Category Archives: Stockbroker Investigation

Two former Wachovia Securities brokers – William Harrison and Eddie Sawyers – are accused of misleading dozens of elderly clients into investing in what they called a sure thing. Instead, investors lost approximately $8 million, according to a lawsuit filed Dec. 15 by the Securities and Exchange Commission (SEC).

The SEC complaint alleges that Harrison and Sawyers misrepresented the investment strategies they were selling to at least 42 clients in 2007 and 2008. Among their promises: A guarantee of 35% returns without any risk to investors’ principal investment. In reality, the brokers were using investors’ money to trade securities in risky online deals.

The SEC said that in July 2008, Harrison and Sawyers withdrew $234,000 from three client accounts as compensation for their management services. They split the amount.

As reported Dec. 16 by Bloomberg, the SEC accuses the duo of recruiting Wachovia investors to a new business venture called Harrison/Sawyers Financial Services.

According to the complaint, Harrison and Sawyers touted their venture as “an essentially foolproof investment plan guaranteed to make money regardless of market conditions.”

Instead, investors – all of whom the SEC says were “unsophisticated investors” – lost big.

In one instance, Harrison and Sawyers reportedly told a husband and wife who had invested $100,000 that their money had “maxed out” by achieving a 35% return. In truth, the couple’s investment had lost nearly $84,000.

Most of the investors involved in the scheme were more than 50 years of age. Some were retired and living on fixed incomes, the SEC says.

In addition to allegations of misrepresentation, the lawsuit says that the two brokers set up online brokerage accounts in some clients’ names, while pooling the investment money from other clients into accounts set up in the name of Harrison’s wife and in a joint account held by the Harrisons.

If you’ve suffered losses while doing business with William Harrison and Eddie Sawyers, please contact our securities fraud team. We will evaluate your situation to determine if you have a claim.

Martin Wegener, a former financial representative for New England Securities, is accused of fleecing investors out of millions of dollars through an elaborate investment scam. The Securities and Exchange Commission (SEC) filed fraud charges against Wegener on June 14, 2010, accusing the one-time broker of scamming investors out of at least $6.5 million.

From December 1998 to May 2010, Wegener worked as a registered representative for New England Securities. According to the SEC, it’s during his employment at New England Securities that the investment scam allegedly occurred undetected.

In the SEC’s complaint, Wegener is accused of encouraging investors to withdraw funds from their New England Securities brokerage accounts so that he could, in turn, invest their money in certain publicly traded securities, publicly traded mutual funds, and other investment vehicles such as certificates of deposit or private businesses. In reality, however, Wegener deposited the money into bank accounts in the name of Wealth Resources.

As it turns out, the sole owner of Wealth Resources was Wegener.

In order to maintain the appearance of legitimate investing, Wegener provided customers with purported “brokerage account” statements from Wealth Resources, which falsely showed that Wegener had placed their money in a variety of investments.

The SEC says that never happened. Instead, Wegener used investors’ money for his personal gain.

Wegener reportedly operated his scam from at least 2007 through March 2010.

New England Securities is the licensed broker/dealer of New England Financial. Whether New England Securities could face regulatory sanctions in the future for failing to properly supervise Wegener remains to be seen. If that happens, however, it would not be the first time that New England Securities has been called on the carpet for supervisory violations.

According to the Financial Industry Regulatory Authority’s BrokerCheck, New England Securities paid a $500,000 fine in connection to that very issue in March 2009. Earlier that same year, the company was fined $1.2 million by FINRA for, among other things, failing to “establish, implement and enforce a supervisory system designed to monitor compliance with regard to participation of associated persons in outside business activities and private securities transactions.”

On March 24, 2010, New England Securities submitted an offer of settlement with the Massachusetts Securities Division over alleged supervisory violations of former representatives and sales of promissory notes.

The alleged stock broker fraud case involving Martin Wegener offers insight into what investors can do to avoid becoming victims of investment scams. On June 14, the Securities and Exchange Commission (SEC) charged Wegener and his companies – Wealth Resources, Inc. and Wealth Resources, LLC – with defrauding investors out of at least $6.5 million.

According to the SEC, Wegener was not a registered broker or investment adviser yet told his clients he would invest their money through Wealth Resources. He would then provide investors with purported “brokerage account” statements from Wealth Resources – statements that falsely represented a variety of investments courtesy of Wegener’s “financial acumen.”

Wegener never used his customers’ money for those investments, however. Instead, the SEC says he took clients’ money for his personal use, paid business expenses and made investments on his own behalf in entities where he had an ownership interest. Those companies included WU Ventures, LLC, Secura Technology, LLC, and Trailblazer Learning, Inc., as well as Wealth Resources. Investors’ funds also were transferred to Wegener’s former wife, Kristin Wegener.

The SEC further says that during the course of the alleged scam, Wegener used money from investors to make Ponzi-like payments to clients who wanted a portion or all of their investment returned.

The Wegener case offers several lessons for investors. First, before investing money with any financial professional, take time to verify that the person is a registered stock broker or financial advisor. Is the individual a member of the Financial Industry Regulatory Authority (FINRA)? Does the person have any customer complaints, disciplinary actions, fines, suspensions or other sanctions by FINRA, the SEC or other federal or state regulatory agencies listed on FINRA’s BrokerCheck Web site?

In addition, be leery of sales pitches that make exaggerated claims about the expected profitability of an investment, such as it will double in value in six months. The bottom line, if it sounds too good to be true, it usually is.

