investment fraud

Broker Investigation: Gregory Dean Churning Claims

April 29, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Gregory Dean (Dean) has been the subject of at least 4 customer complaints over the course of his career. Customers have filed complaints against Dean in recent years alleging that the broker made unsuitable investments and churned their accounts. Other claims concerning Dean’s handling of customer accounts include allegations of failing to execute trades.

Dean has been registered with FINRA since 2005. From January 2007 until November 2011, Dean was registered with J.D. Nicholas & Associates, Inc. Currently, Dean is associated with Worden Capital Management LLC.

All advisers have a fundamental responsibility to deal fairly with investors including making suitable investment recommendations. When brokers engage in churning the investment trading activity in the client’s account serves no reasonable purpose for the investor and is transacted to profit the broker through the generation of commission payments. The elements to establish a churning claim, which is considered a species of securities fraud, are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements.

Gana LLP Broker Spotlight: Pasquale “Pat” Vitucci Sales of Variable Annuities

April 27, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Pasquale “Pat” Vitucci (Vitucci) has been the subject of at least 19 customer complaints over the course of his career. Customers have filed complaints against Vitucci alleging that the broker made unsuitable investments primarily in variable annuity related products. Other claims concerning Vitucci’s handling of customer accounts include allegations of misrepresentations, breach of fiduciary duty, churning, and fraud. In total investors have complained of over $1 million in losses.

Vitucci has been registered with FINRA since 1992. From October 2005 until October 2008, Vitucci was registered with AIG Financial Advisors, Inc. Thereafter, Vitucci has been associated with National Planning Corporation (National Planning). According to public records Vitucci operates out of a DBA business called Vitucci & Associates Insurance Services.

All advisers have a fundamental responsibility to deal fairly with investors including making suitable investment recommendations. Thus, the product or investment strategy being recommended must be appropriate for the investor and the advisers must convey the potential risks and rewards before bringing it to an investor’s attention.

Former RBS Securities Advisor Matthew Katke Plead Guilty For RMBS and CLO Fraud

April 25, 2015 | by Staff Attorney

According to the Department of Justice (DOJ), Matthew Katke (Katke) recently waived his right to indictment and pleaded guilty today in Hartford federal court to participating in a multimillion securities fraud scheme. Katke was registered with RBS Securities, Inc. (RBS Securities), during the time of the DOJ’s investigation. Currently, Katke is associated with Nomura Securities International, Inc. and has been since August 2013.

According to the DOJ, Katke also entered into an agreement to cooperate in the government’s ongoing investigation. Allegedly, between April 2008 and August 2013, Katke was a managing director at RBS Securities, a global securities firm with headquarters in Stamford, Connecticut. Katke and other members of RBS’s Asset Backed Products division traded fixed income investment securities in residential mortgage-backed securities (RMBS) and collateralized loan obligations (CLOs) through RBS trading floor. Katke admitted in his guilty plea that he and others conspired to increase RBS’s profits on CLO bond trades at the expense of their own customers by, among other things, making misrepresentations to induce customers to pay inflated prices and selling customers to accept deflated prices for CLO bonds. Katke misrepresented the CLO seller’s asking price to the buyer and kept the difference between the price paid by the buyer and the price paid to the seller for RBS. In another device used by Katke he misrepresented to the CLO buyer that bonds were held in RBS’s inventory were being offered for sale by a fictitious third-party seller invented by Katke allowing Katke to charge extra commission.

The DOJ’s investigation revealed many fraudulent transactions that cost at least 20 victim millions of dollars. In a statement U.S. Attorney Deirdre M. Daly of the District of Connecticut said that “Broker-dealers, and the people who work for them, need to understand that a market practice that is at odds with the securities law is a crime that carries serious repercussions. We urge others to follow Mr. Katke’s example and cooperate with investigators. We want to thank SIGTARP and the FBI for their efforts to date in this continuing investigation. Additionally, we acknowledge our other partners at the Department of Labor Office of the Inspector General, the Federal Housing Finance Administration Office of Inspector General and the Fraud Section of the Department of Justice for their hard work in the numerous ongoing investigations into this market.”

