Although I recently talked about the 2014 naughty list, I also wanted to share this condensed synopsis of a recent Investment News report (1). From a $1 million office supply heist to an adviser who stole funds from his own mother, this year had its share of hard to believe stories. Obviously we have our ethically challenge people just like all professions, but remember, it’s always a good idea to get a second opinion when it comes to your hard earned money.
Adviser accused of $40M fraud found alive
Aubrey Lee Price, 47, went missing in June 2012, shortly after revealing investor losses in a cryptic letter with suicidal overtones, according to authorities. He was declared dead by a court at his wife's request later that year.
But the former Georgia investment adviser, who was presumed dead after authorities said that he bilked clients out of $40 million in a private-placement fraud, was found alive in January.
Price was sent back to court to face the criminal charges he eluded.
Adviser to the stars hit with credit card theft charges
Former financial adviser to the stars, Dana Giacchetto was charged with fraud in federal court in Manhattan in February, facing allegations that he fraudulently spent more than $10,000 on purchases using someone elses credit card.
The fraud charges stem back to February 2013 through the present. Giacchetto previously managed money for celebrities including Leonardo DiCaprio and Cameron Diaz.
Former Merrill broker accused of ($1.3 million) 18-year Ponzi scheme
A former Merrill Lynch broker was back in the hot seat in March after being indicted for an 18-year Ponzi scheme.
From June 1995 to April 2013, the broker, 61, convinced several clients to take money from their bank and brokerage accounts and give the money to her for private-placement investments, according to the indictment. Instead of investing that money, she allegedly used it for personal expenses and to pay back other investors.
In one case, the broker allegedly persuaded a client to invest in the Hollywood movie “Crooked Arrows.” the broker promised the client a 25 percent return, but the money went to personal expenses and to make payments to other clients, according to the indictment.
Brokers charged with bilking terminally ill
The SEC filed charges against a group of brokers in March in an $80 million scheme wherein wealthy investors used variable annuities with death benefits to wager on the lives of the terminally ill.
The plan involved the sale of more than $80 million in variable annuities. the broker allegedly obtained the personal health and identification data of the dying patients through fraud, marking them as annuitants on variable annuity contracts that he had marketed to wealthy clients, according to the SECs complaint.
Adviser’s scheme fed wife’s baby boutique
The Securities and Exchange Commission sued a Chicago investment adviser in May, claiming he accepted $11.4 million from 35 clients.
Instead of investing the money, the advisor allegedly funded his business; bought two homes, including one for $1.4 million; leased luxury cars; purchased expensive artwork, jewelry and vacations; and made investments in start-up companies, including his wife, Marti’s Urba Baby clothing boutique, which operated two retail locations.
FINRa goes after B-D, CEO who scammed pro athletes
The Financial Industry Regulatory Authority (FINRA) barred a broker-dealer and its founder in June for allegedly defrauding a number of current and former NFL and NBA players out of nearly $14 million as part of a Ponzi scheme.
The Financial Industry Regulatory Authority Inc. expelled Success Trade Securities, an online brokerage, and its founder, Fuad Ahmed, for raising money for the company’s parent company, Success Trade Inc., through purportedly fake promissory notes.
The notes typically had a 12.5 percent interest rate and a term of 36 months, according to FINRA. Because of the financial condition of the parent company, there was little chance they would be paid back, FINRA said. Instead, the funds went to pay Ahmed’s personal expenses, including the lease on a Range Rover and balances on personal credit cards and clothes, FINRA alleged.
The 59 people who invested with Ahmed were mostly “unsophisticated investors,” primarily recent college graduates starting a career as professional athletes, according to Finra.
A report from Yahoo Sports last year noted that clients who bought Success Trades notes included Detroit Pistons guard Brandon Knight, Cleveland Browns cornerback Joe Haden, San Francisco 49ers tight end Vernon Davis, former Washington Redskins running back Clinton Portis and Chicago Bears defensive end Adewale Ogunleye.
