Securities Lawyer Blog | Victim of Fraud?

JOHN M. BABIARZ (CRD# 3047247), a former broker from Peabody, Massachusetts, was sentenced to four years in federal prison and could lose his home, car, his investment account and $645,000 he admitted stealing from his elderly clients. Babiarz, 40, plead guilty in May to wire fraud and aggravated identity theft.

Babiarz contacted several of his former clients after he lost his job with Bishop, Rosen & Co., based in New York. Babiarz admitted telling some of his former clients that he was now working with Fidelity Investments, and other clients that he was working as an independent broker. He managed to convince his former clients, many of whom were elderly and not savvy in using the Internet, to allow him to continue managing their money, and set up accounts online with Fidelity in their names, where he was NOT employed. Babiarz had full access to their accounts including user names and passwords, which meant he had full access to their money.

John M. Babiarz then transferred funds out of the accounts into his own account, or used the clients’ accounts to borrow money for himself to make his own investments. He used the money to purchase among other things, a home and a car.

According to FINRA’s BrokerCheck, JOHN M. BABIARZ was previously registered with the following securities firm(s):

Registered Dates Firm
11/2009 – 09/2011 BISHOP, ROSEN & CO., INC. (CRD# 1248) – NEWTON, MA
06/2009 – 07/2009 CAPITOL SECURITIES MANAGEMENT, INC. (CRD# 14169) – WORCESTER, MA
11/2004 – 06/2009 JESUP & LAMONT SECURITIES CORP (CRD# 39056) – WORCESTER, MA
FINRA expelled the firm in 11/2010
05/2002 – 11/2004 PRIMEVEST FINANCIAL SERVICES, INC. (CRD# 15340) – ST. CLOUD, MN
05/2001 – 05/2002 LINSCO/PRIVATE LEDGER CORP. (CRD# 6413) – BOSTON, MA
04/1999 – 05/2001 INVESTORS CAPITAL CORP. (CRD# 30613) – LYNNFIELD, MA
01/1999 – 04/1999 DEAN WITTER REYNOLDS INC. (CRD# 7556) – PURCHASE, NY
06/1998 – 01/1999 BEAR, STEARNS & CO. INC. (CRD# 79) – NEW YORK, NY

If you or an elderly family member suffered financial losses due to your broker/financial advisor, call Soreide Law Group for a free consultation on how to potentially recover those losses at 888-760-6552. We represent clients nationwide before FINRA.

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Joe Mitchell McCartney (CRD #1349989, Redmond, Washington)

was suspended by FINRA for three months. McCartney allegedly borrowed $60,000 from a client and did not obtain his firm’s approval for the loans.

FINRA’s findings stated that the firm’s procedures required prior written approval from the firm’s personnel for any lending relationships with clients. McCartney denied the existence of the loans on annual compliance questionnaires that were submitted to the firm.

The suspension is in effect from July 7, 2014, through October 6, 2014.
(FINRA Case #2012033700501)

Joe Mitchell McCartney was previously registered with the following securities firm(s):

Registered Dates Firm
01/2003 – 08/2012 KMS FINANCIAL SERVICES, INC. (CRD# 3866) – REDMOND, WA

09/2001 – 01/2003 NEW ENGLAND SECURITIES (CRD# 615) – NEW YORK, NY

10/1993 – 09/2001 AXA ADVISORS, LLC (CRD# 6627) – NEW YORK, NY

10/1993 – 01/2000 THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (CRD# 4039) – NEW YORK, NY

10/1993 – 12/1996 EQUITABLE VARIABLE LIFE INSURANCE COMPANY (CRD# 6907) – NEW YORK, NY

05/1985 – 06/1989 MONY SECURITIES CORP. (CRD# 4386)

This summation of information from FINRA’s website, “Disciplinary and Other Actions, August 2014,” ends here.

Call Soreide Law Group for a free consultation with an attorney: 888-760-6552. Soreide Law Group will represent clients nationwide before FINRA.

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Sep/14

16

Minnesota Broker Barred by FINRA

JOHN A. WALDOCK JR. (CRD #2995364, Bloomington, Minnesota)

was barred by FINRA for allegedly converting a client’s personal gift cards, worth least $2,200, which were given to his member firm for business purposes.

FIRNA’s findings stated that the client asked the firm to coordinate a mailing to potential clients with an enclosed gift card provided by the client, hoping to peak their interest in a potential transaction.

