A Cleveland investment adviser has been indicted on federal charges that he kept money withheld from his employees’ paychecks for their 401(k) accounts, used some of the money for yacht club and business club memberships, and ran an investment Ponzi scheme that solicited more than $1.2 million from investors. The U.S. Attorney’s Office for the Northern District of Ohio announced the charges on October 6.
The defendant is Seku N. Shabazz, 54, formerly known as Jason Brooks, a licensed investment advisor, according to the indictment announcement. Prosecutors say that although he withheld employee retirement savings contributions, he did not remit them into the company’s plan, and that he failed to pay the required employer matching contributions. An indictment is only a charge and is not evidence of guilt.
Where prosecutors say the withheld paychecks went
The announcement says some of the money went to pay for Shabazz’s memberships to a yacht club and a private business and social club. It does not give a dollar figure for the amount withheld from employees or for the club memberships, and it does not say how many workers were affected.
The question for any worker with a 401(k) is how to tell whether deductions are reaching the plan. The test is simple, and it does not depend on the employer’s word. A worker’s own account statement should show each paycheck’s contribution as a deposit, and the Department of Labor lists a missing deposit as a warning sign: the an account statement showing a paycheck contribution that was not made.
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The Ponzi scheme and the mortgage
The investor portion of the case is separate from the 401(k) allegations. Prosecutors say Shabazz began operating an investment fraud Ponzi scheme and solicited over $1.2 million from investors. A Ponzi scheme pays earlier investors with money from newer ones rather than from real returns.
A third piece involves a mortgage. The announcement says $220,000 or more was obtained using stolen identities, and that about $97,000 of the money was used to repay 401(k) participants. The release attributes all of this to the defendant’s alleged conduct.
Counting every charge listed, the indictment has 13 counts: one of embezzlement from an employee benefit plan, seven of wire fraud, three of money transactions and two of aggravated identity theft. The roughly $97,000 used to repay 401(k) participants is about 44 percent of the $220,000 or more the announcement says was obtained with stolen identities, and about 8 percent of the more than $1.2 million solicited from investors.
The counts in the indictment
The charges include embezzlement from an employee benefit plan, seven counts of wire fraud, three counts of money transactions and two counts of aggravated identity theft. Each wire fraud count carries a maximum of 20 years in prison. Those figures are statutory maximums, not a prediction of any sentence, and a trial would have to prove each count. The announcement does not list an arraignment or trial date.
What federal rules say about when contributions must reach the plan
The Labor Department’s Employee Benefits Security Administration says employers must deposit withheld contributions no later than the 15th business day of the month following the payday. That is an outer limit, not a target, and a contribution that is withheld but never deposited is the situation the indictment describes.
The same agency treats late deposits as a violation that employers can correct. Its voluntary correction program covers delinquent participant contributions and loan repayments. The Ohio Division of Securities, part of the state’s Department of Commerce, investigates securities fraud and pursues criminal charges when warranted, which is the state-level route for the investor side of a case like this one.
Matching pay stubs to 401(k) statements
The check takes one pay stub and one plan statement. Find the 401(k) deduction on a pay stub, then find a deposit of the same amount on the plan statement covering that pay period. Because the federal outer limit runs to the 15th business day of the following month, a deposit can legitimately show up a few weeks after payday, so a gap of a few days is not itself a red flag. A contribution that never appears across several statements is.
Workers who find missing deposits can ask the plan administrator or human resources department for a written explanation, and keep their own copies of stubs and statements. If the explanation does not hold up, the Employee Benefits Security Administration is the federal agency that sets the deposit rules described above, and the Ohio Division of Securities is the state office that investigates securities fraud.
The October 6 announcement from the U.S. Attorney’s Office is the only public account of the case so far, and the charges remain allegations until a court rules.
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This article was produced with AI assistance and reviewed by The Financial Wire’s editorial team.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
