On March 27, a complaint was filed with the Financial Industry Regulatory Authority Office of Hearing Officers against Birli and Chapin regarding the State University of New York retirement program. According to the complaint, Birli and Chapin recommended their customers switch MetLife variable Annuities with new ones held outside the retirement plan in MetLife IRA accounts.

Allegedly, Birli and Chapin circumvented their firm’s general prohibition of direct annuities exchange by recommending to their customers that they surrender their annuities to purchase another product available within the retirement program, wait 90 days, and then sell the second product in order to purchase the MetLife IRA annuity.

According to stock fraud lawyers, the new annuities were unsuitable because their liquidity was affected by the seven-year surrender schedules they came with. Furthermore, investors lost accrued death benefits above and beyond their contract value. Allegedly, Birli and Chapin each received commissions of 7.15 percent through the switch.

Variable annuities are a type of insurance product. With this product, the investor pays into an account now in exchange for the guarantee of a future payout. The investment is tied to a stock index return, making it variable. According to securities fraud attorneys, firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance.

If you suffered significant losses as a result of an unsuitable recommendation regarding variable annuities, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a stockbroker claims lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Johnson’s attorney reportedly said that Johnson would likely plead guilty. Securities regulators in Maine and Florida have apparently scrutinized Johnson in the past and, in addition, the Financial Industry Regulatory Authority has already barred him from association with FINRA-registered firms. Securities arbitration lawyers say Johnson previously was associated with Kovack Securities and Next Financial Group Inc.

If Johnson defrauded clients through his company while also registered with Kovack Securities or Next Financial group, he may have been “selling away.” From 2002 until 2009, Johnson was registered with Kovack Securities, and was registered with Next Financial Group from May 2010 to June 2010. According to securities fraud attorneys, “selling away” occurs when a FINRA-registered broker-dealer executes transactions outside his or her registered firm. Investment firms can still be held liable for a broker that is “selling away” if their supervision of that broker is deemed to have been negligent. As a result, it is possible for investors to recover their losses through securities arbitration.

If you suffered significant investment losses because of business conducted with William T. Johnson, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

“Fraley, who was a licensed securities professional employed with licensed broker-dealers until he was terminated in 2011, solicited hundreds of thousands of dollars from Colorado investors, promising the investors that their money would be invested in ‘a well-balanced portfolio of investments’ consisting of Roth IRAs, traditional investments such as stocks and bonds, mutual funds and non-qualified investments,” says the statement from Colorado enforcement officials. However, “Fraley gained unauthorized access to the investors’ accounts, forged the investors’ signatures on checks, deposited the money in a Wealth bank account and converted the money for his own personal benefit, including the purchase of a house.”

Stock fraud lawyers say Fraley was registered from March 2007 to May 2011 with Northwestern Mutual Investment Services, a FINRA-registered broker-dealer. Fraley was registered with another FINRA-registered broker-dealer, MML Investors Services, from May 2011 to October 2011. All FINRA-registered broker dealers are, according to securities fraud attorneys, required to properly supervise the activities of their brokers during the time in which they are registered with the firm. As a result, these firms may be held liable for failing to adequately supervise Fraley.

If you suffered significant losses as a result of your investments with Clinton D. Fraley, you may be able to recover your losses through Financial Industry Regulatory Authority arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

It is clear to securities fraud attorneys, who regularly file claims on behalf of elderly individuals, that financial abuse against the elderly is a common problem. This sentiment was reflected in the June 15 announcement by the CFPB.

“Older Americans have lost billions of dollars to the silent crime of financial exploitation,” says Richard Cordray, CFPB director. “Our older adult population is growing every year, which makes it even more critical that we study this issue. Today, the Bureau will launch a public inquiry to learn more about financial fraud of older Americans and the credentials of financial advisors who counsel them.”

The CFPB’s public inquiry will investigate several issues regarding elder financial abuse. These issues include:

• Determining what effective resources exist to aid seniors in making informed decisions about their brokers or financial advisors.
• Determining what the public and individuals working with elders think about the current methods for determining authenticity and legitimacy of financial advisors’ and financial planners’ credentials.
• Determining what financial counseling, education or management programs are specifically designed for suiting the needs of older Americans, and the effectiveness of current programs.
• Determining what sources compile information on misleading or fraudulent uses of “senior certifications” that are publicly available.
• Determining the details of different forms of deceptive, unfair or abusive practices specifically targeted at Americans of at least 62 years of age. These abusive practices include affinity fraud, power of attorney abuse and other forms of exploitation.
• Determining the details of different forms of deceptive, unfair or abusive practices that target military retirees and older veterans, including military retirement and pension fund fraud.