FINRA stated that after the initial mailings, the firm kept the unused gift cards and was planning on mailing them to additional potential clients. Allegedly, without authorization, John Waldock took some of the cards, placed separate orders and paid for the goods ordered with the converted gift cards.

John Waldock’s firm received an email from his client’s CFO believing someone had attempted to redeem the gift cards the client had provided to the firm. After an internal investigation they concluded that Waldock used the gift cards for business purposes. The firm discharged Waldock.
(FINRA Case #2012031142101)

John Waldock, according to FINRA’s BrokerCheck, was previously registered with the following securities firm(s):

09/2012 – 11/2012 EIDE BAILLY SECURITIES, LLC (CRD# 112176) – FARGO, ND

06/2008 – 01/2012 LAZARD MIDDLE MARKET LLC (CRD# 146092) – MINNEAPOLIS, MN

05/2008 – 07/2008 GOLDSMITH, AGIO, HELMS SECURITIES, INC. (CRD# 26100) – MINNEAPOLIS, MN

06/2002 – 04/2003 LABRANCHE & CO. LLC (CRD# 32661) – NEW YORK, NY

This ends the information from FINRA’s “Disciplinary and Other Actions, August 2014.”

If you’ve suffered investment losses due to your broker’s recommendations Soreide Law Group for a free consultation with an attorney: 888-760-6552. Soreide Law Group will represent clients nationwide before FINRA.

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CLAUS C. FOERSTER (CRD# 1912949)

was barred by FINRA for allegedly soliciting his clients to invest in a fictitious entity marketed by Foerster as an income-oriented investment, and converting those investments for his own personal use. Foerster converted approximately $3 million from clients.

FINRA’s findings stated that Claus Foerster allegedly had clients move funds from their brokerage accounts to their personal accounts and write checks from their personal accounts to the entity. This entity was not an investment fund, but a bank account controlled by Claus Foerster.

FINRA’s findings reported that Foerster also provided some clients with fictitious account statements and made monthly payments to two clients.
(FINRA Case #2014-041483401)

Claus Foerster, according to FINRA’s BrokerCheck, was previously registered with the following securities firm(s):

Registered Dates Firm
02/2013 – 06/2014 RAYMOND JAMES & ASSOCIATES, INC. (CRD# 705) – GREENVILLE, SC

02/2008 – 02/2013 MORGAN KEEGAN & COMPANY, INC. (CRD# 4161) – GREENVILLE, SC

07/1997 – 02/2008 CITIGROUP GLOBAL MARKETS INC. (CRD# 7059) – SPARTANBURG, SC

03/1989 – 07/1997 J.C. BRADFORD & CO. (CRD# 1287) – NEW YORK, NY

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Sep/14

15

Washington Broker Barred by FINRA

Brian Harris Brunhaver (CRD# 2498928 Snomish, WA)

has been barred by FINRA for allegedly sending and receiving business-related e-mails on his personal e-mail account, which is against his member firm’s policies. Allegedly these emails sent by Brunhaver to his client contained false statements about a real estate investment trust (REIT). These statements incorrectly assured the client that the investment was not risky and was guaranteed.

According to FINRA, Brunhaver’s client invested $114,300 in the REIT. Then Brunhaver also sent e-mails to additional clients with similar false statements. No information about the risk of REITs was included. Also, allegedly, Brunhaver met personally with clients regarding REITs and falsely represented them as risk free and guaranteed by the company.
(FINRA Case #2011-026852001)

Brian Harris Brunhaver was previously registered with the following securities firm(s):
Registered Dates Firm
08/2011 – 12/2011 PACIFIC WEST SECURITIES, INC. (CRD# 6390) – SNOHOMISH, WA

05/1995 – 06/2011 LPL FINANCIAL LLC (CRD# 6413) – SNOHOMISH, WA

06/1994 – 04/1995 FORTIS INVESTORS, INC. (CRD# 421) – OAKDALE, MN

If you experienced investment losses due to your stock broker/financial advisor’s recommendations regarding REITs, or other illiquid, and complex products, call for a free consultation on how to potentially recover your losses. Call Soreide Law Group: 888-760-6552.

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Sep/14

12

Florida Broker Barred by FINRA for Conversion of Funds of Foundation

Fort Lauderdale-based Soreide Law Group, (888) 760-6552, recently obtained the following summary of information located on FINRA’s website, under “Disciplinary and Other FINRA Actions, August, 2014.”

