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Stoltmann Law Offices, a boutique securities, investment, and consumer fraud law firm in Chicago, has represented victims of fraud and Ponzi schemes since 2005, recovering tens of millions of dollars for out clients and restoring their financial security and freedom.  On September 9, 2022, it was reported that an Ameriprise financial advisor, Dusty Lynn Sternadel, was barred from the securities industry by FINRA for failing to cooperate with FINRA’s requests for information in connection with an investigation launched by the regulator.  The investigation stemmed from a regulatory filing made by Ameriprise wherein it stated it had terminated Sternadel for cause “for violation of company policies for misappropriation of client funds.”

The FINRA investigation into Sternadel did not get very far because she refused to cooperate with the regulator.  When financial advisors fail to cooperate with a FINRA investigation, FINRA Rule 8210 provides FINRA with the authority to essentially end the advisor’s career. The penalty for not cooperating with the regulatory investigation is harsh and brokers like Sternadel know this, yet she chose to take the lifetime ban instead of cooperate.  The FINRA AWC states that FINRA sent Sternadel a request to testify and produce documents, and that on August 30, 2022, during a phone call, Sternadel stated she would not cooperate or appear and understood the penalty for her refusal.

The Ameriprise disclosure regarding her termination is very vague, yet combined with the FINREA action, is disconcerting. According to the Ameriprise filing, Sternadel was terminated for cause for misappropriating (converting) client funds. Neither the Ameriprise termination notice nor the FINRA AWC state how much money was allegedly misappropriated or from how many Ameriprise customers. There are no customer complaints disclosed yet on Sternadel’s FINRA  Broker/Check Report.

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from dealing with broker-advisors who’ve robbed their accounts. There’s no shortage of incidents where brokers have taken advantage of older Americans to “churn” or over-trade their accounts to generate commissions. In many cases, their clients may be unaware of the abuses or unknowingly granted power of attorney to facilitate broker theft of customer funds. Other times, brokers go rogue and flat out steal from their clients.  That is the unfortunate reality for Totowa, New Jersey-based PFS Investments financial advisor Jeffrey Dampf.

FINRA, the federal securities regulator, has barred ex-Primerica/PFS broker Jeffrey Dampf, who had joined the firm in 2009, according to Thinkadvisor.com. “On Oct. 30, 2020, Ocean County Prosecutor Bradley D. Billhimer announced that Dampf, then 69, of Brick Township, New Jersey, was charged with attempted theft and conspiracy to commit theft. Meanwhile, Robert Tindall, then 46, and Leanna Guido, then 47, both of Toms River, New Jersey, were charged with theft for their roles in the same scheme.” An investigation by the Ocean County Prosecutor’s Office “revealed that Dampf, in his capacity as the power of attorney and accountant for two senior siblings, was misappropriating funds entrusted to him while caring for the two older clients,” according to Billhimer.

Dampf “allegedly attempted to electronically transfer $500,000 to an investment account from the victims’ bank account for his own benefit. The transfer was ‘flagged,’ however, and the money was not transferred from the victims’ account,” according to Billhimer. “Tindall and Guido received funds they were not entitled to in an amount exceeding $1.5 million” from the victims, Billhimer said. “The funds were allegedly misappropriated through check or electronic transfer executed by Dampf and drafted to appear as though they were legitimate reimbursements for money spent on the care and for the benefit of the clients.”

Chicago-based Stoltmann Law Offices is investigating regulatory filings establishing that former Fifth Third and Merrill Lynch financial advisor David S. Wells has accepted a permanent bar from the securities industry. According to a publicly filed Acceptance, Waiver, and Consent (AWC) filed with the Financial Industry Regulatory Authority (FINRA), Wells accepted the lifetime ban in lieu of appearing for or providing information to FINRA pursuant to FINRA Rule 8210. Wells did not admit to any misconduct. He chose to accept a lifetime bar from the securities industry instead of sitting for an OTR (on the record) interview, answer questions, or provide information to FINRA.

According to David Wells’s FINRA broker/check report, he “resigned” from Fifth Third Securities on June 30, 2021 after admitting he misappropriated funds from three clients. There is no other information available publicly about how much Wells stole or whether he refunded the victims. One fact is certain: his registration with Fifth Third Securities gives victims a change to recover those stolen funds. As a a matter of law, Fifth Third Securities is responsible for the conduct of their agents, like David Wells. Fifth Third had a duty to supervise Wells, his office, his client accounts, and to exercise supervisory authority over Wells to prevent violations of securities rules and regulations. These supervision rules and regulations are a critical part of the securities industry regulatory system and brokerage firms like Merrill Lynch and Fifth Third Securities can be held liable for damages for failing to properly supervise financial advisors like David Wells.