With the high number of arbitration claims being filed on behalf of older and retired individuals, investment fraud lawyers are glad to see agencies like the CFPB focusing on this issue in an effort to reduce the instances of elder financial abuse.

If you believe you or a loved one has been the victim of any type of financial elder abuse, contact a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Cofounder and director of Results One Financial LLC, Steven Salutric, was recently ordered to restore $1,211,902.25 to clients who held pension plans with him. The money was allegedly withdrawn from four pension plans between 2005 and 2009. This action violated the Employee Retirement Income Security Act. Allegations against Salutric stated that he misdirected client assets to entities such as a restaurant, a film distribution company, a real estate partnership and the church at which he served as treasurer. Salutric had a personal interest in all these entities, according to stock fraud lawyers.

“It is particularly egregious when those entrusted with protecting workers’ retirement assets jeopardize them by committing illegal acts for personal gain,” Hilda L.Solis, secretary of the U.S. Department of Labor, said.

In another case, a preliminary injunction against Hutcheson Walker Advisors LLC and Matthew D. Hutcheson was granted by the U.S. District Court for the District of Idaho. Allegedly, Hutcheson used over $3.2 million belonging to the workers of multiple employers, located in retirement plan savings, for his own personal benefit. Hutcheson allegedly tried to use the money to purchase an interest in a failed golf and ski resort, Tamarack Resort. The Department of Labor says that, as a result of Hutcheson’s alleged actions, the retirement plans affected have been left without sufficient funds to pay the benefits owed to the participants.

If these two cases tell the public anything, it is that investment fraud lawyers have a right to be concerned about the amount of retirement fraud affecting individuals today. If you believe you have been the victim of securities fraud related to your retirement account, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a stock fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

The most common IRA custodians are broker-dealers and banks. In traditional IRAs, holdings are limited to mutual funds, CDs, firm-approved stocks and bonds. However, custodians for self-directed IRAs may invest in promissory notes, tax lien certificates, real estate and private placement securities. Investments that tie up retirement funds for a time period that is too long, fail to diversify in order to reduce possible loss or contain a risk for loss that is too high are in breach of advisers’ fiduciary duty and brokers’ suitability standard. In addition, early withdrawals come with a penalty that encourages money remains tied up in them longer.

Another significant danger of self-directed IRAs, and a reason they become a target for fraud promoters, is that they often do not require the custodian or trustee of the IRA to perform audits or keep accurate records.

If you hold a self-directed IRA and have accepted unsolicited investment offers, accepted an investment that “guaranteed returns” or if you do not have access to retirement funds because of your investment’s lengthy time horizon, you may have already been a victim of stock broker fraud. To find out more about your legal rights and options, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

For more on how to avoid becoming a victim of self-directed IRA fraud, see the earlier blog entry “The Risks of Self-Directed IRAs.”

According to Brad Borncamp, a certified public accountant, “IRAs have a specific purpose: long-term investment for retirement. It’s really easy to mess up these transactions, and there’s more than meets the eye.” Self-directed individual retirement accounts allow their owners to invest in more unusual investment vehicles such as raw real estate, limited partnerships, private placements and life settlements. This is in contrast to traditional IRAs, which are usually limited to mutual funds, stocks and bonds. According to NASAA, about 2 percent of the total IRAs, or $94 billion, is estimated to be self-directed.

Because self-directed IRAs’ owners are able to hold unregistered securities, due diligence is often neglected by custodians. In addition, early withdrawals come with a penalty that encourages money to remain tied up in them longer, making these investments a frequent vehicle for stock broker fraud. Although up until now, smaller broker-dealer firms have resisted giving up the higher profit margins associated with self-directed IRAs, they will soon be following in the footsteps of their larger counterparts because of recent developments.

There are many restriction options available to broker-dealers. For instance, LPL Financial doesn’t allow advisers to sell any self-directed IRAs. Commonwealth Financial Network allows self-directed IRAs but they are subjected to due diligence. Fidelity Investments allows self-directed IRAs but holders can only purchase non-traded real estate investment trusts. Other options that have been adopted by firms are aimed at disallowing nontraditional investments or ensuring that the firm can not be held liable for self-directed IRA investments that go bad.

