Articles Tagged with broker fraud

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.

Times can get complicated when a broker was romantically involved in the past with a client. Sometimes seemingly good contacts are not so good. Then charges and countercharges fly back and forth. A prior sexual relationship may or may not have influenced this case.  A lot of money was lost.

We emphasize that the information below relates to a FINRA  “complaint.” Always, as part of our Blog and general practice, the reader must await the “other side of the story” as to the complaint.  But, previously, a FINRA arbitration Panel ordered payment  of $34 million to the estate of Home Shopping Network co-founder Roy Speer because of unauthorized trading, churning  and other violations by Ms. Forte.  Ms. Forte was fired in March 2016 by Morgan Stanley. But a lot of the facts seem to have been established by an Arbitration hearing which preceded the FINRA Complaint.

The fundament of the FINRA complaint and preceding arbitration, of course, was churning of a customer’s account.  http://www.BrokerFraud.Net