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Articles Posted in Affinity Fraud

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Investment fraud lawyers continue to investigate claims on behalf of elderly individuals who have been the victims of affinity fraud. In many cases, it is up to the children and grandchildren of elderly individuals to discover and put a stop to the victimization of their loved ones by fraudsters.

Have Your Loved Ones Been the Victims of Affinity Fraud?

A recent article in Forbes examined why elderly parents are susceptible to scams that seem obvious to younger individuals. According to the article, there are three main reasons for this: isolation and loneliness, diminished cognition and feelings of financial insecurity. Fraudsters know how to talk to lonely elders in a way that garners trust and makes them feel engaged. In addition, Alzheimer’s Disease research indicates that the first kind of judgment to be impaired is financial judgment, which may go undetected in the beginning stages of Alzheimer’s.

In one example, Gary H. Lane, a former Bank of America financial advisor, pleaded guilty to five counts of tax evasion and 12 counts of fraud on September 3, 2013 and was sentenced to a 10-year prison sentence on February 10, 2014. Allegedly, Lane defrauded six investors of more than $2 million from January 2010 until March 2011. During that time, Lane was reportedly employed by Bank of America Investment Services. Allegedly, Lane convinced these clients to invest their money through an E-trade account instead of following normal bank procedures.

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Two former JP Morgan Chase Securities Inc.-registered brokers, Fernando L. Arevalo and Jimmy E. Caballero are the subjecct of regulatory charges alleging theft. Reportedly, the Financial Industry Regulatory Authority (FINRA) permanently barred both Caballero and Arevalo from the securities industry.

Two JP Morgan Brokers Barred by FINRA for Theft of $300,000 from Elderly Client

FINRA’s investigation of the two brokers found that they allegedly collaborated to steal approximately $300,000 from one of their clients, a widow who had diminished mental capacity. Reportedly, the client held accounts at both JP Morgan and a related bank affiliate. She sold two annuities between April and July 2013 and deposited the proceeds — approximately $300,000 — into a bank account that had been opened for her by Arevalo.

Subsequently, the funds were allegedly withdrawn using two cashier’s checks. On the same day, the money was allegedly deposited by Caballero into a joint account he opened at a different bank in his name and the client’s name. When the deposits were questioned by the bank and further confirmation was required, Arevalo allegedly drove the client to the bank so she could confirm the source of the funds.

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Investment fraud lawyers are currently investigating claims on behalf of elderly seniors who have been the victim of affinity fraud or other investment scams. Affinity fraud is an investment scam that targets an identifiable group such as seniors, ethnic communities, professional groups, religions groups, etc. In one recent claim, Gary C. Snisky reportedly targeted and defrauded more than 40 seniors in a scam that cost these individuals $3.8 million. According to the allegations, Snisky mostly targeted retired annuity holders, many of whom lived in Colorado.

Elderly Seniors Targeted for Financial Fraud

The charges were filed by the Securities and Exchange Commission and claim that Snisky used insurance agents to sell Arete LLC interests, which he claimed were safer and more profitable than annuities. Furthermore, the SEC’s claims allege that Snisky told investors that their funds would be used to purchase government-backed agency bonds at a discount by eliminating middlemen fees, which would then be used for overnight banking sweeps. However, he allegedly misappropriated around $2.8 million, using these funds to pay commissions and mortgage payments. According to securities arbitration lawyers, scams like this are far too common and, unfortunately, many investors are either unaware or too embarrassed to come forward.

Reportedly, Snisky described Arete LLC as an “annuity plus” with up to 7 percent in guaranteed annual returns. Furthermore, he allegedly claimed that investors could earn interest and take principal from the investment without penalty, even after 10 years. According to the SEC’s allegations, Snisky stated that the investments were safe, exhibited falsified investor account statements that showed earnings to staff and drafted documents to be used as offering materials by salespeople.

