In today's blog we come upon an all-too common bit of Wall Street misconduct: fudging personal expenses so as to make them look like reimbursable business expenses. Some of the machinations that we've reported about come off as piggish, pathetic, and, okay, perhaps a bit laughable despite it all. What is no joke are the consequences after getting caught. More often than not, you get fired. More often than not, a devastating disclosure is placed on your industry record. More often than not, a regulator will fine and suspend (or bar) you. All of which leaves us wondering why you did it; and, frankly, I suspect that you're left to wonder the same thing for the rest of your life.
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, Anthony DeJohn submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Anthony DeJohn, Respondent (FINRA AWC 2020065015901)
The AWC asserts that DeJohn was first registered in 1996 and by June 2015, he was registered with BMO Capital Markets Corp.
Cutting to the chase, these are the pertinent allegations in the the AWC:
From March 2019 through August 2019, DeJohn improperly charged to his firm-provided
corporate card and then submitted for reimbursement seven charges totaling $2,270 in
commuter bus travel for his regular commute from his home in New Jersey to his Firm
office in New York City. These expenses were personal expenses that were not eligible
for reimbursement as business expenses under BMO's policies. For four of the
reimbursement requests, DeJohn made handwritten notations on the bus travel receipts he
submitted to the Firm, in which he suggested that he undertook the bus travel for client
meetings away from his office. Specifically, he wrote "Travel ticket Boston" and the
name of a client on one receipt, wrote that he was traveling to another client on a second
receipt, and wrote the name of a Pennsylvania-based client on two other receipts. In fact,
the receipts did not represent the costs of DeJohn's travel to client meetings, but rather
were for monthly and ten-trip bus passes for his daily commute. The firm reimbursed the
$2,270 in bus travel. After detection by BMO, DeJohn repaid the costs of the bus travel
to the firm.
By improperly seeking and obtaining reimbursement for expenses related to his
commute, DeJohn improperly used funds and violated FINRA Rule 2010.
The consequence of a couple of thousand bucks in fudged bus tickets on a 25-year industry career -- one with an otherwise unblemished record -- was devastating, as noted in the AWC;
On January 2, 2020, BMO filed a Form U5 disclosing that DeJohn had been discharged
by the firm, and which stated "[DeJohn] used his corporate card for personal expenses.
[DeJohn] repaid amounts owing within 24 hours of being directed to do so. Loss of
confidence, not customer or securities related."
In April 2021, DeJohn became associated with another member firm as a GS, a SU, and a
GP. On August 31, 2021, that member firm filed a Form U5 stating that DeJohn was
voluntarily terminated as of August 29, 2021.
In accordance with the terms of the AWC, FINRA imposed upon DeJohn a $5,000 fine and an eight-month suspension from associating with any FINRA member in all capacities.
Bill Singer's Comment
Truly, I don't know where to begin.
DeJohn's industry record is otherwise unblemished but for what now amounts to a horrific brain fart. He didn't harm any investors. His misconduct didn't involve and securities products. Regardless, DeJohn embarked upon a course whereby he essentially took about $2,200 in money that wasn't his to take, and he took it from his employer BMO, which amounts to biting the hand that feeds you.
9/17/2021 ADDED COMMENT: As the AWC alleged, DeJohn "improperly charged" his corporate card seven times from March through August 2019. The cited misconduct was not isolated as such. DeJohn placed the seven charges on his corporate card but those charges were non-reimbursable personal expenses in the form of "bus travel for his regular commute." In damning fashion, the AWC alleges that "The firm reimbursed the $2,270 in bus travel. After detection by BMO, DeJohn repaid the costs of the bus travel to the firm."
As such, BMO reimbursed DeJohn for $2,270 in non-reimbursable bus travel. He didn't go out of pocket for those fares as it seems he should have but, rather, he put the charges on his corporate card, which was paid by BMO via reimbursement. Moreover, as the AWC notes, he "repaid" the bus fares, and you can't repay something unless you previously received the now-questioned payment.