Top Merrill Lynch Broker Thomas Buck Terminated Under Unusual Circumstances

April 22, 2015 | by Staff Attorney

According to news sources, Thomas Buck (Buck) and his daughter Ann Buck, were recently terminated by Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch), now known as Bank of America, NA (Bank of America) under unusual circumstances. Buck’s team managed nearly $1.5 billion in investor assets at the time. Buck has been associated with Merrill Lynch since 1982 according to Financial Industry Regulatory Authority (FINRA) records and became one of the company’s largest producers.

According to news sources, Buck was terminated for allegedly making unauthorized trades in client accounts. Advisors are not allowed to engage in unauthorized trading. Such trading occurs when a broker sells securities without the prior authority from the investor. The broker must first discuss all trades with the investor before executing them under NYSE Rule 408(a) and FINRA Rules 2510(b). These rules explicitly prohibit brokers from making discretionary trades in a customers’ non-discretionary accounts. The SEC has also found that unauthorized trading to be fraudulent nature.

The termination occurred on March 6, 2015, and stunned the firm’s other employees because the termination appeared out of the blue and without explanation leading to rumors. One person was quoted in the news saying “There is a lot more out there. I think it’s a little bit of heavy-handedness on Merrill’s part. Tom was shocked.”

Macquarie Capital Accused of Failing to Conduct Due Diligence in Failed Puda Coal Offering

April 17, 2015 | by Staff Attorney

The Securities and Exchange Commission (SEC) recently announced charges against Macquarie Capital (USA) Inc., (Macquarie) a wholly owned subsidiary of Macquarie Group Limited. The SEC alleged that the firm was responsible for underwriting a public in Puda Coal (Symbol: PUDA). However, during the firm’s due diligence, the SEC alleged that Macquarie obtained a report indicating that the China-based company’s offering materials contained false information.

Macquarie agreed to settle the SEC’s charges by paying $15 million and covering the costs of a fair fund to compensate investors who suffered losses after purchasing shares in the public offering. In its press release, the SEC recognized that underwriters are gatekeepers who are supposed to be relied upon by investors to ferret out the essential facts and address inaccuracies before marketing a stock to the public.

The SEC found that Macquarie was the lead underwriter on a secondary public stock offering in 2010 by Puda Coal. At that time Puda Coal purported to own a coal company in China and falsely told investors that it held a 90 percent ownership stake in the Chinese coal company. Macquarie then was accused of repeating those statements in its marketing materials for the offering despite obtaining a report showing that Puda Coal did not own any part of the coal company. The SEC found that Macquarie had access to filings in China during its due diligence review that showed that Puda Coal’s chairman had transferred ownership of the coal company to himself and then sold nearly half of his interest.

Broker Spotlight: Wells Fargo Advisor Marcus Debaise

March 30, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Marcus Debaise (Debaise) has been the subject of at least 14 different customer complaints over the course of his career. Beginning in 2011 and continuing into 2015, customers have been filing complaints against Debaise alleging that the broker made unsuitable investments and unauthorized trading in speculative securities that were inappropriate for the customer.

Debaise has been registered with FINRA since 1993. From 2003 until present Debaise has been registered with Wells Fargo Advisors, LLC (Wells Fargo).

All advisers have a fundamental responsibility to deal fairly with investors including making suitable investment recommendations. Part of the suitability requirement is that the broker must have a reasonable basis to believe, based on appropriate research and diligence, that all recommendations are suitable for at least some investors. Thus, the product or investment strategy being recommended must be appropriate for at least some investors and the advisers must convey the potential risks and rewards before bringing it to an investor’s attention. Second, all brokers must have a reasonable basis to believe that the recommended investment strategy is suitable for the particular customer. The recommendation must be reasonable for the investor based upon the investor’s risk tolerance, investment objectives, age, financial circumstances, other investment holdings, and experience.

FINRA Files Complaint Against Broker Darnell Deans Over Undisclosed Tax Liens

March 23, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) has filed a complaint against broker Darnell Deans (Deans) concerning allegations that while associated with Garden State Securities, Inc. (GSS), Deans willfully failed to amend his Form U4 documents to disclose three unsatisfied federal tax liens totaling approximately $254,995. FINRA also alleged that from in or about April 2011, through August 2011, Deans borrowed a total of $266,000 from two customers of the firm without seeking or obtaining the firm’s approval for the loans. In addition, FINRA alleged that in November 2011, Deans falsely represented to GSS in an Annual Attestation that he had not borrowed money from customers. Thereafter, in January 2012, FINRA alleged that Deans failed to disclose to GSS the extent of funds borrowed from two customers.

