You hear about the FINRA regulatory settlement involving the employee who submitted personal charges for reimbursement except he claimed that some mystery man had misused his credit card but then sought reimbursement anyway but later paid all the charges including a first-class-flight ticket even though he testified that he was forced to buy that first-class ticket because a supervisor kept him late and he missed an earlier flight? Strap yourself in for a roller coaster of a regulatory ride.
Case In Point
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Christopher William Wingader submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Christopher William Wingader, Respondent (AWC 2016049496401, April 11, 2017).
The AWC asserts that Wingader entered the industry in March 2013 and by August 2013 was registered with FINRA member firm Merrill Lynch, Pierce, Fenner & Smith , a FINRA-regulated broker-dealer. The AWC asserts that Wingader had no prior relevant disciplinary history in the securities industry.
Glamorous: Flyin' First Class
Under the "Overview" section of the AWC, we are informed, in pertinent part:
In November 2015, Wingader charged approximately $1,538 in personal expenses to his corporate-issued Bank of America credit card, including a $1,134.10 first-class airline ticket (the "Charges"). In December 2015, Wingader claimed that all of the Charges were fraudulent, and later submitted a false expense report with the Firm seeking reimbursement for a portion of the Charges. . .
Additionally, under the 'Facts and Violative Conduct" section of the AWC, these additional details are presented:
On November 24, 2015, Wingader used his Corporate Card to pay for eleven personal expenses totaling approximately $1,538, including a first-class airline ticket in the amount of $1,134.10. At the time that he incurred the Charges, Wingader knew that personal expenses were not reimbursable under Firm policy.
On or about December 15, 2015, Wingader falsely reported that his Corporate Card had been fraudulently used by an individual other than himself to make the Charges. Shortly thereafter, Wingader submitted a statement to the Firm falsely claiming that each of the eleven Charges was fraudulent.
Let's do a quick recap. Two days before Thanksgiving Day, Wingader put 11 personal expenses totaling about $1,538 on his Bank of America corporate card. The AWC asserts that when Wingader used the card in November, he knew he was not entitled to reimbursement from Merrill Lynch for personal expenses.
Okay. Fine. I got it. Seems fair enough. So far, so good
About three weeks after incurring the 11 personal charges, Wingader reports on December 15th that his card was misused by another individual and, to dig a deeper grave for himself, "shortly thereafter," he provides Merrill Lynch with a written memorialization of his bogus claims.
The AWC resorts to some odd phrasing about Wingader's bogus December 15th report because the settlement document does not specify to whom Wingader "falsely reported." Both Merrill Lynch and Bank of America are referenced in the "Overview' section of the AWC, but to which of those entities Wingader filed his false December 15th report is not specified. Not a big deal but I note it in the spirit of a housekeeping issue.
SIDE BAR: Regardless of this bit of muddiness in the AWC, compliments to FINRA for finally naming the name of a parent bank! Since Bank of America issued the corporate card and is Merrill Lynch's parent/affiliate, it's nice to see that FINRA has stopped with its silly policy of not naming such parent/affiliates and only referencing them as a "bank affiliate" or "bank subsidiary."
Then there's the issue of that "shortly thereafter" report that Wingader submitted to Merrill Lynch (the "Firm"). The "Overview" characterizes that report as a "false expense report;" whereas the "Facts and Violative Conduct" characterizes that report as a "statement." Again, the distinction in characterization is not a big deal but there is a difference between submitting a spreadsheet showing dates, amounts, and nature of charges versus a written statement in which the author comments about how he had been victimized by the theft of his card. Simply noting a bit of inconsistency that should be avoided in a published regulatory document.
During the relevant time, the AWC asserts that Merrill Lynch had the following expense-reimbursement protocol::
[T]he Firm's written policies and procedures ("WSPs") provided that the Firm would reimburse employees only for ordinary and necessary expenses incurred on business-related trips or on behalf of the Firm. The Firm's WSPs further prohibited its registered representatives from the theft, embezzlement or misappropriation of Firm or client assets, and from providing false or misleading information to the Firm.
Merrill Lynch's reimbursement policy covers business-related charges and employees are not allowed to engage in fraud or criminality (hardly something that needed to be put in writing but y'all know how lawyers are when drafting such things, right?). Not clarified in the AWC is whether employees could use the corporate card for personal expenses provided that they paid for them out of their own pocket, notified the firm of said charges, and did not seek reimbursement of any personal charges. My guess is that the corporate card was to be used for only corporate charges but policies exist whereby associated persons may charge a corporate card with certain personal expenses provided they are promptly disclosed, timely paid out of the associated person's pocket, and not submitted for reimbursement. There is a dramatic difference between a corporate policy that prohibits using a corporate card for personal expenses and one that "would reimburse employees only for ordinary and necessary expenses incurred on business-related trips or on behalf of the Firm." The latter variant suggests that it is not a violation to incur personal charges but only a violation to seek reimbursement of same.
Why Not Wait-and-See?