Finally, the AWC alleges that it was only "after detection by BMO" that DeJohn repaid the $2,270 in reimbursed expenses, and the AWC clearly states that said repayment was undertaken "within 24 hours of being directed to do so. . ." All of which suggests that had DeJohn undertaken voluntary repayment before BMO had detected the charges, that things may have worked out differently. Similarly, the AWC notes that the former employer "directed" DeJohn to make repayment, and that too seems an exacerbating circumstance.
As both the AWC and BMO alleged, DeJohn mischaracterized a personal expense as a business expense, which prompted the use of the corporate credit card. In response to the generation of those debits, BMO reimbursed the bus fares. From FINRA's regulatory perspective: "By improperly seeking and obtaining reimbursement for expenses related to his commute, DeJohn improperly used funds and violated FINRA Rule 2010." The bus fares were not reimbursable according to FINRA and BMO. The reimbursements came out of BMO's pocket and was not for DeJohn to seek or keep. To his credit, he repaid the reimbursement, which FINRA seems to have taken into consideration.
After 40 years on the Street, however, I am able to find compassion for DeJohn because I've seen this before and know that he likely fell victim to the silly-assed stuff that we all do, perhaps should regret when we do it, usually don't regret, usually do it because we figure, hey, who the hell is gonna find out, and then, when they do find out and the universe caves in upon our shoulders, we realize that there's no one else to blame other than me, myself, and I. I'm sure that DeJohn finds himself in that incredibly lonely place.
DeJohn's industry pedigree is impressive. Before joining ED&F and BMO, he had stints at Bear Stearns, Credit Suisse, Lehman Brothers, and Citigroup. DeJohn was Director of Prime Services Sales at Credit Suisse; Senior Vice President/Capital Markets Prime Services Sales Origination at Lehman Brothers; Director of Prime Finance Sales Organization at Citi; US Head of Prime Finance Cross Asset Hedge Fund Sales at BMO; and Managing Director Equity Sales at ED&F. Certainly, not a light weight.
What jumps out at me was his tenure at Lehman Brothers from May 2006 to June 2008. If you recall, it was on June 9, 2008, that Lehmann Brothers reported a nearly $3 billion loss, and by August 2008, the firm had announced its intention to lay off about 6% of its staff, and by September 15th, the firm was filing for bankruptcy. The Great Recession had to be a scary time for DeJohn, as it was for many on Wall Street.
What prompts someone of DeJohn's stature to seek reimbursement for about five months of bus fare in the relatively paltry amount of $2,270? Don't waste your time trying to answer that question -- it's rhetorical. No answer will make any sense. The fact of the matter is that DeJohn commuted from his home in New Jersey to his office in New York City. Same way you drive in each day. Same way I might take the subway. It's virtually impossible per IRS Tax Code https://www.irs.gov/taxtopics/tc511 to legitimately claim "commuting" (the daily trek from home to the office and back) as a business travel expense Likely DeJohn knew the way things worked because he went to some lengths to depict his daily bus commute to NYC as involving a so-called "business destination," for example, a trip to Boston involving a client meeting. He didn't go there. There wasn't any client meeting. He was traveling from his "tax home" to his "main place of business." It was an elaborate ruse that simply wasn't warranted given the paltry dollars involved.
Among the reasons that I publish the BrokeAndBroker.com Blog and the Securities Industry Commentator feed is to warn folks about the consequences of whatever stupidity they are mulling over. No one ever engages in fraud with the expectation of getting caught. It's all thought out and thought through. I'm too smart. They're not looking for this. It will fly under the radar. I've earned it. I'm entitled to it. Why shouldn't I? Ultimately, I have no issue with BMO's discharge of DeJohn or with FINRA's sanctions. Perhaps FINRA placed some weight on the fact that DeJohn fully repaid every dollar that was reimbursed to him based upon his scheme. Perhaps FINRA felt that these pandemic times required some mercy.