In January 1992, Deans first became registered with FINRA. From January 2005, through November 26, 2013, Deans was registered through GSS. On November 26, 2013, GSS filed a Form U5 terminating Deans’ registration stating that Deans was terminated due to management’s loss of confidence due to ongoing regulatory issues. Thereafter, Deans was associated with John Carris Investments LLC until June 2014. Currently, Deans is associated with brokerage firm BlackBook Capital LLC.

In addition to FINRA’s recent action, Deans has had three other regulatory actions filed against him, at least three customer complaints, and has one judgment and tax lien on record. These statistics are troubling because so many customer complaints, regulatory actions, and liens are rare. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. These disclosures do not necessarily have to include customer complaints but can include IRS tax liens, judgments, and even criminal matters. The number of brokers with multiple customer complaints is far smaller.

LPL Financial Terminates Charles Fackrell Over Securities Fraud Claims

March 12, 2015 | by Staff Attorney

LPL Financial LLC (LPL) has terminated its former broker Charles Fackrell (Fackrell), registered with The Financial Industry Regulatory Authority (FINRA), alleging that the broker engaged in unapproved private securities transactions (known in the industry as “selling away”) and also due to a felony arrest for obtaining property under false pretenses.

Fackrell entered the securities industry in 2007 and was registered with Morgan Stanley & Co., Incorporated. From July 2008 until December 2009, Fackrell was registered with SunTrust Investment Services, Inc. Thereafter, from December 2009, until June 2010, Fackrell was a broker with Wells Fargo Advisors, LLC.

According to news sources, Fackrell was arrested in January and faces charges of fraud that police now allege involve more than $500,000. In February Fackrell was served warrants and his bond was set at $2.2 million. News reports state that the victims were unsuspecting investors in Yadkinville and surrounding counties.

SEC Alleges that Levi Lindemann Engaged in a Ponzi Scheme

March 11, 2015 | by Staff Attorney

The Securities and Exchange Commission (SEC) has filed a complaint against former FINRA registered broker Levi Lindemann (Lindemann) alleging that from about September 2009, to August 2013, Lindemann, a resident of Minnesota, fraudulently raised at least $976,000 from six investors located in Wisconsin including elderly individuals and a member of his own family among other allegations.

Previously, Lindemann was a FINRA registered broker with several brokerage firms beginning in 2001. From March 2008 until October 2009, Lindemann was associated with United Equity Securities, LLC. Then, from October 2009 until November 2010, Lindemann was a broker for Workman Securities Corporation. Thereafter, from November 2010 until March 2012, Lindemann was associated with J.P. Turner & Company, L.L.C. (JP Turner).

According to the SEC’s complaint Lindemann told investors that their money would be used to purchase a variety investments, including 1) secured notes in Home Path Financial LP (Home Path), a Wisconsin-based real estate investment company; 2) notes issued by GWG Life, LLC (GWG Life); and 3) interests in a unit investment trust through Lindemann’s sole proprietorship, Alternative Wealth Solutions (AWS). The SEC alleged that none of these investments were ever made.

FINRA Files Complaint Against Daniel McCourt Concerning Promissory Notes

February 27, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) filed a complaint against broker Daniel McCourt (McCourt) concerning allegations McCourt participated in private securities transactions, also known as “selling away”, without providing prior written notice to his member firm. In addition, FINRA alleged that McCourt provided false information and falsified documents to a mortgage company for a client to help the client qualify for a home loan.

McCourt first entered the securities industry in 1984. In 1985 McCourt associated with FINRA firm Foothill Securities, Inc. (Foothill). McCourt remained registered with Foothill until he was permitted to resign on or about June 7, 2013, due to “possible violations of firm policies and procedures.”

FINRA alleged that at various times from May 2005 through May 2009, McCourt participated in private securities transactions without providing Foothill prior written notice of the transactions. FINRA alleged that in or around 1990, McCourt notified Foothill that he wanted to begin an outside business activity in a coffee business. According to McCourt’s brokercheck the coffee business is called Surf City Coffee Co., Inc. (Surf City). Foothill approved McCourt’s involvement with Surf City.