealing his subsequent secret payments, according to the U.S. attorney's release. 

In a separate agreement with the SEC, Rafal has agreed to pay $575,000 in fines for his illegal payments and coverup. Other sanctions include being barred for life from the securities industry.

l.howard@theday.com

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