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Elderly Sugar Daddy, His Young Thing, And His Banker / Broker
January 30, 2015
Good intentions seem to have exploded in a banker / broker's face, when he came to the aid of an elderly customer, who fell under the sway of a younger woman with a criminal record. When the do-gooder stepped in to protect the customer, some things he did cost him his job and then some. How come the former employer and Wall Street regulator piled on? Some will find good cause in what was, at best, questionable conduct -- and others may simply roll their eyes and wonder if this Good Samaritan was the victim of over-zealous compliance and regulatory staffs.
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, Paul DeFilippis submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Paul DeFilippis, Respondent (AWC #2013039089201, January 27, 2015).
An Affiliate But Unnamed ... Why?
DeFilippis entered the securities industry in 2008, and during the times relevant to this matter, he was registered with FINRA member firm J.P. Morgan Securities, LLC ("JPMS") and was also employed as a personal banker.
Don't Bank On It SIDE BAR: Online FINRA BrokerCheck records as of January 29, 2015 disclose that DeFilippis was registered with Chase Investment Services Corp. for two stints: May through September 2010 and then again April 2011 through October 2012; and thereafter with JPMS.The online records further disclose that he was employed by JPMORGAN CHASE BANK NA ("JPM Chase Bank") from April 2011 through October 2012.If you read and then re-read the AWC, you will not find a single reference to JPM Chase Bank by name -- as if what? -- the identity of the bank's name is a closely guarded state secret to be disclosed only upon penalty of death? Last I heard, JPM Chase Bank was affiliated with JPMS.
90-Year-Old Customer
The AWC alleges that in his capacity as a personal banker, beginning around 2011, DeFilippis provided services to a 90-year-old bank customer, who was "living on his own despite failing health and mental condition." This elderly customer is described as having "bank and securities accounts at the bank at which DeFilippis worked."
Bank Shot SIDE BAR: Yeah, me again. Sorry for this interruption but, geez, "at the bank at which DeFilippis worked"? That's the best that FINRA can do? If you think that I'm kidding about this, go read the original AWC
Sugar Grand-Daddy
At some point in time, the elderly customer is described in the AWC as "taking money out of his accounts to give to a younger woman who had a criminal record." Now that's ominous and it sounds like someone has found a sugar daddy in the form of an easy mark.
Don't Ask 'Cause I Dunno SIDE BAR:
- How and who discovered the involvement of the criminal is not noted in the AWC.
- How much money was taken out of the accounts is not stated.
- Whether the woman was prosecuted is not disclosed.
- Whether the unnamed bank had policies and procedures in place to detect the transfers from an elderly customer's account is not set forth.
Co-Trustee
The AWC asserts that DeFilippis arranged to have a friend serve as a co-trustee along with the elderly customer for the customer's accounts "in order to try to conserve assets."
A Matter Of Trust SIDE BAR: Okay . . . let's just stop a moment and recap. We got an elderly customer in failing health and declining mental condition. For whatever reason, no one has stepped in to become this individual's guardian and no court has apparently appointed anyone to protect and handle the customer's financial affairs. And if the opposite of those assumptions is true, the AWC does not disclose any of this.Add into that mix the AWC's concession that De Filippis took steps to try and "conserve" the elderly customer's assets at a time when a criminal appears to have entered the picture and is obtaining funds from the senior citizen. As to the "friend," we have no idea whatsoever from the AWC as to that individual's background or qualifications; however, in the absence of any negative assertions about the co-trustee's character and history in the settlement document, we should not assume anything dubious.
Into the Trust Account
In or about October 2013, the elderly customer transferred about $264,500 out of his securities account, and, in so doing, closed out that account and deposited the proceeds into "a trust account DeFilippis helped him establish at the bank." As such, after adding his friend as a co-Trustee to the customer's account, DeFilippis then consolidated his assets into a trust account at JPM Chase Bank.