FINRA wields mighty authority over the registered representatives they license under Rule 8210. When FINRA comes calling for information in connection with an investigation under FINRA Rule 8210, financial advisors have two options. 1) They can cooperate fully with FINRA’s investigation or 2) they can voluntarily accept a lifetime bar. It would seem obvious why a financial advisor would accept the life time bar – they do not want to provide FINRA with any information because FINRA is on to something.  Its not quite that simple however. Complying with and responding to a FINRA Rule 8210 request can be difficult and if done without counsel is not advisable. If the registered representative is not being supported by his brokerage firm, it can be a terrifying experience.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with financial advisors who’ve stolen their money. Can a financial adviser ask you to pay him personally to buy investments? If he does, it may be considered theft. Former NY Life Securities broker Jeffrey Scott Anderson was barred by FINRA, the federal securities industry regulator, after he was accused of stealing approximately $26,600 from an elderly client.

According to FINRA, “Anderson convinced an elderly NYLife customer to write five checks totaling $26,600 from October through December 2019 to him personally to purchase investments and insurance. Rather than using the funds for those purposes, FINRA claims that he deposited the money into his bank account and paid personal expenses.” Anderson resigned in March 2020 after “an internal review raised a number of concerns regarding the quality of his business, including repeat replacement and suitability concerns and undisclosed customer complaints.”

Later that year, NY Life disclosed two other customer complaints against him, including one from a customer who provided NYLife with “copies of three personal checks…which were made payable to and endorsed by [Anderson] totaling $16,500.” After he left NY Life, Anderson’s BrokerCheck profile showed other customer theft issues: “Anderson became registered with Pruco Securities but was fired less than three months later for misappropriating funds from a customer while associated with another FINRA member and submitting altered documentation to company investigators during its internal investigation.”

Chicago-based Stoltmann Law Offices has represented investors who have suffered losses as a result of their brokerage or investment accounts being infiltrated by hackers.  How safe are your retirement funds from hackers? With massive hacking activity and cybersecurity in the news every day, that’s an essential question to ask your financial advisor. Cybercriminals are trying to steal money and personal financial information 24-7.

Here’s a series of questions to ask: When financial advisors suspect that your retirement accounts are being hacked, have they reported this information to you? Even more importantly, have they reported it to federal authorities such as the FBI or Treasury Department? That’s not only the right thing to do, they are legally obligated to do so.

Of course, if an advisor or third party fails to report suspicious online activity to regulators, they may be breaking the law. The U.S. Securities and Exchange Commission (SEC), for example, recently imposed a $1.5 million fine and settled charges against GWFS Equities, an affiliate of Great West Life and Annuity Insurance Company, “for violating the federal securities laws governing the filing of Suspicious Activity Reports (SARs).”

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with broker-advisors who’ve stolen their money. Sometimes brokers are not the least bit subtle about what they do with clients’ assets. They may shift cash into separate accounts and spend it themselves.  Such was the case with Apostolos Pitsironis, a former Janney Montgomery Scott advisor. He is accused of stealing more than $400,000 from his clients from 2018-2019.

In the brokerage business, stealing clients’ funds is often known as “converting” their assets. Brokers may spend the money on gambling, cars or other consumption items. Pitsironis was “discharged in June 2019 after an internal investigation uncovered that the FA transferred funds via unauthorized ACHs from a client’s account to a third-party bank account owned and controlled by Pitsironis,” according to ThinkAdvisor.com. “He later used this money to pay his family’s personal expenses, all the while deceiving both his victims and the financial services firm for whom he worked,” prosecutors stated.  Pitsironis also allegedly spent his clients’ money on casino gambling debts, credit card bills and the lease of a luxury car.

“Janney is committed to serving our clients with the utmost integrity and trust,” the brokerage firm said in a statement obtained by ThinkAdvisor. “Upon discovering the improper actions taken by this advisor with one client account, he was promptly terminated, and the client was fully reimbursed. Janney has fully cooperated with law enforcement and will continue to do so.”

Chicago-based Stoltmann Law Offices is investigating incidences of investors whose brokerage accounts have been hacked. Market regulators are investigating reports that customers of the popular online trading app Robinhood were ripped off. Hackers reportedly obtained account information of Robinhood customers, then transferred funds out of their accounts. The customers have contacted the U.S. Securities and Exchange Commission and FINRA, the securities industry regulator, to probe the thefts.

How safe is your money in an online brokerage account? It should be protected by numerous safeguards, although lately cyberthieves have found a way to steal money directly from investors. During the COVID pandemic, online trading soared, with millions of day traders using their phones and other devices to trade stocks and other securities. But as a recent wave of customer complaints suggest, their accounts have been hacked and money taken from their accounts, according to Bloomberg News.

In a statement to Bloomberg, Robinhood did not take responsibility for the thefts:

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with brokers who’ve fleeced clients. This is a sad occurrence, but sometimes brokers take advantage of clients and steal their money. We’ve investigated countless cases when this has happened.

The instances are all too familiar to us: Usually it’s elderly, retired women who are preyed upon. A recent case involving a 73-year-old client is a case in point. A former LPL broker, Matthew O. Clason, of Chesire, Connecticut, is accused of stealing more than $300,000 from the client, “with whom he formed a personal relationship.” Clason, who had been a registered broker since 2004, sold securities from his client in 45 transactions over the last 20 months, the SEC said in its suit filed against the broker.

