A Lynnfield investment firm is paying nearly $2 million to settle charges of failing to supervise a broker who, after arrested on a charge of rape, allegedly admitted stealing $3 million from clients.

Secretary of the Commonwealth William Galvin announced yesterday that Investors Capital Corp. agreed to cover $1.7 million of client losses and pay a $250,000 fine for lax supervision of Stephen Clifford.

"Whether you're Bernie Madoff or some guy from around the corner, it doesn't matter," Galvin told the Herald. "You need procedures in place to protect investors."

Investors Capital didn't return calls seeking comment on the case.

Clifford, 57, allegedly admitted the embezzlement to police after a 2008 arrest on a charge of rape. He was in custody for allegedly assaulting his girlfriend's 18-year-old daughter, whose father is reportedly a Bourne police officer.

Acting on an alert from Massachusetts authorities, Connecticut police arrested Clifford on June 4, 2008, at Foxwoods Resort Casino. The police allegedly found a loaded .357 magnum handgun in Clifford's car. The man remains jailed on Cape Cod pending trial.

Galvin's office, which regulates Massachusetts stock brokers, last month won a default judgment requiring Clifford to return all ill-gotten gains and pay a $125,000 fine. The U.S. Securities and Exchange Commission has also filed federal charges against the man.

Authorities allege Clifford, who worked for Investors Capital from 2005 through 2007, swindled at least eight clients between 2001 and 2008.

He allegedly promised to put customers' funds into risk-free investments paying 7 percent a year, but authorities say he simply pocketed the money.

Investors Capital is settling allegations that it failed to properly supervise Clifford or run adequate background checks before giving him a job. Galvin claimed Investors Capital founder Theodore Charles, a longtime Clifford friend, ordered the man hired even though a credit check showed the suspect had some $442,000 in debts.

Originally published by By JERRY KRONENBERG.

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