Articles Posted in Senior Investors

Minnesota-Based Investment Adviser Gets Six-Year Jail Term
According to the Minnesota Department of Commerce, Levi David Lindemann was ordered to serve a 74-month prison sentence—that’s six years—for bilking clients in a Ponzi scam.  Lindemann owned Gershwin Financial, which did business using the name Alternative Wealth Solutions. He pleaded guilty to money laundering and federal mail fraud charges.

Minnesota Commerce Commissioner Mike Rothman said that Lindemann abused his position as a financial adviser when he defrauded clients, including older investors. He did this by promising to invest their funds in safe investments but instead used their money to make Ponzi-type payments to clients and pay for his own expenses.

Lindemann’s guilty plea states that he solicited money from about 50 investors. He attempted to hide the securities fraud by generating fake secured notes as supposed evidence of the clients’ investments. The SEC permanently barred him from the securities industry earlier this year.


SEC Accuses Barred Broker of Selling Securities to Older Investors 

According to the SEC, ex-Morgan Stanley (MS) broker Rafael Calleja solicited $2.7M from 10 retiree and elderly investors after he had already been barred from the securities industry. The regulator claims that Calleja told investors their principal was insured and they would get a fixed return rate in a year. Meantime, he allegedly used at least $12K of their funds to pay for cruises, golf outings, and other personal expenses. He also purportedly failed to tell investors that his broker license had been revoked.

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Secretary of State William Galvin is accusing Texas-based brokerage firm Investment Professionals of selling investment products to elderly customers even though the investments were not suitable for them. The San Antonio broker-dealer allegedly ran high-pressure sales contests at several partner community banks in the New England state between 2013 and 2016. Galvin said that the purported “sales gimmicks” were  “unacceptable” and that his office would not tolerate them.

The Texas-based brokerage firm allegedly prioritized sales volume over whether or not the investments they were selling were suitable for the older customers. The customers had accounts at the local Massachusetts banks. For example, one bank customer, who was suffering from terminal cancer, saw so many of her assets placed in a variable annuity that she could not access her savings.

Galvin charged that these sales contests were not in alignment with Investment Professionals’ own procedures and policies and his office accused the firm of inadequate supervision, in particular of the Texas broker-dealer’s representatives who worked out of the Massachusetts banks. He noted that sales contests are “contrary to investor protections.”

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Once again, financial adviser Dawn Bennett is in the news. The Financial Industry Regulatory Authority has reportedly filed a securities case against Bennett, who is the owner of Bennett Group Financial Services, for not appearing four times to testify in the regulator’s probe into her retail clothing business, DJBennett.com. FiNRA said that her failure to appear to testify violates its rules. Bennett was recently investigated for fraud while she was an independent broker at Western International Securities.

She stepped down from that firm last year after FINRA found that she may have committed securities fraud, as well as been involved in private securities transactions, undisclosed external business activities, and the misappropriation of investor funds.

It was in 2015 that she allegedly solicited Western clients in a debt deal that her retail clothing company was supposed to guarantee. Bennett sold $6M of convertible and promissory notes to about 30 investors.

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FINRA has issued a complaint against Stanley Clayton Niekras accusing the broker of elder financial abuse. According to the regulator, Niekras allegedly cheated a couple, who are in their nineties and in failing mental and physical health, out of over $70K in financial panning services fees.

Even though Niekras didn’t have an investment advisory or financial planning agreement with the elderly couple, he allegedly billed them for hundreds of hours of time that he purportedly spent working on their “financial future” –work that he claimed to have done over four years. The purported elder fraud would have taken place while he worked for MML Investors Services. FINRA said that Niekras charged the couple  $250/hr in retroactive compensation. The couple received their bill for these supposed services in 2013.

FINRA contends that Niekras knew that he had no right to the “financial planning fees or the “estate planning” fees he was charging the couple. The self-regulatory organization said that the broker, who had been contending with tax liens, had told MML Investors Services that he could cover the liens because of commissions he was expecting. Niekras purportedly thought that he could sell variable annuities to the children of the older couple, who had gifted them with about $500K in securities and cash each.
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In his continued sweep to target broker-dealers who have hired brokers with disciplinary histories,  Massachusetts Secretary of the Commonwealth William Galvin has filed complaints against two New York-based brokerage firms. The cases were brought against Spartan Capital Securities, broker Dean Kajouras, Revere Securities, and broker Jonathan Eric Altman.

Galvin claims that the agents named in both cases already had “numerous” reports of misconduct on their records and then went on to engage in more wrongful conduct involving older investors. The state regulator contends that the firms knew—or if they didn’t, then they should have—that Kajouras and Altman posed a risk to clients because of their histories. Galvin said that Spartan Capital and Revere Securities had a duty to put the two men on “special heightened supervision.”