Former rep buys groceries with stolen client funds
A former representative for an independent broker-dealer was indicted in Massachusetts in June on charges she orchestrated a $2.5 million investment fraud that promised clients high yields if they put their money in exclusive “investment clubs.”
Instead of investing the money, the rep allegedly misappropriated client funds, using them to gamble and write checks to herself, according to the indictment. She also allegedly used client money to buy groceries, pay utility bills, and make loan payments, according to the indictment.
Adviser spends client assets on luxury home, car
An investment adviser in Seattle fraudulently misused more than $8 million of client assets to make loans to himself, buy a luxury vacation home, and refinance a vintage automobile, according to the Securities and Exchange Commission.
Ex-husband of ‘Sopranos’ star in penny stock bust
Abraxas “AJ” Discala, the CEO of OmniView Capital Advisors, was arrested in July along with two registered reps with independent broker-dealers and four other individuals on securities fraud charges in connection with market manipulation of penny stocks, according to the US Attorney’s office.
Discala was married in 2003, to “Sopranos” actress Jamie-Lynn Sigler. The couple separated two years later, and then divorced.
The defendants, along with others, allegedly agreed to defraud investors and potential investors in four publicly-traded companies, they used false and misleading press releases, and filings with the SEC to artificially control the price and volume of shares in those companies, in what is known as a “pump and dump” stock scheme.
Former broker allegedly steals from blind couple
The Securities and Exchange Commission charged a former UBS Wealth Management Americas broker for allegedly defrauding several elderly clients, including a blind couple, as part of a five-year Ponzi scheme.
The SEC claimed Donna Tucker misappropriated more than $730,000 from her clients from January 2008 until April 2013, while she was at UBS. She used the money to pay for vacations, three cars, clothing, and a country club membership, according to the SEC’s complaint, while misleading clients about the status of their funds, the SEC said.
In the case of one blind couple, Tucker allegedly concealed the theft of nearly $350,000 by convincing them to conduct their banking online and receive electronic statements, according to the SEC.
“Ms. Tucker knew that they could neither access nor receive their statements,” the SEC said.
Man pleads guilty to eating insider trading tips
Frank Tamayo, 41, pleaded guilty in federal court in Trenton, NJ, to taking part in a five-year scheme that made $5.6 million in profit. The broker, Vladimir Eydelman, 42, and Steven Metro, a law firm clerk accused of passing inside information, were charged in March and fired by their firms.
Adviser uses client funds for gambling debts
A former financial adviser with Ameriprise Financial Services Inc. was sentenced in October to three-and-a-half years in prison and ordered to repay more than $3 million he allegedly stole from investors and used for personal expenses, including paying off his gambling debts, according to the US Attorney’s Office for the Northern District of Illinois.
During sentencing, a doctor expressed the opinion that Mr. Overbey is a pathological gambler. During one year, federal authorities accused Mr. Overbey of being in a casino for 323 days.
Adviser steals $1M in office supplies
Between February and August of this year, Jeffrey Brian Grove, who was a financial consultant in Charles Schwab & Co.’s Melbourne, FL, branch, used the firm’s order system to purchase supplies and equipment, and then sold the items to “different individuals,” according to FINRA’s disciplinary database.
Adviser swindles his own mom in Ponzi scheme
Former financial adviser Jason Muskey faced a federal lawsuit for allegedly cheating five individuals, including his mother, out of almost $400,000, the Scranton Times-Tribune reported in November.
The funds Muskey allegedly stole included $25,000 his mother received through a life insurance policy when his father died in 2006. Muskey allegedly covered up his crime by sending false quarterly financial statements to his clients.
Advisers kept clients in Madoff-linked funds
Two investment advisers must pay more than $6.3 million in fines and restitution for misleading clients whose money was invested in hedge funds linked to Bernie Madoff, a Securities and Exchange Commission administrative law judge ruled in December.
I believe the lesson or thought to take away from this column is that trust in your financial advisor is perhaps the most important factor of all; before you give someone your money to invest, make sure they are trustworthy.