Financial Fraud Is on the Rise According to Officials, Scamming Billions of Dollars From Investors
It’s been nearly a decade since the $65 billion Ponzi scheme orchestrated by Bernard Madoff, and while there was a temporary dip in the number of similar schemes in the wake of that massive theft, securities officials are reporting that scams are on the rise again.
The biggest case in recent years by far is the $1.2 billion Ponzi scheme operated by the Woodbridge Group of Companies, but it’s not the only one. 1st Global Capital LLC and 1st West Capital LLC were the subject of an SEC investigation after warning signs indicated that the companies were involved in a $283 million loan fraud. Neither of these schemes come close to the financial damage that Madoff’s scheme caused, but they’re part of a much larger issue facing the investment world – more of these types of schemes are popping up seemingly every day. And, a considerable number of the people attempting to take advantage of their marks are unregistered and unlicensed in the securities industry, a change from recent trends.
"The surge in cases against unregistered actors reversed a two-year trend in which registered individuals and firms in the securities industry, broker-dealers and investment advisers, had constituted the majority of respondents in state enforcement actions," according to the North American Securities Administrators Association (NASAA).
NASAA reported that 647 of the cases in 2017 involved registered brokers, a nine percent spike from 2016, while 675 cases in that year involved unregistered individuals, a 24 percent spike from the year before. On top of that, some officials are seeing another worrying trend among scammers.
"A lot of the scamsters are getting a lot smarter," said Joe Borg, director, Alabama Securities Commission. "For example, if you asked me 10 years ago, do you have a problem with lawyers, I would have said no. Now, there are a slew of cases where lawyers are roped in by the crooks. They recruit the attorney to open an LLC or create an operating agreement."
This dramatic increase in the number of reported cases of fraud is a worrying issue, and our investment fraud lawyers at Meyer Wilson are currently investigating a number of brokers and individuals accused of fraudulent actions. If you were the victim of an investment scam or fraud, contact us today by filling out our online form, or call us at (800) 738-1960 to discuss your legal options with a member of our firm.
An Awful Example of 401k Fraud: Ohio Business Executive Convicted for Embezzlement, Failure to Pay Over Taxes
C. David Snyder, the former chief executive officer, president, and chairman of Attevo, Inc. was recently convicted on five counts of failure to pay over taxes and one count of embezzling from an employee pension fund.
According to the United States Attorney’s Office for the Northern District of Ohio, Snyder collected almost $860,000 from employees that he did not pay to the IRS, and embezzled $126,000 from an employee retirement fund.
According to the U.S. Attorney’s Office, employees at Attevo prepared financial reports, quarterly and annual returns, records, and schedules at Snyder’s direction. On behalf of the technology consulting company based out of Cleveland, OH, Snyder agreed to a $48,350 monthly payment plan with the IRS. According to court documents, he only made 10 payments before stopping.
Snyder reportedly withheld his employees’ payroll tax, but did not pay it to the IRS. He reportedly failed to pay an estimated $328,355 in these taxes in 2010, and an estimated $530,778 in 2012. He also reportedly created a profit-sharing and 401k plan for his employees in 2009, which was funded by employee payroll deferrals. Snyder reportedly failed to pay an estimated $126,000 in loan repayments and contributions into the plan from 2010 to 2012 – instead, he reportedly spent $20,000 per month on four vehicle leases, renting his vacation home and a personal residence, and other personal expenses.
“Charles Snyder embezzled retirement savings from his employees’ 401k accounts, and used the money for his personal benefit,” said James Vanderberg, Special Agent-in-Charge, Chicago Region of the U. S. Department of Labor Office of Inspector General. “We will continue to work with our law enforcement and other partners to protect retirement assets covered by the Employee Retirement Income Security Act.”
Our investment fraud attorneys at Meyer Wilson have considerable experience working with victims of fraud, including cases involving 401k accounts. If you lost money due to the fraudulent actions of your employer or broker, give us a call to discuss your situation with a member of our firm over the phone, or send us the details of your case through our online form to schedule a free case evaluation today.
Tips to Protect Your Elderly Loved Ones from Financial Exploitation
Senior investors are among the most frequently targeted victims of financial exploitation. In order to better protect this group of people, the Financial Industry Regulatory Authority (FINRA), adopted new rules to allow brokers to take additional steps to protect senior investors and other specific groups, the first nationally standardized protection of its type in the nation. These rules include:
Including an Additional Person as a Point of Contact on Accounts
This new FINRA rule requires brokers to make a reasonable effort to secure someone to fill the role of designated trusted contact person to include on the senior investor’s brokerage account. This person will act as a resource for the brokerage firm who can assist in responding to possible cases of exploitation, the protection of assets, and account administration.