“He transferred about $330,000 [from proceeds of the sales of client assets] to a joint checking account they had opened at a large national bank, funding most of it through securities sold from a non-retirement account that charged the client 1.54% of her assets under management,” the SEC reported. The agency is requesting “that the court enter an order freezing Clason’s assets and requiring an accounting. The SEC also seeks permanent injunctive relief, disgorgement plus prejudgment interest, and civil penalties.” Clason, who was registered with LPL and Integrated Wealth Concepts, could not be reached for comment, according to AdvisorHub.com. He was fired by LPL on August 13 for failing to comply with firm policies with respect to handling client funds, the SEC said.

Stoltmann Law Offices has been following the Justice Department’s case against former Ameriprise Financial advisor Yilin Hsu Lee, a/k/a Li Lin Hsu, since 2016 when she was barred by the Financial Industry Regulatory Authority (FINRA).  On Friday, January 31, 2020, the Justice Department announced that Hsu had been sentenced to 136 months in prison – more than 11 years – for swindling her clients out of almost $8.2 million dollars. Amongst her more than 20 victims were members of her family, an all too common fact in Ponzi scheme cases like this.  Although she has been ordered to pay over $5 million in restitution as part of her sentence, it is unlikely she will ever be able to repay even a fraction of what she owes to the victims.

According to the U.S. Department of Justice, Hsu’s scam ran from February 2014 to May 2018. During this time, it was alleged that she falsely represented to investors that she would invest their money safely.  Instead of investing the money conservatively as she represented, Hsu converted her clients’ money and used the funds to buy homes in Diamond Bar, California, a Tesla automobile, an expensive stay at the Peninsula in Paris, France, and spent thousands of dollars of her clients’ hard-earned money during shopping sprees at Hermes and Chanel.

Hsu gained the trust of her victims, mostly members of the Chinese American community in Southern California, by speaking to them in their native Chinese or Mandarin. This is called Affinity Fraud which is a specific type of scam where the schemer solicits his victims from a select community, usually one he is actually a part of. Affinity Fraud scams impact specific ethnic and religious groups. In Hsu’s case, she focused her fraudulent scheme on the Chinese American community.  Her ability to speak the same language and understand the customs of her victims made her even more dangerous, and even easier for her victims to fall for her fraudulent sales pitch.  As pointed out by the Securities and Exchange Commission, Affinity Fraudsters may not actually be members of the community they seek to victimize, they just pose as a member, in a true crime sense.

Stoltmann Law Offices is investigating on behalf of defrauded investors claims made by the Securities and Exchange Commission that Lester W. “Chad” Burroughs, a financial advisor for Lincoln Planning of Torrington, Connecticut, misappropriated client money for personal use. Burroughs was also a registered investment advisor through Capital Analysts. According to the SEC complaint filed on December 9, 2019 in the Federal District Court, District of Connecticut, Burroughs ran his scheme from November 2012 through at least January 2019.  It was a simple scam, one that is all too common in fact.  Burroughs offered victims an investment called a “Guaranteed Interest Contract”, also known as a “GIC”.  The terms of these “GICs” offered by Burroughs included interest at either 4% or 7% per year for the term of the contract. Once again, and these scams are becoming so much more common, 4% to 7% per year is not an exorbitant return people typically think of when being sold a fraudulent investment.  In fact, 4% per year barely pays more than the average rate of inflation.

In furtherance of his scheme to defraud his clients, Burroughs created fake account statements, and according to the SEC, the reason he sold GICs to subsequent investors was to pay off previous investors – the hallmark of a Ponzi scheme. According to his FINRA BrokerCheck Report, Burroughs is no stranger to customers complaints. When he was hired by Lincoln Planning, Burroughs had fourteen customer complaints disclosed on his CRD Report, which is a statistically enormous number.  Burroughs also paid a fine to the Insurance Commission of the State of Connecticut in 2003 for violations. This history of complaints and compliance issues put Lincoln Planning on notice when they hired Burroughs in 2012 that he was a compliance risk.  Standard operating procedure at a brokerage firm like Lincoln Planning under these circumstances would be to place the advisor on “heightened supervision”.  These heightened supervision programs regularly require increased compliance surveillance like random, unannounced on-sight branch audits and direct communications with clients without the knowledge of the advisor. Certainly, had Lincoln Planning put the necessary resources into supervising Burroughs, he would not have so brazenly created and sold these phony GICs to clients.

This “heightened supervision” requirement for brokers like Burroughs with a history of customer complaints has been part of the regulatory lexicon required by FINRA for almost 20 years.  In NTM 03-49, then NASD (now FINRA) explained to brokerage firms like Lincoln Planning that brokers with a history of customer complaints should be more closely monitored because they are a compliance risk. NASD provided some statistics in this notice which were pretty shocking when one considers the number of complaints Burroughs had on his record prior to even being hired.  According to this notice, only 3.3% of all registered brokers had at least one customer complaint; 0.71% had two; 0.22% had three, and only 0.09% were subject to at least four customer complaints. The Fourteen complaints on  Burroughs record put him in extremely rare company.  Lincoln Planning had an obligation to adequately supervise Burroughs and the firm clearly failed to do that.  As such, Lincoln Planning can be liable for the damages caused by Burroughs to his clients.

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