A former Ameriprise and GunnAllen broker-dealer will spend eight years and one month in federal prison for operating a $1.8 million investment fraud scheme.

Jeffrey J. Southard, 44, of Pittsgrove, N.J., must also pay $1.8 million in restitution and serve three years of supervised release following his prison sentence, according to the U.S. Attorney’s Office for the District of New Jersey.

In December 2008, Southard was arrested at his home by agents with the FBI, IRS and U.S. Department of Labor, as well as the New Jersey Division of Criminal Justice, on a federal criminal complaint. In June, he pleaded guilty to single counts of mail fraud and signing a false tax return.

Southard could have faced up to 30 years in prison, but U.S. District Judge Robert B. Kugler went with the lighter sentence after consulting the advisory U.S. Sentencing Guidelines, providing ranges that take into account the severity and characteristics of the offense, the defendant’s criminal history, if any, and other factors.

Southard worked as a licensed securities broker dealer with American Express Financial Advisors, now Ameriprise, from July 1997 to September 2003, when he was suspended and allowed to resign, according to the U.S. Attorney’s Office. He was hired by GunnAllen Financial in December 2003 until July 2008, when he was being investigated internally by the firm for the sale of nonexistent investments by using an undisclosed and unapproved outside business entity.

At his plea hearing, Southard admitted to operating a scheme from December 2001 through May 2008, where he solicited and/or induced his clients to purchase “Ohio bonds” or “Bank of America bonds” as investment vehicles. Neither bond existed.

Southard promised a tax-free rate of return of between 6% and 10% on the nonexistent bonds, he admitted in court. According to the criminal complaint against him, at least 14 of Southard’s former clients claimed to have been victimized.

Southard said he typically instructed victims to make checks payable to “JD BAC Financial Service,” then deposited the checks into a bank account he established in that name in 1999. The funds were used to pay Southard’s mortgage, auto payments for a Lincoln Navigator, private schooling for his five children, and other luxury expenses outlined in the complaint.

Regarding the mail fraud count, Southard confessed that he mailed a “statement” documenting a victim’s investment in the phony securities. He also confessed to the tax charge, after signing and filing a 2003 U.S. Individual Income Tax Return stating his taxable income from American Express Financial Advisors and JD BAC Financial Services was $1,670. He omitted $245,042 obtained through the fraudulent scheme, however.