Stuart James Siegel (CRD #835515, Bradenton, Florida)

was barred by FINRA for allegedly converting more than $76,000 of a foundation’s funds for his own personal use.

FINRA’s findings stated that Siegel was appointed president of a foundation established by a customer’s estate after the customer’s death, and subsequently opened a brokerage account at his member firm to fund the foundation’s activities.

According to the FINRA report, Stuart Siegel was allowed to serve as president, but his firm prohibited him from receiving any compensation and from serving as the foundation’s broker. Because he was president, Siegel had access to the foundation’s checking account, and had authority to use its debit card. Siegel was also responsible for placing trades in the foundation’s brokerage account.

According to FINRA, Siegel used the foundation’s funds for his personal benefit, and did not inform the other officers or board members.
(FINRA Case #2012035272901)

According to FINRA’s BrokerCheck, Stuart James Siegel was previously registered with the following securities firm(s):

Registered Dates Firm
03/2013 – 01/2014 OPPENHEIMER & CO. INC. (CRD# 249) – SARASOTA, FL

06/2009 – 12/2012 MORGAN STANLEY (CRD# 149777) – VENICE, FL

05/2005 – 06/2009 CITIGROUP GLOBAL MARKETS INC. (CRD# 7059) – VENICE, FL

06/1994 – 06/2005 MORGAN STANLEY DW INC. (CRD# 7556) – PURCHASE, NY

03/1991 – 06/1994 LEGG MASON WOOD WALKER, INCORPORATED (CRD# 6555) – BALTIMORE, MD

05/1990 – 04/1991 JESUP, JOSEPHTHAL SECURITIES CO., INC. (CRD# 3144)
08/1986 – 05/1990 JOSEPHTHAL & CO., INCORPORATED (CRD# 475)
03/1988 – 10/1988 A. G. EDWARDS & SONS, INC. (CRD# 4)
10/1985 – 08/1986 GRUNTAL & CO. INCORPORATED (CRD# 372)
10/1982 – 10/1985 HERZFELD & STERN INC. (CRD# 406)
11/1980 – 10/1982 E. F. HUTTON & COMPANY INC (CRD# 235)
09/1979 – 09/1980 SHEARSON LOEB RHOADES INC. (CRD# 7506)
09/1978 – 09/1979 MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (CRD# 7691)
03/1977 – 09/1978 MERRILL LYNCH, PIERCE, FENNER & SMITH, INC. (CRD# 572)

This ends the summary from FINRA’s website.
Please call the Ft. Lauderdale-based Soreide Law Group for your free consultation on how to potentially recover your investment losses: 888-760-6552.

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Sep/14

11

Melbourne Beach FL Broker Fined and Suspended by FINRA for Altering Client Forms

The Fort Lauderdale-based Soreide Law Group, (888) 760-6552, obtained the following summary of information which is located on FINRA’s website, under “Disciplinary and Other FINRA Actions, August, 2014.”

Karen Lee Chafe (CRD #1935625, Melbourne Beach, Florida)

was assessed a deferred fine of $5,000 and suspended by FINRA member for one year. FINRA reports that Chafe modified and resubmitted forms requesting the withdrawal of funds from annuity contracts, distributions from individual retirement accounts (IRAs), or modifications of arrangements for periodic distributions from IRAs.

FINRA’s findings stated that instead of using new forms for clients, Chafe reused old forms and submitted the altered forms as originals to her member firm or the annuity company.

FINRA found that within a six-year period Karen Chafe submitted altered at least 61 times with 14 clients. Chafe admitted this in a FINRA information request.

The suspension is in effect from June 16, 2014, through June 15, 2015.

Karen Lee Chafe, according to FINRA’s BrokerCheck, was previously registered with the following securities firm(s):

Registered Dates Firm
12/2002 – 01/2012 BERTHEL, FISHER & COMPANY FINANCIAL SERVICES, INC. (CRD# 13609) – MELBOURNE, FL

04/1996 – 12/2002 WACHOVIA SECURITIES FINANCIAL NETWORK, INC. (CRD# 11025) – ST. LOUIS, MO

05/1995 – 04/1996 CADARET, GRANT & CO., INC. (CRD# 10641) – SYRACUSE, NY

01/1992 – 05/1995 TRANSAMERICA FINANCIAL RESOURCES, INC. (CRD# 3600) – LOS ANGELES, CA

11/1989 – 08/1991 ANCHOR MANAGEMENT GROUP, INC. (CRD# 25022) – MELBOURNE, FL

03/1989 – 10/1989 ANCHOR NATIONAL FINANCIAL SERVICES, INC. (CRD# 5774)

This ends the information from FINRA.

