On April 17, 2012, the Securities and Exchange Commission ("SEC") filed a Complaint in the United States District Court for the Central District of California alleging that since February 1, 2010, Michael Anthony Gonzalez raised approximately $1 million by telling investors he would invest their money in specific tax-exempt municipal bonds insured by the Securities Investor Protection Corporation (SIPC) . The SEC claims that Gonzalez never purchased the bonds, deposited investor money into his own bank account for personal use, and attempted to conceal the scheme by providing investors with phony confirmation statements. SEC v. Michael Anthony Gonzalez (CDCA, 12-03319 SJO (PLAx), April 17, 2012).
NOTE: The SEC Complaint contains allegations and the Defendant is presumed innocent unless and until prove guilty in a court of law.
According to the SEC's complaint, Gonzalez falsely portrayed himself to investors as a legitimate money manager associated with New York-based broker-dealer May Capital Group; when, in fact, he had no relationship with that firm. In seeking out clients, not only did Gonzalez rely upon word of mouth among friends and associates, but he also ran advertisements, which portrayed him as a specialist in the tax-exempt municipal bond market and as someone who had managed "AAA-rated portfolios of clients that have outperformed the bond market in general by 2.75%." The advertisements also touted his experience as a financial consultant for Crowell and Salomon.Gonzalez, 46, Pasadena, CA, allegedly operated his purported bond portfolio management business out of his home using two different business names, Michael Gonzalez INY and Michael Gonzalez Investments. In 1994, Gonzalez obtained his Series 7 securities license. From 1994 to 2000, Gonzalez was a registered representative with Salomon Smith Barney, Inc., a registered broker-dealer. From 2000 to 2001, Gonzalez was a registered representative with Crowell, Weedon & Co., also a registered broker-dealer.
Moreover, the Complaint charges that Gonzalez defrauded investors into believing that their investments were insured and safe - some of that was accomplished through phony trade confirmations that identified securities that were either not purchased or non-existent. Also, Gonzalez informed his investors that he cleared his trades through E*Trade.
Judge S. James Otero granted the SEC's request for a temporary restraining order against Gonzalez and issued orders freezing his assets, requiring accountings, prohibiting the destruction of documents, and granting expedited discovery. Additionally, the SEC is seeking preliminary and permanent injunctions, disgorgement, prejudgment interest, and financial penalties against Gonzalez.
Okay, now's the time for one of my patented jeremiads. Follow me.
Five simple steps that may take you all of two or three minutes. And what do we find? We're on Gonzalez's FINRA BrokerCheck online record.
On Page 3 we learn that he was, indeed, registered with Salomon Smith Barney from 1994 to 2000; and then with Crowell, Weedon & Co. from 2000 through July 2001.
On Page 8 of the BrokerCheck record we learn that on September 26, 2003, Gonzalez was barred by the New York Stock Exchange pursuant to a settlement in which the allegation was misappropriation of customer funds.
At this point, I opened up a new browser window and went to the New York Stock Exchange's website at http://nyse.com , where I typed in Gonzalez's name and clicked on a result, which was his disciplinary Decision:http://www.nyse.com/pdfs/03-161.pdf. What we learn from the NYSE'sDecision is that allegedly from 1995 through 1999, "20 checks with a total value of approximately $95,700 were drawn against Customer S's account at the Firm and made payable to members of Gonzalez's family."
Oh, hold on, we're not done. Don't be so quick. Just imagine that you've been contacted by Michael Anthony Gonzalez about his investment program and, gee, you know, you thought that before writing out a six-figure check that you might spend, say, five minutes online checking this guy out. Not great due diligence but at least a minimal effort.
On Page 9 of Gonzalez's BrokerCheck report we learn that on June 30, 2003, the old NASD barred him pursuant to the terms of a settlement. I invested about another minute of my time, went to http://finra.org, typed in Gonzalez's name and found this on Page 494 at http://www.finra.org/web/groups/industry/@ip/@enf/@da/documents/disciplinaryactions/p007443.pdf:
Michael Anthony Gonzalez (CRD #2515811, RegisteredRepresentative, Pasadena, California) submitted a Letter of Acceptance, Waiver, and Consent in which he was barred from association with any NASD member in any capacity. Without admitting or denying the allegations, Gonzalez consented to the described sanction and to the entry of findings that he received $27,200 from a public customer to be invested, and instead of applying the funds as directed, he misused the funds for a period of time before returning the misused funds to the customer. (NASD Case #C02030038)in which the main allegation was the misuse of $27,200 in customer funds.
Sure, I could start a rant here about lazy investors and the need for some eugenics on Wall Street, but what's the point - really? If Bernie Madoff were released from prison tomorrow, there are likely morons among us who would hand him fat checks to invest. And, equally likely, after they learned that good old Bernie had fleeced them, they would claim that they didn't know he had a criminal record.
So, go ahead, yell and scream all you want about MF Global, Citigroup, Goldman Sachs, JP Morgan, Merrill Lynch, and any other firm that you don't like. In the end, if a two-time, penny ante loser like Gonzalez can separate a million bucks from the savings accounts of his pigeons, why would you really expect any reform on Wall Street: If you're always counting on the regulators to do your work, it's never going to solve anything.