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Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with Wells Fargo Advisors and James Arnold Busch. Reportedly, Busch, a former Wells Fargo advisor, recently entered into a Letter of Acceptance, Waiver and Consent (AWC) regarding alleged misappropriation of funds from brokerage customers.

Customers of Wells Fargo Advisors James Arnold Busch Could Recover Losses

The AWC states that “at relevant times, Busch worked in various branch offices of WFA located in the Firm’s affiliated bank. Many of Busch’s customers had both Wells Fargo brokerage accounts and Wells Fargo bank accounts, and Busch had access to his customers’ bank account information. From approximately 2006 to 2013, Busch utilized his customers’ bank account information to misappropriate approximately $1.3 million from approximately eight of his Wells Fargo brokerage customers, most of whom were elderly women.”

Furthermore, according to the AWC, Busch primarily used several methods to misappropriate the money. He contacted his credit card company to request payments from the Wells Fargo bank accounts of his customers to his personal credit card account, providing his credit card company with the bank account and routing numbers of his customers. Prior to 2009, he used a manual process with paper debit memos and from 2009 to 2013 he called the automated system for his credit card company. In some cases, he allegedly generated cash by liquidating securities contained in the brokerage accounts of his customers and then transferred the cash to his customers’ bank accounts before misappropriating the funds.

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Stock fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with Bambi Holzer. According to a Forbes article, Holzer’s investment advice has resulted in securities settlements amounting to more than $12 million. Despite this article, which appeared three years ago, her trades are still being cleared by brokerage firms.

Bambi Holzer Still Trading Despite Numerous Customer Complaints

Currently a broker at Newport Coast Securities, Holzer has also worked with a number of other firms, including UBS, Brookstreet Securities Corporation, AG Edwards, Wedbush Morgan Securities Inc. and Sequoia Equities Securities. Holzer and UBS have already been compelled to pay to settle securities claims amounting to $11.4 million. These claims alleged that Holzer misrepresented variable annuities through misrepresentation of guaranteed returns. Holzer was fired from AG Edwards in 2003 for allegedly engaging in business practices that did not coincide with the firm’s policies. Further allegations against Holzer include misrepresentations while at Brookstreet. These misrepresentations allegedly occurred in 2005 at a Beverly Hills presentation at which Holzer allegedly stated that a fictional couple was able to make $9 million by deferring $732,000 in taxes through the use of trusts. In another claim, a customer of Wedbush Morgan Securities alleged breach of fiduciary duty, account mishandling, and breach of contract that allegedly resulted in damages of $824,000.

According to securities fraud attorneys, allegations against Holzer include fraud, churning, unsuitable investments, misrepresentations of fees, Securities Act violations, private placement-related fraud, negligent representations related to variable annuities, inadequate supervision, variable annuity-related fraud, negligent recommendation and sale of Provident Royalties LLC, negligent sale and recommendation of Behringer Harvard Security trust and other unsafe products as well as elder abuse.

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On June 15, coinciding with World Elder Abuse Awareness Day, the Consumer Financial Protection Bureau (CFPB) announced that it would be launching a public inquiry regarding the financial exploitation of elder Americans. The CFPB is a new agency that will be policing consumer financial products, and investment fraud lawyers applaud its choice to focus its attention on elder financial abuse.

Elder Financial Abuse Targeted by CFPB

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.”

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Affinity fraud is a scam in which personal contacts are used by the perpetrator to defraud a specific group of people. While religious fraud is common, church congregations are not the only breeding grounds for affinity fraud. Investment attorneys urge the public to be aware that any tight-knit community can be a target. Groups targeted can include professional circles, ethnic communities, rotary clubs or even social media groups. One case of fraud targeted a Persian language radio show’s listeners.

