October, 2008

The Arizona Corporation Commission ordered a Lake Havasu couple who defrauded investors to pay restitution of nearly $720,000 and a penalty of $100,000. The couple raised over $1 million from at least 15 investors, most of whom were senior citizens with winter homes in Arizona. However, neither was registered to sell securities in the state. According to officials, the couple’s solicitation materials never stated how they’d invest client funds to generate the promised profits. Nor did the couple ask prospective clients about their risk profile. 

A Pennsylvania man was sentenced to 10 years in prison for stealing approximately $790,000 from clients of his investment firm, which offered specialized financial services for podiatrists. He was also ordered to pay the same amount in restitution to his victims and to surrender his New Jersey insurance license. The private wealth manager admitted he and his live-in business partner stole client funds and used them to buy a Pennsylvania home and to cover their personal expenses. He also admitted providing clients with false monthly statements and dividend checks.

A Utah man was sentenced to one year in jail for stealing more than $237,000 from his aging and blind mother who had entrusted him to help manage her finances. The man pleaded guilty to one third-degree felony count of abuse, neglect, or exploitation of a vulnerable adult and three third-degree felony counts of theft by deception. The man’s crimes began over 10 years ago when he began forging letters to an insurance company to gain access to his mother’s $80,000 annuity account. When he began managing her finances in 2002, he used her checking account for his own expenses. Several years later, he convinced his mother to obtain a reverse mortgage, but spent most of the mortgage proceeds on himself. He also used his mother’s tax-refund checks and even pawned some of her jewelry.

September, 2008

A North Carolina licensed insurance agent has been sent to prison for 87 months for defrauding his elderly clients of over $2 million and then losing most of the money in bungled day trades. According to the U.S. Department of Justice, the agent convinced clients to invest their annuity proceeds with an outside company, promising guaranteed rates of return from private mortgage investments. In reality, the agent controlled the company. After receiving client funds, he engaged in money laundering before losing the money through day trading.

The New Jersey Bureau of Securities has filed suit against three men who allegedly conned investors, including members of a state church, out of an estimated $500,000. The men promised their investments would fund charitable purposes, including the purchase of a new church building. In reality, they transferred the investors’ money between business and personal accounts they controlled and ultimately used the funds for personal expenses and purchases. Neither the men, nor their investments, were registered with the New Jersey Bureau of Securities.

A disbarred Texas lawyer has been sentenced to 20 years in prison and ordered to pay $3.2 million in restitution in connection with his conviction for securities fraud. The former lawyer operated an investment fund he marketed to senior citizens from a Houston office. The fund obtained more than $10 million from approximately 80 investors. According to the Texas Securities Commissioner, the former lawyer misrepresented the profitability of his fund and concealed misuse of prior investor funds as well as his prior disbarment. In addition to this year’s action, a 2007 civil court proceeding ordered the lawyer to pay about $4.7 million to investors.

August, 2008

A New Jersey man was sentenced on charges he defrauded senior citizens out of nearly $2 million by claiming he would invest their annuity deposits when in fact he spent their money on luxury automobiles, gifts for exotic dancers, gambling, and personal expenses. The advisor was sentenced to 87 months incarceration and restitution on charges of mail and wire fraud and a violation of the Investment Advisers Act.

A Georgia stockbroker was sentenced Tuesday to five years in federal prison for defrauding her clients. She was also ordered to serve three years on supervised release and to pay restitution of almost $1.2 million. Federal authorities presented evidence at trial that the broker fraudulently transferred $679,670 from the accounts of nine clients. As part of the scheme, she forged her clients’ names on letters of authorization, causing funds to be transferred to accounts she controlled. She then used the stolen funds to benefit herself, family members or other clients.

A South Carolina financial planner was sentenced to 51 months in prison, followed by three years of supervised release, and ordered to pay a $50,000 fine on four counts of tax evasion and one count of making false statements in a bankruptcy petition.  Trial evidence revealed that the planner made more than $2 million in commissions for selling financial products such as insurance policies, annuities, and mutual funds. It also revealed that he did not file tax returns or pay any income taxes during any of the three years in question. In fact, the planner had not filed personal tax returns since 1995. However, he used bogus tax returns to attach to loan applications and other financial dealings. To help hide his income, the planner used the bank accounts of several entities that he controlled. He then signed and filed a bankruptcy petition claiming that his income was only approximately $17,000, when, in fact, it was approximately $800,000.

July, 2008

A federal jury convicted six men in a $60-million tax scam that peddled phony trusts through a Chicago firm to nearly 700 wealth y clients. The advisors were convicted of diverting income from businesses into sham trusts, hiding millions of dollars of income and producing a $60-million
tax-revenue loss to the U.S. government. The May 2008 convictions join more than 30 other convictions relating to the so-called “abusive trust” scheme. The felons will be sentenced in August and September.

A Kentucky financial planner got 37 months in prison for conspiracy and tax fraud relating to an off-shore insurance fraud. The planner operated an insurance agency that conspired with an insurance company in the U.S. Virgin Islands to sell phony “loss of income” insurance. The “policies” were sold as a tax-deductible vehicle that would return nearly 85% of the premium paid through a supposedly non-taxable offshore loan or investment.

A California resident was sentenced to 14 years in prison for grand theft, forgery, tax evasion, and transacting insurance without a license. The convicted resident created a bogus insurance company that sold medical malpractice insurance to medical personnel through California and other states. The government said the individual operated the company without state certification, issued fraudulent documents, and failed to file tax returns. The “agent” used the millions of dollars generated to purchase fine art and 32 acres of prime California real estate.

June, 2008

A Texas financial advisor was sentenced in April 2008 after pleading guilty to wire fraud. He raised $805,000 from investors through wire transfers, for oil and gas drilling projects that his firm did not own or control. He was sentenced to 33 months in federal prison and ordered to pay restitution of $805,000.

A Connecticut insurance agent had his license revoked for using clients’ assets without permission for his own business and personal gain. State regulators found evidence of forgery and conversion of client funds to the agent’s personal and business bank accounts. The funds were held from 4 to 10 months before being reinvested on behalf of the clients.

A California life insurance agent was convicted and sentenced on charges he defrauded an elderly couple of nearly $300,000. He was sentenced to serve a two-year prison term and pay $291,576 in restitution to the victims' estate, in addition to $5,000 in fines. California authorities determined that between June 1, 1994 and August 31, 2002, the agent became the trustee of his elderly client's estate.  He then took nearly $300,000 in client funds without the person’s knowledge or consent.