October 22, 2010
NEW FINRA MONTHLY DISCIPLINARY CASES
NOW ONLINE AND ANALYZED BY BILL SINGER
Regulatory lawyer Bill Singer has analyzed and posted the latest crop of FINRA disciplinary cases
- One enterprisng broker borrowed over $30,000 from firm customers pursuant to a signed promissory note -- unfortunately, the member firm did not permit such borrowing and the broker failed to seek or obtain his firm's permission. As these tales often go, the lending customers wound up having to go to court to sue for repayment. They won. However, the broker didn't have the bucks to repay.
READ HERE at http://www.rrbdlaw.com/enforcement-actions/index.php?cid=1#2008014828301
- This one starts off with the payment of $102,635 in supposed insurance premium payments by customers to their insurance companies. Alas, the payment got a tad derailed. The broker deposited the funds into his personal account and used the money for his personal activities. If you just went by the usual odds, well, this might have been an easy hundred thou or so in the broker's pocket. Funny thing 'bout odds, thgou. A hurricane struck Texas and the broker's customers filed insurance claims and discovered they were not entitled to coverage.
READ HERE at http://www.rrbdlaw.com/enforcement-actions/index.php?cid=1#2008015003201
- Sometimes you read a disciplinary case, scratch your head, maybe scratch something else, and simply shrug -- what the hell were they thinking, you ultimately ask yourself. In this puzzler, the FINRA member firm allowed its registered representatives to use email to conduct business but the firm did not have an automated system for email surveillance or archiving. How did the firm intend to monitor business-related email, as is required by industry rules and regulation? Okay, sit down for this on -- the firm relied upon its registered representatives to electronically forward their emails to a dedicated internal email address for purposes of supervisory review by a principal and archiving. Yup, you got it, the old honor system. I'm guessing you can sort of guess as to the regulator's reaction to that surveillance system.
READ HERE at http://www.rrbdlaw.com/enforcement-actions/index.php?cid=1#2008015341602
- Here's a simple set of allegations: A supervisor is charged with permitting $1,254,239.00 in excessive markups and markdowns. I figure that got your attention, right?
READ HERE at http://www.rrbdlaw.com/enforcement-actions/index.php?cid=1#2005003644601
- Did you hear the one about the Associated Person who misappropriated $33,445.82 from her supervisor's personal checking account for her own personal use. The thief wrote checks to herself as reimbursement for expenses her office never actually incurred. She misappropriated approximately $2,000 in cash a third party made to her supervisor.
READ HERE at http://www.rrbdlaw.com/enforcement-actions/index.php?cid=1#2009018407601
- One enterprising individual misappropriated member firm funds by using expense reimbursements for personal expenses, charging personal expenses to her corporate credit card and failing to pay the bills on the card. The employee's firm had previously sent her a memorandum about deficient and late payments on her corporate credit card, reminding her that she had agreed to use the card only for corporate expenses and to pay the balance in full each month.
READ HERE at http://www.rrbdlaw.com/enforcement-actions/index.php?cid=1#2008015708701
- How about this lovely gent? He stole $1,000 from an elderly customer by using an automatic teller machine (ATM) card to withdraw the funds from the customer's account without her knowledge or consent.
READ HERE at http://www.rrbdlaw.com/enforcement-actions/index.php?cid=1#2008015139801
- Talk about getting off on the wrong foot! This broker completed an employment application with a member firm in which he falsely represented his annual compensation at a previous securities firm and falsely represented the customer assets he managed and the revenues generated. He provided the firm with numerous fictitious documents supporting his claims and, based upon his false representations, he obtained an upfront loan of $780,000 from the firm. Yeah, you guessed it, the firm found out.
READ HERE at http://www.rrbdlaw.com/enforcement-actions/index.php?cid=1#2010022904801
From 2005 through January 2008, Vance Moore II and Walter Netschi solicited over $80 million worth of investments in Automated Teller Machines ("ATMs") purportedly placed in various retail locations around the country, including convenience stores, gas stations, malls, and hotels. Moore and Netschi claimed that the ATMs would generate revenue streams for their investors based on fees charged for withdrawals of cash. Moore and Netschi entered into contracts with investors representing that the investors collectively had purchased over 4,000 ATMs.
Okay, so, you know, it doesn't sound like all that bad an opportunity. Those ATMs are all over the place and folks really seem to flock to them for cash.
Of course, come on now, why the hell would I be writing about this investment if something hadn't gone wrong?
Talking about something going wrong, how about we simply start with the fact that approximately 90 percent of the machines sold to the victims (at this point, I think I'll stop referring to those folks as "investors," victims strikes me as a far better term) either did not exist or were never owned by Moore or Netschi. To further the fraudulent scheme, Moore transmitted monthly reports and monthly payments to the victims relating to their investments in the ATMs. The reports actually contained false information and the payments were not revenues from ATMs, but were simply monies received by Netschi from new investors. Can you spell P-O-N-Z-I ?
Apparently, not all the victims were easily duped. Some of them noticed discrepancies in the reports or asked questions. In response to such queries, Moore apparently told some whoppers. For example, in the fall of 2006, a victim visited the location of an ATM in Florida that he thought he had purchased from Netschi's company and that was purportedly being serviced by Moore's company. The investor could not find the ATM and was informed by the hotel where the ATM was supposedly located that no such ATM existed. Moore then falsely represented to the investor that the ATM in question had been relocated elsewhere in Florida. Now, how would I imagine some of Moore's artful deflections went? How about: Oh that ATM? Oh, that's not there anymore. We moved it. Where? Oh, either it's in Disneyworld in Epcot or in the middle of the Everglades. I'll get back to you on that.
In reality, Moore and Netschi did not use the victims' funds to purchase ATMs, but rather used the money to further the fraudulent scheme and to enrich themselves. Reality can be a bummer! Seems that there has been lots of self enriching going on the past few years. Nice work, if you can get it.
Alas, our tale comes to a familiar ending. On September 21, 2010, Moore, 55, of Raleigh, North Carolina, and Netschi, 62, of McKinney, Texas, were indicted on one count of conspiracy to commit wire fraud and nine counts of wire fraud. Each count in the Indictment carries a maximum potential penalty of 20 years in prison and a fine of the greater of $250,000 or twice the gross gain or loss derived from the offense. The Indictment also seeks $80 million in forfeiture from Moore and Netschi.
On October 18, 2010, Vance Moore II pled guilty in Manhattan federal court before U.S. District Judge Thomas P. Griesa . Moore, 55, of Raleigh, North Carolina, faces a maximum penalty of 200 years in prison, and a fine of over $2,500,000.Moore has also agreed to a money judgment of $50 million and to specifically forfeit his right, title, and interest in properties located in North Carolina and Florida.
At present, Netschi has not pled and may proceed to contest the allegations at trial.
NOTE: The charges and allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Read about another recent ATM scam at "Bulgarian Indicted for ATM Skimmin Fraud"