Eric Bustillo, Regional Director of SEC's Miami Regional Office. Photo: J. Albert Diaz.

The U.S. Securities and Exchange Commission sued a Tallahassee-based investment adviser firm and its two former principals Tuesday, alleging they defrauded investors.

Those investors were mostly retired NFL players in a class action lawsuit against the league claiming they suffered brain injuries as a result of concussions. Many had risked their NFL retirement funds.

The defendants are Cambridge Capital Group Advisors; Phillip Timothy Howard, the former president of the investment firm and a Florida attorney; and former registered investment adviser Don Warner Reinhard. The SEC had previously barred Reinhard from acting as an investment broker or adviser because of fraud charges.

"We allege that Cambridge, Howard and Reinhard defrauded these particularly vulnerable investors, many of whom invested their retirement savings," said Eric I. Bustillo, director of the SEC's Miami regional office. "Instead of investing all of the funds' assets as promised, Howard and Reinhard used a significant portion of investor money to line their own pockets."

Between Oct. 5, 2015, and March 31, 2017, the defendants raised an estimated $4.1 million from about 20 investors through the sale of limited partnership interest securities in two private investment funds, according to the complaint filed in U.S. District Court for the Northern District of Florida. More than half of the players had used retirement accounts to make their investments, the SEC alleged.

"Howard represented National Football League players who suffered concussion-related brain injuries during their NFL careers in connection with a class action lawsuit against the NFL," the SEC wrote in the complaint. "Howard has acknowledged that these players' 'brain function is not there, their body has been beat up from the NFL, they don't have employment capacity, they don't have credit, and they don't have capital anymore.'"

The complaint said Howard and Reinhard "knowingly or recklessly materially misrepresented the Funds' investment focus, how the Funds would use investor money, and Reinhard's background and experience in the securities industry." They reportedly told the former players their funds were invested in a "diverse range of securities with a secondary focus on litigation settlement advances."

"In truth, the Funds primarily paid settlement advances to former NFL players—including 18 of the 20 investors—in connection with the NFL Concussion Lawsuit," the complaint said.

"Additionally, the Defendants misappropriated a total of more than 20 percent of investor funds, or about $973,000, to pay themselves fees and to cover costs associated with Howard's personal residential mortgages," the complaint said. "On top of that, in 2015 and 2016, Howard, on behalf of Cambridge, filed disclosure statements with the Commission representing that in the past ten years no affiliate of Cambridge had pled guilty to a felony or been enjoined by a domestic court in connection with any investment-related activity."

That was wrong, according to the SEC. "In 2009, Reinhard pled guilty to a felony. In 2008, this District Court permanently enjoined Reinhard from violating the anti-fraud provisions of the federal securities laws in a civil enforcement case the Commission filed against him for securities fraud for misleading clients regarding investments," the complaint said.

Howard has also faced scrutiny in the past from former business associates and the state bar. In April, the Florida Bar accused the lawyer of false accounting and misappropriating the settlement funds of a paraplegic client. Howard has also been sued by his former co-counsel J.B. Harris over disputes in tobacco cases.

Howard and Reinhard could not be reached via phone or email Thursday, and their voicemail box was full.