Affinity Fraud Rears its Ugly Head… Again

Ephren Taylor, who credited himself as the youngest black chief executive of a publicly-traded company in American history, appeared on CNN and NPR, and was a Democratic National Convention speaker, was endorsed at one of his “Wealth Tour Live” seminars by Eddie Long, pastor of the New Birth Missionary Baptist Church with the words, “[God] wants you to be a mover and a shaker… to finance you well to do His will.” Taylor then offered “low risk investment with high performances” to the Pastor’s flock. Taylor now stands (whereabouts unknown) accused of fraud. The full extent of investor losses as a result of Taylor’s fraud is yet to be determined because of the complicated web of companies, both legitimate and shell.

While many individuals that are targeted for stock broker fraud are elderly and/or uninformed, these are not the only victims of affinity fraud. One man who was taken in by Ephren Taylor had an MBA and was an electrical engineer. A Utah man in another affinity fraud case, who was taken for $50,000, had worked on white-collar fraud cases as a federal agent before his retirement.

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The North American Securities Administrators Association (NASAA) released its annual report last month on enforcement actions to fight securities fraud. The report compares the data on securities fraud enforcement actions from 2010 to that of 2009. According to the report, the number of actions pursued in 2010 rose 51 percent, a major jump from 2009. In addition, the report notes a 10 percent increase of securities fraud violations, a 9 percent increase in unregistered securities violations and a 24 percent increase in unregistered individual violations.

Other reported statistics include:

  • 7,000 total investigations, 3,475 of which led to enforcement actions
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Affinity fraud is nothing new in the investment word. It involves targeting faith-based organizations, professional associations and community service groups. The victims of affinity fraud are tied together through common interests, professions, faith, hobbies and lifestyles. Scammers then use this common ground to establish a relationship with their victims, making stealing much, much easier. Now affinity fraud has become even easier for scammers with social networking sites like Facebook, LinkedIn, Twitter and even online dating sites like eHarmony.


Online social networking is good news for scammers because they don’t have to worry about that pesky “sixth sense” some people get when they are physically near someone who is up to no good. Limiting the social interaction to online encounters in the beginning helps scammers get past the initial phase of their plan — gaining your trust. Not only is it easier to gain your trust, but they can work at it any time and from anywhere.

According to Melanie Woods, the Indiana Investor Education Coordinator, the average Facebook user has connections with 80 community pages, events and groups. Each one of these connections is an opportunity for scammers to take advantage of the individual.

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Roy Fluker Jr. was finally sentenced to 15 years in federal prison in connection with an investment and mortgage fraud scheme, something that should have taken place last December. Fluker’s son, Roy Fluker III, and daughter, Ronnanita Fluker, are already serving eight-year prison terms for the scheme. Fluker Jr., who failed to appear for sentencing last December, later was arrested in Florida and sentenced on August 25, 2011. Father, son, and daughter were found guilty of multiple fraud counts following their May 2010 trial. Roy Fluker III was sentenced on August 16, 2010, and Ronnanita Fluker was sentenced in December, but Roy Fluker Jr., a resident of Highland Park, fled Illinois before his sentencing.

Florida father joins children in prison after fleeing sentencing

According to the U.S. Attorney’s office, about 2,000 victims lost a total of around $10.7 million. The fraud targeted African-Americans and many of the victims could be found at Chicago churches and hotels. The Fluker family fraud took place between 2005 and 2008, yielded a profit of around $18 million, and resulted in the acquisition of some of their victims’ homes. The Flukers’ “Housing Program” was supposed to reduce mortgage payments and result in total ownership in five years. Their “Spend and Redeem Program,” a financial and educational program, boasted a 200 percent profit in one year. The fraud was conducted through two companies, All Things in Common LLC (also known as More Than Enough) and Locust International LLC.

The trial that concluded in 2010 ordered $9 million preliminary forfeiture judgments and $7.34 million in restitution. After freezing the Flukers’ accounts, about $3.4 million was recovered by the Illinois Attorney General’s office. The recovered amount, combined with the restitution amount ordered, will go to replaying the targeted victims who had not yet been repaid.

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