Responding to the complaint, Spartan Capital said that it had retained 60 reps with previous disciplinary records between 1/2014 and 6/2016  but only felt the need to put six of them on heightened supervision.

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The Securities and Exchange Commission is charging ex-Samoyedic’s Inc. and Fun Cool Free Inc. founder Craig V. Sizer and boiler room operator Miguel Mesa with involvement in a $20M penny stock scam to bilk senior investors and others. At least 600 investors were allegedly victimized in the fraud. The two men have consented to partial settlements of the civil charges accusing them of violating broker-dealer registration and anti-fraud provision of federal securities laws. However, they are not admitting to or denying the claims. 
 
According to the Commission, Sizer hired Mesa to draw in and bilk investors in both his companies. Mesa ran boiler rooms in California and Florida. Sizer gave Mesa pitch points for boiler room agents to use when selling stock shares.  The points included alleged misrepresentations, including that investor money would go toward development and research but not toward commissions. Sizer also purportedly solicited investors by phone using the same misrepresentations and omissions to sell company shares.
 
Unfortunately, contends the regulator, the two men misappropriated about 90% of the money raised for their own enrichment and to pay the agents their sales commissions of 15-20%.  Sizer is accused of using at least $3M on his own spending.

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The Financial Industry Regulatory Authority has barred ex-broker Douglas Wayne Studer after it was discovered that he was named to inherit a 91-year-old customer’s Florida waterfront condominium. FINRA’s investigation, which began last year, sought to determine whether he violated his ex-employer’s policy by being named in the estate documents belonging to the elderly investor.

Without denying or admitting to FINRA’s allegations Studer agreed to the sanction. Until July, Studer had worked for Kovack Advisors Inc.  since last October. 
 

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NASAA Puts Out Practices and Procedures Guide to Protect Vulnerable Adults

The North American Securities Administrators Association has issued a guide to help investment advisory firms and broker-dealers create procedures and practices to help them identify and tackle suspected incidents of financial exploitation involving vulnerable adult clients, including senior investors and adults with diminished capacity. The guide provides steps that revolve around five key concepts:

  • Identifying who is a vulnerable individual
  • Governmental reporting
  • Third-party reporting
  • Delaying disbursement from the account of a client who is a vulnerable adult
  • Ongoing regulator cooperation when a disbursement is delayed or a report of suspected financial exploitation is made.

It was just recently that NASAA put into effect its Model Act to Protect Vulnerable Adults from Financial Exploitation and this guide is a companion to the act.

If you are an elderly investor or a vulnerable adult who has suffered losses due to fraud, call our senior financial fraud law firm today.

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The Financial Industry Regulatory Authority has filed a securities case against Christopher Ariola, a former broker. According to the regulator, while he was at Bay Mutual Financial, Ariola recommended that three retirees invest a chunk of their retirement funds in energy and gold stocks. He is accused of helping a fourth investor with similar investments using a TD Ameritrade (AMTD) account under his control.

This caused the investors to lose $140K. All of them had previously worked for the same bus company. These were not sophisticated investors who could handle a lot of risk nor did they have unlimited financial resources to withstand huge losses. Ariola came to work with them after the employees decided to roll over their money from their 401(k) into a Bay Mutual Financial IRA.

FINRA alleges that Ariola recommended that these investors “invest heavily” in energy and gold, including high-yield dividend producing stocks that came with a lot of risk. One couple, both retired bus drivers, were about 80% exposed to these risky stocks because of Ariola’s recommendations. Another bus drives was 44% invested in the stocks.

FINRA said that not only did Ariola expose these investors to “significant” risks with his recommendations, but also the recommendations were unsuitable for them.

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The Financial Industry Regulatory Authority has filed a securities fraud case against Hank Mark Werner. The self-regulatory organization is accusing the New York broker of churning the account of a 77-year old widow who is blind, and engaging in unsuitable and excessive trading involving her account. FINRA claims that Werner charged the elderly customer over 243K in commissions while he churned her accounts for over three years and caused her to sustain about $184K in losses.

According to FINRA, Werner, who had been the broker of the elderly widow’s husband since 1995, until he passed away four years ago, started aggressively trading her accounts after he died. The SRO claims that Werner did this to earn excessive commissions.

From 10/12 to 10/15, Werner placed more than 700 trades in over 200 securities while charging the elderly customer commission or a markup on every sale and purchase. Because she was seriously debilitated, blind, and needed in-home care, the woman was totally dependent on Werner to let her know how her account was doing.

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