Stoltmann Law Offices continues to investigate allegations that Robert Walberg of Arlington Heights, Illinois, defrauded a few dozens investors, including family, friends, and the Northwest Suburban Montessori School. As we previously discussed, on January 24, 2019, the Illinois Securities Department issued a Temporary Order of Prohibition against Robert C. Walberg, Chartwell Strategies LP, and Chartwell Advisory Group LLC. Chartwell Strategies LP is a hedge fund created and sold by Robert C. Walberg and his company, Chartwell Advisory Group LLC. According to the Illinois Securities Department, Mr. Walberg solicited an Illinois resident at the end of 2017 and early 2018 to invest in Chartwell Strategies LP. Mr. Walberg allegedly commingled his client’s funds with his personal assets. Walberg was charged in early October with wire fraud, investment advisor fraud, securities violations, and theft by deception. According to court papers, Walberg is alleged to have converted more than $600,000 from the Montessori school he acted as Treasurer for, which puts the school’s future at risk. It was reported recently that Walberg also stole $45,000 worth of retirement money from his Aunt and Uncle.
Mr. Walberg was a registered FINRA broker on and off from 1984 through 2013, but he has not been registered with the SEC or FINRA since November 2013. Because he was not registered, in furtherance of his scheme, Walberg had his investor “clients” open accounts at Fidelity. He then used the clients’ credentials to log-in to their accounts and transfer funds from their Fidelity accounts to Chartwell Strategies, a private entity allegedly created for investment purposes.
Depending on the nature of the transactions and specifically how Walberg gained access to his clients’ funds, Fidelity could be responsible for either negligence, or aiding and abetting breach of fiduciary duty. All too frequently, fraudsters use big named, well known companies like Fidelity to give their schemes an aura of legitimacy. Fidelity has duties and obligations to all of its clients, including purported victims of Walberg’s scam, to at a minimum, perform its compliance, execution, and supervisory functions at or above the standard of care. Further, Fidelity, as a FINRA member firm, has explicit responsibilities to its clients to ensure it adaquetly monitors and supervises electronic access to their accounts and have reasonable measures in place to ensure someone other than the client is not logging-in using their credentials. This is a bright red flag that someone is acting in a questionable manner. In the normal investment advisor-client relationship which uses Fidelity as the broker/dealer, that investment advisor has his own log in credentials and uses the Fidelity RIA platform to run his business. That Walberg did not do this and instead used client credentials is an indicia that he was not licensed or registered to act as an investment advisor. Upon information and belief, Walberg abused his trust in this way to numerous clients resulting in the theft of as much as $5 million. Fidelity could have liability for these losses.