A puzzling aspect of Wingader's conduct is why he sent in December a "false expense report" or "statement" to Merrill Lynch. The AWC alleges that Wingader notified Bank of America on December 15th that some villain had fraudulently incurred the 11 Charges. Further, the AWC asserts that it was only on December 22nd that Bank of America informed Wingader that he would be credited for 8 of the 11 disputed charges. What was the point of submitting a reimbursement request to Merrill Lynch for any of the 11 Charges before the bank had made its decision? Not that it would have significantly lessened the misconduct but at least Wingader would have been guilty of only trying to seek wrongful reimbursement for 3 Charges from Merrill Lynch rather than all 11. As noted in the AWC:
On December 22, 2015, Wingader was informed by Bank of America that he would receive a credit in the amount of $330.03 for eight of the Charges, but not for the remaining three Charges, including the $1,134.10 airline ticket. On December 30, 2015, Wingader submitted a false expense report to the Firm in which he sought and obtained reimbursement for $403.78 of the Charges ($73.75 for business-related expenses and $330.03 as credits for fraudulent charges). Wingader ultimately paid the Firm for the airline ticket on January 29, 2016, and paid the Firm for the remaining charges on March 8, 2016.
It seems that the "shortly thereafter" report may be the December 30th one referenced in the quote above. Unfortunately, the AWC does a hatchet job when it comes to explaining what happened to the reversed charges and Wingader's subsequent efforts to obtain reimbursement.
On December 22nd, Bank of America informs Wingader that his account will be credited for 8 of the 11 disputed charges in the amount of $330.03, which leaves a shortfall of about $1,207.97, of which $1,134.10 is for the first-class airfare. The difference between the $1,207.97 in non-credited charges and the airfare is about $73.87.
At this point, what's the dollar amount of the personal expenses for which Wingader wrongfully seeks reimbursement from Merrill Lynch? He wouldn't need to seek reimbursement of the $330.03 in credits for the 8 charges no longer appearing on his card statement. Those charges were purportedly removed from the corporate card. As such, it would seem that Wingader would seek reimbursement for the remaining 3 Charges totaling $1,207.97.
Seem what it may, the AWC does another hatchet job on this aspect of the settlement.
The AWC asserts that on December 30th, Wingader sought $403.78 in reimbursements from Merrill Lynch. The AWC asserts that the $403.78 represented "$73.75 for business-related expenses and $330.03 as credits for fraudulent charges." I'm sorry but that doesn't make any sense. Wingader sought reimbursement of the $330.03 in personal charges that Bank of America had reversed? If the charges were removed from his corporate card, why would he need to have them reimbursed? Which isn't to suggest that Wingder may not have sought that double-dip but it is to suggest that the AWC makes a mess of whatever the explanation is. Further, the AWC asserts that Wingader "ultimately paid the Firm for the airline ticket on January 29, 2016, and paid the Firm for the remaining charges on March 8, 2016."
I mean, what the hell? Was it Wingader's intent to personally pay for the airline ticket all along?
(Not) Adding It All Up
In tallying up the misconduct and figuring out the violations, the AWC alleges that:
By (i) misappropriating $403.78 from the Firm; (ii) attempting to misappropriate $1,134.10 from the Firm; and (iii) providing false and misleading information to the Firm regarding the nature of the Charges, Wingader violated FINRA Rule 2010.
Taking a bit of the double-dip route itself, FINRA then tacks on this:
As described above, Wingader submitted an expense report to the Firm on December 30, 2015, that falsely represented that eight charges totaling $330.03 were fraudulently made on his Corporate Card and that two other charges totaling $73.75 were business-related and reimbursable by the Firm.
By knowingly submitting a false expense report to the Firm in December 2015, Wingader caused the Firm to maintain inaccurate books and records concerning its liabilities and expense accounts and violated FiNRA Rules 4511 and 2010.
The AWC asserts that in a Uniform Termination Notice for Securities Industry Registration ("Form U5") dated April 4, 2016, Merrill Lynch reported that Wingader's employment and registrations had been terminated for "[c]onduct involving personal use of a corporate credit card" unrelated to clients of the Firm.
But that this saga ended with Wingader's termination. Alas, on November 4, 2016, Wingader gave sworn testimony during a FINRA on-the-record interview ("OTR") and apparently explained that he was
forced to purchase the first-class airline ticket because his Firm supervisor kept him late at the office that day, causing him to miss an earlier, ticketed flight. However, there is no record of Wingader ever having been in his Firm office on November 24, 2015. Accordingly, his testimony was false.
By providing false and misleading testimony during the OTR, Wingader violated FINRA Rules 8210 and 2010.
In accordance with the terms of the AWC, FINRA imposed upon Wingader a Bar from association with any FINRA member in any capacity.
Bill Singer's Comment There was nothing first-class about Wingader's conduct as he tried to defraud both Bank of America and Merrill Lynch. To destroy a career over such nonsense is ridiculous. Good riddance!