At Another Bank
Notwithstanding DeFilippis's efforts, the AWC explains that he "became concerned" that the elderly customer was continuing to give more money to the criminal. The AWC asserts that with the customer's consent, DeFilippis arranged for his friend the co-Trustee to have a $264,000 cashier's check cut against the bank account and made payable to DeFilippis (exclusive of $2,000 in cash that was given directly to the customer). According to the AWC, the cashier's check was deposited in a bank account at another bank in DeFilippis' name but with the elderly customer "(through his trust) as the death beneficiary."
Okay,that last step does raise legitimate concerns. Why did DeFilippis transfer the funds from the JPM Chase Bank trust account into an away account in his name but with the customer as a death beneficiary? Sure as hell wish I knew the answer to that one; however, I am also annoyed, and profoundly so, that the AWC fails to disclose DeFilippis's explanation for that conduct. Given that there is no assertion in the AWC that DeFilippis was criminally prosecuted or named as a defendant in any civil suit for the conduct set forth in the AWC, I am compelled to infer that no such actions were taken against him. All of which suggests that he was well-intentioned but should have executed his plan in a more appropriate manner.
A Matter Of Competition?
According to online FINRA BrokerCheck records as of January 30, 2015, DeFilippis was "Discharged"on October 17, 2013, based upon allegations that:
TERMINATED BY AFFILIATE BANK- NON SECURITIES RELATED. REGISTERED REPRESENTATIVE ACCEPTED A CASHIER'S CHECK DRAWN OFF A BANK CUSTOMER'S ACCOUNT BY THE CUSTOMER'S POA AND MADE PAYABLE TO THE REGISTERED REPRESENTATIVE, WHO ENDORSED AND DEPOSITED THE CHECK INTO A BANK ACCOUNT IN THE REGISTERED REPRESENTATIVE'S NAME AT A COMPETITOR BANK
Note that JPM Chase Bank is specifically referred to as an "affiliate" of JPMS in the termination notice on FINRA's BrokerCheck. All of which makes you wonder why the AWC seems to have gone to such great lengths to hide the identity of that affiliated bank. You notice that reference in the allegations: "at a competitor bank." I wonder how much of the zeal in this case was fueled by the fact that the funds wound up in an away account?
Spelling It Out
Notwithstanding many of the apparent good intentions and good deeds set forth in the AWC, the official language of the AWC charges that:
In October 2013, Respondent Paul DeFilippis caused the withdrawal of funds from the bank account of a customer of his firm and of the bank at which he worked and deposited those funds into an account in his own name at another bank. He failed to establish a trust account or other mechanism to protect the customer's interest in the account, thereby violating FINRA Rule 2010.
Try as I might, I just don't see much of an effort to note the mitigating circumstances in that nugget. That's an important consideration because it's the nugget that often becomes the squib by which the case is known. A little bit of moderation and modulation may have been fair and appropriate here. Regardless, in accordance with the terms of the AWC, FINRA imposed upon DeFilippis a $5,000 fine and a two-year suspension from association with a FINRA member firm.
Bill Singer's Comment
The road to Hell is paved with good intentions and no good deed goes unpunished. If nothing else, this AWC sort of proves those points.
It appears that DeFilippis may have represented himself in negotiating the settlement with FINRA. If that inference is accurate, it may well explain why the language of the AWC is so unsatisfactory and why the sanctions do not seem calibrated for the true nature of the conduct at issue. A skilled regulatory lawyer may well have reduced the suspension to a far more appropriate period than what strikes me as the outrageously punitive two years. Also, I'm not quite sure why the facts in this case warranted a $5,000 fine.
On the other hand, if, in fact, the underlying facts are not as benign as they are presented and if DeFilippis's motive was not to protect the elderly customer but to further victimize the senior citizen, then this AWC is a disgraceful attempt to massage facts and manicure allegations.
I would hope that someone on FINRA's National Adjudicatory Council or its Board would call this settlement for review, but since I don't have a high opinion of either of those panels (or the self-regulatory organization to begin with), I'm not going to hold my breath.