Articles Tagged with breach of fiduciary duty

The Financial Institutions Regulatory Authority (FINRA) has ejected broker Mark Kaplan from the securities industry. Kaplan was found to have churned the account of a 93 year old client.

According to the Letter of Acceptance, Waiver and Consent agreed to by Kaplan, the 93 year old was stricken with dementia.

The churning occurred over  4 years. $723,000 in trading losses occurred. Kaplan reportedly generated a like amount of commissions and mark ups for himself and his employer, Vanderbilt Securities.

On December 19, 2018, the SEC announced additional charges against an additional 13 individuals and 10 companies for unlawfully selling securities of Woodbridge Group of Companies LLC to retail investors.

Woodbridge collapsed into bankruptcy in December 2017. The SEC previously  charged the owner, the company and others of operating a $1.2 billion Ponzi scheme. Top sales agents were also accused.

The supplemental defendants, all 13, of selling more than $350 million of unregistered securities to about 4,400 investors. The defendants told the purchasers that the Notes were “safe” Investments.

December 25, 2018

According to The Financial Industry Regulatory Authority (FINRA) former advisor Scott Kozak (Kozak). has been accused by his former firm and barred by FINRA over unapproved securities.  Kozak has four customer complaints on his record.

The charge was “selling away” securities, not approved by the broker Kozak was affiliated with. The activity occurred between July 2011 and March 2017. Kozak was associated previously with Cetera Advisors LLC (Cetera) in Highlands Ranch, Colorado.

A Ponzi scheme  is a financial scam where early investors are paid returns with money from later investors rather than legitimate investment returns. A big time Ponzi scheme occurred in Fla. recently. The most recent “huge Ponzi” was Bernard L. Madoff Securities, LLC, involving as much as $65 Billion. Well, this one was $1.2 Billion which is still bad enough.

A Villages, Florida, resident and four companies were charged in an enormous Ponzi scheme by the SEC for unlawfully selling securities of Woodbridge Group of Companies LLC to unsuspecting clients. The SEC previously charged the now bankrupt company, Knowles Systems, Inc., its principal and others with operating a  $1.2 billion Ponzi scheme.

One defendant is Lynette M. Robbins, a cosmetologist who lived with Theodore F. Leutz at 731 Evans Way in the Villages. The Wall Street Journal reported that Knowles Systems Inc. and Robbins, its chief executive and owner, was the highest earning agent for Woodbridge. A SEC report said she received at least $8.1 million in commissions. Other Florida-based defendants sold more than $243 million of its unregistered securities to about 1,600 retail investors.

According to the Financial Institutions Regulatory Authority, a complaint was filed in 2016 against broker Hank Mark Werner of Northport, New York, charging him with securities fraud for churning the account of his customer, a 77-year old blind widow. The FINRA complaint alleged that Werner churned the widow’s accounts over a three-year period. $243,000 in commissions were charged with $184,000 in losses.

Werner had been the elderly widow’s broker and that of her deceased blind husband for 21 years. After the customer’s husband passed away, Werner aggressively traded  traded the widow’s account to generate excessive commissions for himself. Werner exercised control over each account and recommended every trade. The widow customer followed  Werner’s recommendations. Because she was blind and severely debilitated, requiring in-home care, the customer relied completely on Werner to accurately report account activity and performance.

Churning involves unauthorized trading of any account for the purpose of generating commissions for the broker’s benefit. Many other factors are considered. Expert witnesses many times are called at hearing. Some if the components are control of the account by the broker, annual turnover and the commission to equity ratio. The Law offices of Anthony M. Abraham, Esq., PC  has pressed many claims of this nature. http://www.BrokerFraud.Net.  Here is a snapshot of interesting aspects of this case:

David Brooks, now dead , was a big time scamster who sold defective body armor to the Dept of Defense. After much litigation, on November 5, 2018 U.S. District Judge Joanna Seybert entered an order forfeiting more than $143 million in assets that had been seized from David H. Brooks. David H. Brooks was controlling shareholder  of DHB Industries, Inc. The armor was used extensively in Afghanistan and Iraq and was defective. David H Brooks (DHB) was also a supplier of body armor to law enforcement agencies.

In 2010,  Brooks was convicted of mail and wire fraud, securities fraud obstruction of justice and filing false tax returns.  The Court had ordered forfeiture and restitution to victims.  Brooks died in prison while an appeal of that case was pending.

Brooks cooked DHB’s books and records and then lied to auditors to cover-up.  DHB’s shares were artificially inflated through the scams to $20 per share. Brooks started selling DHB shares which delivered $185 million.  Thereafter, the price of DHB stock declined to pennies. Brooks spent DHB’s funds to finance his family’s extensive spending, including an expensive bat mitzvah party, vacations and other personal spending.