TAG | broker failure to return money to clients
Comments off · Posted by Securities Lawyer in FINRA
In a February 17th., 2012, article for InvestmentNews.com, Bruce Kelly writes that a broker formally affiliated with Morgan Stanley Smith Barney LLC, Berthel Fisher & Co. Financial Services Inc. and LPL Financial LLC was arrested in Oregon this month for allegedly stealing $584,000 from three investors.
The now ex-broker, James Scott McKee, was charged Feb. 9 with four counts of aggravated theft in the first degree, according to a statement by the City of Eugene Police Department. McKee’s victims included an 81-year-old retiree and a local church, according to a complaint against Mr. McKee filed this Tuesday by the Financial Industry Regulatory Authority Inc.
Mr. McKee persuaded an LPL client in April 2007, to invest $400,000 in a real estate venture. Mr. McKee did not notify LPL or get the firm’s approval for the venture, according to the Finra complaint.
Kelly writes that after the client had a heart attack, she incurred significant medical expenses and contacted Mr. McKee to get her money back, according to Finra. In February 2008, Mr. McKee received two checks for $200,000 from the development and converted those funds to his own use, even though he told the client the funds were still invested in the development. So far, Mr. McKee has not returned the client’s investment, according to Finra.
McKee, 44, from February 2008 to the present, “committed aggravated theft by deception and fraud with respect to securities or securities business,” according to the police statement.
Kelly writes that according to officials in Eugene, Mr. McKee’s actions included the sale of unregistered securities, the unauthorized liquidation of monies from investment accounts by a financial planner, the unauthorized deposit of those funds into the financial planner’s personal bank account and the subsequent concealment of that liquidation.
Mr. McKee was affiliated with LPL from November 2002 to September 2008 and with Berthel Fisher from that point until November 2010. He then joined Morgan Stanley, where he worked until this October when he was discharged, according to his profile on BrokerCheck.
Finra filed a complaint this week against Mr. McKee alleging that he defrauded investors from February 2006 until September 2011.
Kelly writes that Mr. McKee persuaded investors to invest in various undisclosed outside real estate ventures through material misrepresentations and omissions, according to the Finra complaint. Mr. McKee had a direct or indirect financial interest in those real estate ventures, according to Finra.
McKee’s other alleged victims included an owner of a small office supply company and other unsophisticated investors seeking conservative investments, according to the Finra complaint. Mr. McKee allegedly promised investors unreasonably high returns not supported by the underlying businesses and hid the precarious financial condition of those businesses, according to Finra. He also allegedly lied about how he would use the invested funds, and also allegedly improperly used or converted customer funds for his own benefit, according to the Finra complaint.
The InvestmentNews.com article adds that McKee used money from one customer to pay off another customer who threatened him with legal action for wrongfully taking funds in connection with an earlier transaction, according to Finra.
McKee also allegedly recommended that a local church invest in a local coffee shop in which he had a business interest, and knew that the investment was not consistent with church’s stated objectives and financial needs, according to Finra. He also allegedly falsified the church’s account documents to prevent his firm and securities regulators from discovering the unsuitable nature of the investments, according to Finra.
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