Lawrence Allan DeShetler is facing up to 20 years in prison for Texas investment adviser fraud. The Houston-based financial adviser pleaded guilty to mail fraud last month.
DeShetler fraudulently obtained $1.9M from clients he worked for through DeShetler & Company Inc. Three years ago, he started recommending that they take out money from their investments and give the cash to him so that he could help them garner higher returns. Instead of investing these funds, he put the money in a bank account that was only under his authority.
DeShetler admitted to using one investor’s funds to begin building a house in Nicaragua and persuading a senior investor, who was a widow in her eighties, to liquidate a trust account and move nearly $190K to him. Last year, DeShetler stayed at her house while she visited family. When she came back, he was no longer there and neither were her investment documents.
Meantime, the Texas State Securities Board alleges that the Houston financial adviser misapplied money from one client’s IRA that was previously valued at over $720K after he recommended that she cash out the account and move the funds to him. He was supposed to put her money in a new IRA but instead spent some of the funds on country club fees, restaurant bills, and other personal expenses.
As part of his plea deal, DeShetler has agreed not to contest an administrative law case filed by the state of Texas that would take away his investment adviser registration.
State Securities Board Reprimands Firm
In other Texas Securities news, Commissioner John Morgan submitted a disciplinary order that reprimanded PTI Securities & Futures LP after its compliance officer wired funds out of an elderly Texas client’s account at the requests of persons pretending to be the 75-year-old. Three times, the compliance officer wired over $91,500 collectively from the senior investor’s IRA even though this person never asked for the money to be moved.
Instead, individuals had hacked the client’s email account and included a bogus social Security number, signature, and birth date on the request form for the wire transfer that was obviously not the DOB of the elderly client. Still, the compliance officer responded and the wire transfers went through.
The firm has since paid the Texas client who was harmed all of the money that was taken from his account. The Texas Securities Board also fined PTI Securities $5000 after finding that it violated procedures and ignored discrepancies that allowed the unauthorized wire transfers to take place. As noted by Texas Securities Commissioner Morgan, incidents of cyber fraud are growing in number and it is up to state-registered investment advisers and others that are registered to set up procedures for assessing related risks.
Cyber Crimes Using Email Accounts
It was just last year that The Financial Crimes Enforcement Network put out an advisory warning about e-mail fraud scams that made it possible for fraudsters to steal money from financial firm clients through wire transfers. In 2012, the Financial Industry Regulatory Authority cautioned members about an increase in client email accounts being compromised. FINRA noted that the incidents are examples of the risks involved with accepting instructions for wire transfers via email.
At Shepherd Smith Edwards and Kantas, LTD LLP, our Houston securities fraud lawyers work with Texas investors and others to recoup their financial fraud losses. Contact us today.
Financial Planner Guilty of Mail Fraud, Texas State Securities Board, June 8, 2017