In 2005, Forbes Magazine nicknamed Mandell Wall Street’s “bad boy broker” and it’s no wonder, with the bad publicity Sky Capital has received. A Forbes article released in July of 2011 by Walter Pavlo describes “the low bar of becoming a stockbroker” at Sky Capital. McKyle Clyburn, a witness at Mandell’s trial, described how he lied about his name, age and “pretty much everything” when first becoming a stock broker and then found himself a home at Sky Capital — despite his aversion to reading and writing and his drug abuse — making sometimes as much as $750,000 a year. He also stated that using margin trades to burn through a client’s money to earn himself commissions was common at Sky Capital. Clyburn is one of four former Sky Capital employees to plead guilty to criminal charges and then testify to their broker misconduct at Mandell and Harrington’s trial.

The trial lasted five weeks and testimonies like Clyburn’s exhibited the kind of lifestyle that Sky Capital brokers enjoyed at the expense of their clients. According to the Wall Street Journal, evidence introduced by prosecutors also showed that over $162,000 of Sky Capital investors’ money went to “adult entertainment expenses.” Attorneys for both Mandell and Harrington say they will appeal.

Mandell and Harrington have not yet been sentenced and were taken into custody pending U.S. District Judge Paul Crotty’s delayed decision.

Selewach was employed with Ameriprise from September 1997 until he was fired in April 2006. In February of 2008, he was permanently barred from acting as a securities broker by the Financial Industry Regulatory Authority. His broker misconduct took place between July 2005 and November 2008, during which time he stole nearly $350,000 from six victims. For the last nine months of this time period, he was barred from being a broker but continued to operate as one regardless. Selewach led investors to believe that he was investing their money in hedge funds, commodities and real estate, but in reality he was using it for personal benefit including travel, mortgage payments and sporting event tickets.

During the trial, Selewach’s defense argued that the monies he received were loans rather than “high-interest-rate investments,” according to the Cape Cod Times. Selewach himself testified to this effect. However, victims of his crimes testified otherwise. One of his victims, Patricia Conti, lost more than $150,000 to Selewach. Conti testified that Selewach did not disclose that his departure from Ameriprise was a result of termination, that he continually pressured her and that he asked her to sign documents which she was unable to read fully because they were largely concealed from view.

Conti further testified that at one point, Selewach came to her home with a $30,000/30-day investment opportunity which he said would yield 19 percent interest. Though she told him no, he appeared at her residence, uninvited, multiple times to pressure her about the investment. She finally relented and upon asking for her returns after 30 days, Selewach replied that he said 30 days but actually meant 60 days. When Conti received a letter from the Massachusetts Securities Division asking her about a “loan,” she contacted Selewach, who then said “to go along with the testimony or your money would be in jeopardy.” Fearing financial ruin, Conti did as Selewach instructed.

Originally arrested in September 2009, Selewach now faces 8-12 years in prison followed by another 10 years of probation, during which he is barred from working as a financial custodian or fiduciary. In addition to his prison sentence and probation, Selewach is required to pay full restitution, totaling $335,000, to his victims.

Official court documents stated that Noel and Klosek’s fraud took place from about January 2003 to around July 2006 and involved over 100 clients, the majority of which were local NC retirees. In this atrocious broker fraud, clients were persuaded to invest large sums with Noel’s business, which were then diverted to another company belonging to Noel, significantly decreasing clients’ investment values. The diversion occurred without his clients’ knowledge or approval. The decrease in investment value was then hidden from clients with falsified quarterly statements and in July 2006, investors were told that their investment had actually grown. Victims of Noel and Klosek’s fraud now believed their assets to be around $16 million when, in fact, they had dwindled to only around $1 million.

According to the NC Securities Division Newsletter, Acting Special Agent in Charge of the Charlotte Division of the FBI, Joseph S. Campbell, said this of the case: “Retirees are often victims of fraud, and to steal their financial security is unconscionable. These men stole millions of dollars from people who don’t have the opportunity to restore the savings they’ve spent their lives building.” Though the $1 million that is now being distributed is only a small portion of the total restitution ordered by the court, it is a start.