Placing Holds on Suspicious Activity
Placing holds when potential fraud is detected is not a new process in the financial world, brokers now have permission to use the same responses as most banks in these situations. This rule specifically applies to accounts belonging to people 65 years old and above and people with physical or mental impairments that make it difficult for them to protect their investments.
"Before this new rule, firms were really struggling with this day to day," said Jeanette Wingler, an attorney in FINRA's Office of the General Counsel. The new rule gives "the firms time to investigate when a request for a disbursement raises red flags."
Firms or brokers that suspect financial exploitation may be occurring can place a hold on disbursements from that account for up to 15 business days, and may continue that hold for an additional 10 days if additional information supports the initial suspicion comes up during its investigation. The account holder and trusted contact will be notified of the hold.
If you or one of your loved ones was the victim of financial exploitation, our investment fraud lawyers at Meyer Wilson are ready to hear your story. Over the past 19 years, we have successfully recovered more than $350 million in verdicts and settlements for our clients. Send us your information through our online form to set up a free case consultation, or give us a call at one of our office locations to talk one of our attorneys over the phone today.
Is Your Advisor Skimming Funds from Your Investment Accounts?
Unethical financial brokers and advisors skim money from clients' investment accounts without their knowledge. In many cases, unethical brokers and advisors deceive investors by providing false information, withholding important information related to investments, or offering clients bad investment advice.
Skimming Funds from Investment Accounts
Recently, the Securities Exchange Commission (SEC) secured a court order to freeze the assets of a Colorado financial broker who skimmed $2.8 million from client investment accounts. According to SEC complaints, the former broker for LPL Financial allegedly forged client signatures on checks made out to a company called C Investments, then deposited the funds in the phony company held by one of her advisory friends. When questioned by her clients, the broker allegedly lied about having any connection to C Investments.
Aoccording to the allegations, over the course of 13 years, the broker, Sonya Camarco, was able to accumulate $2.8 million for her personal gain. According to the SEC, the stolen funds were used to pay for personal mortgage debts, credit card bills, and other miscellaneous purchases.
In a separate case of fraudulent activity in Texas, a Houston financial advisor has been charged with theft for skimming funds from clients' retirement accounts. In July, 2017, the U.S. Attorney's Office charged Lawrence DeShetler with investment fraud. DeShelter allegedly skimmed $1.9 million from unsuspecting investors' retirement accounts, then used the funds for personal expenses and purchases.
The securities litigation attorneys at the Meyer Wilson law firm handle a variety of fraud cases and investment claims. Cases involving securities fraud often include:
To protect investors from various types of fraud, the SEC is establishing a searchable database that shows a list of brokers who have been barred or suspended from practice due to federal violations. Concerned investors are encouraged to use the website to identify unethical brokers and advisors who are guilty of committing fraud. By using FINRA's BrokerCheck, potential or established investors can conduct background checks on brokers and advisors prior to investing. The database isn't perfect but it is a good first step.
If you were the victim of investment fraud, contact our investment fraud attorneys at Meyer Wilson to set up a free case consultation today.
Man and Sons Charged With Stealing $18 Million in Mail, Wire Fraud Scheme
A Tennessee man, Larry Bates, and his sons, Robert and Charles, are under investigation by the U.S. Postal Inspection Service and the Federal Bureau of Investigation. The men have been indicted for carrying on mail and postal fraud that defrauded more than 300 unsuspecting customers out of $18 million dollars.
Larry Bates was a former Tennessee legislator. He was also the CEO of First American Monetary Consultants, Inc. (FAMC) and of Information Radio Network, Inc. (IRN). FAMC was a financial company that bought, sold, and traded precious metals, primarily in gold and silver coins. IRN was a broadcast radio station that offered listeners advice and information on many topics including politics and world economy. Larry’s son Charles Bates served as executive vice president and news director at IRN and economist at FAMC, while Robert also acted as an economist at FAMC.
From May 2002 through October 2013, the Bates men allegedly advised their customers, primarily Christians and the elderly, to buy coins from FAMC. Because the customers thought that FAMC was a moral and upright company, they did as advised. The Bates men would use IRN as a source of marketing as well, urging listeners to invest in gold and silver coins from FAMC. They counseled their listeners to protect themselves from “Mystery Babylon” which they claimed would be a great economic recession.
Once the customers sent in money orders to purchase coins, or sent their old precious metals in to trade, they allegedly heard little more than false promises. Purportedly, the defendants would only fulfill half a customer’s orders, or neglect them all together. According to the indictment, when customers asked about their purchases, they would receive either false promises or radio silence. It is supposed that the Bates used the money and metals to fund their lifestyles and their two companies.
It is alleged that the fraud was targeted to more than just Tennessee. Some of the customers that were allegedly defrauded were in Texas, Alabama, Kansas, Florida, and many more. The Bates are charged with mail and wire fraud and conspiracy to commit mail fraud. If they are convicted, they can face up to 20 years’ imprisonment along with up to $1 million dollars for each count.