If you’ve had investment losses due to your broker’s recommendations call Ft. Lauderdale-based Soreide Law Group for a free consultation with an attorney: 888-760-6552. Soreide Law Group will represent clients nationwide before FINRA.

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Sep/14

10

Minnesota Firm Fined $1 Million by FINRA for Failing to Supervise Penny-Stock Sales

On September 2, 2014, the Financial Industry Regulatory Authority (FINRA), fined Feltl & Company of Minneapolis $1 million for failing to properly supervise its penny-stock business between 2008 – 2012. FINRA reports that Feltl & Company failed to inform their clients ahead of certain penny-stock transactions about the suitability and risks. Also FINRA claims they did not send customers account statements showing the market value of each penny stock or keep proper records of transactions.

Penny stocks trade below $5 a share and are risky investments because it is difficult to track such companies’ business potential and future value. FINRA has warned firms repeatedly to review their procedures.

According to FINRA, Feltl earned $2.1 million from at least 2,450 solicited customer transactions in 15 penny stocks during the four years in question. It is not known how much Feltl made from selling penny stocks between 2008-2012 that they did not keep track of, however, according to FINRA it was “substantial.”

Feltl, employs aproximately 113 brokers and has eight branches in Minnesota and Illinois. They have had four regulatory problems with FINRA before this last problem with penny stock.

If you or a loved one purchased high-risk penny stocks on the recommendation of your stock broker/financial advisor and experienced financial losses, please contact Soreide Law Group at (888) 760-6552 for a free consultation. We represent clients nationwide before FINRA.

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The Florida Office of Financial Regulation recently filed a complaint in state administrative court against Regent Investment Advisors and Timothy C. Mingo, president and chief compliance officer of Aventura, Florida. They are seeking civil penalties and fines for allegedly overcharging clients and issuing false financial statements. The Office of Financial Regulation (OFR) has proposed a $69,000 fine against Regent Investment and a $35,000 fine against Timothy Mingo.

Florida’s OFR found eight clients that had been overcharged $15,291 by Regent Investment Advisors in management fees. They found Regent had exceeded the terms listed in their contracts. The clients had paid $44,835 to Regent over several years. One client in particular was overcharged $3,388 in performance fees. Also, three clients were charged performance fees even though they shouldn’t have qualified under Securities and Exchange Commission (SEC) rules. Regent had deducted the management fees directly from their clients accounts during 2010-2012, but did not send out invoices, leaving the clients unaware.

According to the OFR, there were also inaccuracies in Regent’s financial statements 2010-2012. These included overstated asset levels and incorrect figures for fixed assets.

Call the Ft. Lauderdale-based Soreide Law Group for a free consultation on how to recover your investment losses: 888-760-6552.

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Sep/14

10

Texas Financial Advisor Pleads Guilty to Wire Fraud

Redonda Russell, 66, a former investment advisor from Fort Worth, Texas plead guilty to wire fraud on Aug. 26, 2014. Russell went after the inactive accounts of her firm, First Command Financial of Fort Worth, Texas and caused the liquidation of more than $316,000 according to the U.S. attorney’s office. Almost half of these clients were deceased. Russell was employed by First Command Financial for 22 years. She left in 2013. For the past seven years Russell worked as associate director of client services with First Command Financial of Forth Worth, Texas.

According to investigators, Russell perpetuated the fraud electronically. For over a year, Russell received personal identifying information for eighteen of First Command clients, eight of whom were deceased. Russell then drafted documents giving her control of the accounts. Russell then took the proceeds from the liquidation of the accounts and deposited the funds into one of her many personal accounts, all using different signatures, but all included the last name of Russell.

Russell is currently free on bail. Her sentencing, which the maximum could be 20 years in prison and a $250,000 fine plus restitution, is scheduled for December 8, 2014.

If you or an elderly family member suffered financial losses due to Redonda Russell or your broker/financial advisor, call the Soreide Law Group for a free consultation on how to potentially recover your losses at 888-760-6552. Soreide Law Group represents clients nationwide before FINRA.

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