At Meyer Wilson, we believe that you should not be punished for putting your faith and trust in the wrong people. If you or someone you know is a supposed victim of an investment scheme, give us a call today! We can help you try to recover the money you lost.
Wilfred Azar Pleads Guilty in $7 Million Bond Scheme
The owner of a Maryland office building “Empire Towers” recently pleaded guilty to operating a $7 million bond scheme involving more than 50 investors.
Last week, former owner of Empire Towers Wilfred T. Azar III pled guilty for his role in orchestrating a massive, multi-million dollar bond scheme as well as falsifying tax returns.
From January 2006 to April 2010, Azar ran a bond scheme involving more than 50 investors and $7 million. Azar was the president and majority owner of Empire Corporation, a company that owned Empire Towers, an office building in Maryland.
Although bond certificates that Azar provided to investors indicated they were “registered”, the bonds were not actually registered with the SEC or any state securities regulator. Azar also misled investors by overstating the financial health of Empire Corporation and claiming that the bonds would generate a 10 percent return per year.
Investors were promised that their investment dollars would be used to renovate the Empire Towers building, but instead Azar used most of the money for personal expenses, such as buying an Aston Martin, paying his mortgage, and holding Baltimore Ravens season tickets. To conceal the money he embezzled from Empire Corporation, Azar lied on his tax returns.
Azar is scheduled for criminal sentencing on August 12. The SEC has also filed a complaint against Azar as well as another individual who they believe is connected with the bond scheme.
This case highlights the importance of doing extensive research before you invest. Make sure your broker or financial advisor is registered. A great way to check the registration status of a broker is by using FINRA’s Broker Check tool. Before placing your money in a particular investment, you should also ask your broker if the investment is registered with the SEC.
If you lost money through investment fraud or misconduct, we invite you to contact our securities fraud lawyers today for a free review of your case!
Non-Profits and Charities Burned by Investment Fraud
A recent Washington Post study found fraud, embezzlement and related misconduct at more than 1,000 non-profit organizations based on analysis of tax filings within the past five years. The non-profits indicated in this study cite losses of at least a quarter million dollars each.
What these 1,000+ non-profits had in common was that they all indicated "significant diversion of funds" when they filed their taxes. This check box on tax forms allowed non-profits to reveal various harms such as theft or embezzlement-related diversion of funds.
The Washington Post also reported that out of all non-profit organizations that indicated these types of losses over the past ten years, the ten that suffered the most sustained $500 million combined losses. Joe Stephens, investigative reporter and co-author of this study, stated that many of these organizations were harmed by Bernie Madoff's Ponzi scheme.
One shocking case revealed by this study is that some working from within the Conference on Jewish Material Claims against Germany stole tens of millions of dollars that were supposed to go to Holocaust victims. Mr. Stephens explained that many of these non-profit fraud schemes were run by those within the organization.
Prior to 2008, non-profit organizations were not required to disclose these losses. New regulations require non-profits not only to check the "significant diversion of funds" box, but also offer a detailed explanation of what that entailed.
Non-profit fraud is likely more widespread than this study even indicates. The report only calculates fraud in cases where the organization chose to disclose it, and many non-profits throughout the United States are unregistered.
"The thousand, more than a thousand, we found are just a sliver… it makes it almost impossible to estimate how big the losses are, but they obviously are larger than we had known," said Stephens.
Former Merrill Lynch Advisor Arrested for Embezzlement Scheme
Former Merrill Lynch Advisor, James Ryan Lanier, Arrested in Embezzlement Scheme, Charged with Stealing $800K from Clients
James Ryan Lanier, a former Merrill Lynch advisor, has been arrested and charged with fraud, money laundering, and identify theft in connection to an alleged embezzlement scheme. Authorities allege that he stole more than $800,000 from his clients between 2008 and 2010.
According to the 65-count indictment, Lanier made a series of false claims and misrepresentations to convince client associates to wire transfer funds from his clients’ investment accounts into bank accounts under his control. He allegedly lied to the associates and told them that he obtained voice approval for the transfers from the clients on a recorded telephone line. He also allegedly forged client signatures in order to facilitate the transfers.
Lanier is accused of spending the stolen funds on vehicles and a condominium in Albany, Georgia. He also allegedly used the money to make loan payments and to invest in a cellular telecommunications business. He was arrested in San Diego, California, on August 9.
If convicted, Lanier could face up to 30 years in prison for each count of fraud, up to 10 years in prison for money laundering, and up to two years for aggravated theft. His formal arraignment is scheduled for Aug. 16 at 1:30 p.m. in Tallahassee. For additional information, click here.