An influx of stockbroker fraud lawsuits and regulatory investigations has prompted the Financial Industry Regulatory Authority (FINRA) to significantly expand the information it provides through its BrokerCheck Web site.

Specifically, FINRA plans to increase the number of customer complaints reported publicly, make certain information about brokers available on a permanent basis, and extend the public disclosure period from two years to 10 years for any broker who leaves the industry.

“The greater amount of information that is available to the investing public will only provide the opportunity for investors to be better informed as to the investment professionals they are entrusting their assets to,” said Steven Caruso of Maddox Hargett & Caruso, P.C., in a July 14 phone interview with On Wall Street.

The BrokerCheck expansion will be implemented in two phases, according to FINRA. In late August, historic complaints will be added to the public records of all current and former brokers. By the end of 2010, full records will be publicly available for brokers whose registrations were terminated within the past 10 years.

The Martin Wegener fraud investigation is now the subject of a civil injunction action by the Securities and Exchange Commission (SEC). According to the June 14 complaint, the Grand Rapids stock broker defrauded investors of at least $6.4 million from March 2007 to March 2010.

Wegener’s office in Walker, Michigan, has been closed since April following a raid by law enforcement officials. So far, at least two of Wegener’s former clients are suing New England Securities, the company Wegener represented.

In its 13-page civil complaint, the SEC contends Wegener ran his alleged scheme by investing clients’ money in a variety of bogus securities, as well as in two companies of which he had ownership, Wealth Resources, Inc. and Wealth Resources, LLC.

In reality, however, Wegener was keeping investors’ money for himself, while sending out fake brokerage statements to clients.

The SEC also accuses Wegener of using investors’ money to make Ponzi-like payments to other customers who requested a return of all or a portion of their investment.

Maddox Hargett & Caruso P.C. currently is investigating both Martin Wegener and New England Securities on behalf of investors who sustained investment losses. If you have a story to tell related to this matter, contact our securities fraud team. We can evaluate your situation to determine if you have a claim.

The Financial Industry Regulatory Authority (FINRA) has issued a Regulatory Notice on a proposed rule to improve oversight of broker/dealers’ back-office operations. Specifically, the new rule would expand registration requirements to individuals who engage or supervise activities related to sales, trading support and/or handling of customer assets.

Previously, FINRA’s registration requirements only applied to brokers, investment bankers, traders or other financial professionals who gave advice to customers and handled securities transactions. Individuals who could be required to register under the new proposed rule include those who develop and approve valuation models; manage trade confirmations, account statements, trade settlement and margin; or oversee stock loan/securities lending, prime brokerage, receipt and delivery of securities, and/or financial regulatory reporting.

According to a statement from FINRA, the proposal is designed to provide “reasonable assurance” that these individuals understand their professional responsibilities, including key regulatory and control themes, as well as the importance of identifying and escalating red flags that may harm a firm, its customers, or the integrity of the marketplace or the public.

The Securities and Exchange Commission (SEC) must approve the rule change before it becomes effective.

Medical Capital Holdings broker John B. Guyette has surrendered his securities license to practice business in Colorado over what regulators say was a violation of state and federal securities laws regarding sales of private placements in Medical Capital Holdings. Guyette also is no longer registered with the Financial Industry Regulatory Authority (FINRA).

Colorado regulators allege that Guyette sold the private placements to a number of investors with whom he did not have a prior relationship, which is a violation of Regulation D. Regulation D is the federal securities law under which private placements are offered.

“I surrendered my license; I did not lose it,” said Guyette, who contends that he personally invested more than $200,000 in Medical Capital notes. “I voluntarily resigned rather than take this to the next level [court]. I decided not to fight this, and retired,” he said in an April 13 story in Investment News.

Guyette neither admitted nor denied the allegation by Colorado regulators, but nonetheless agreed to the order.

Private placements have come under fire by state and federal regulators following a 2009 announcement by the Securities and Exchange Commission (SEC) to file fraud charges against Medical Capital Holdings. According to the SEC’s complaint, Medical Capital allegedly operated much like a Ponzi scheme.

Since 2003, Medical Capital raised $2.2 billion from six private placement offerings to 20,000 investors nationwide. Things started to go haywire in the summer of 2008, when many Medical Capital borrowers began defaulting, which resulted in late interest payments to investors throughout 2009. Since then, investors have filed several complaints against Guyette alleging losses of $600,000.

Guyette and his business partner, Tom Miller, sold Medical Capital securities through Elite Investments; other broker/dealers marketed and sold the placements through CapWest Securities in Greeley.

Guyette remains licensed to sell securities in California, Illinois and Wyoming. According to an April 13 article by American Chronicle, Guyette sayshe has no plans to fight the state of Colorado for the return of his license or move to states where he is licensed.

To borrow from Bob Dylan, ‘the times they are-a changin’ for Kirkland securities broker Rhonda Breard. Breard, a former broker for ING Financial Partners, faces 20 years in prison and a $1 million fine for the single count of mail fraud that federal prosecutors charged her with last week.

State regulators estimate that Breard may have scammed nearly $8 million from investors in a Ponzi scheme that allegedly had been going on since at least 2007.

According to prosecutors, instead of placing investors’ money in insurance and financial investments, Breard used the funds for her own profit and, in turn, allegedly gave phony statements to clients.

On March 10, in what is likely to be a slew of future lawsuits against Breard, James and Shelley Heath sued the disgraced broker, alleging they lost their life savings to her scam. The Heaths also sued one of Breard’s associates, Colleen Brown, and Breard’s former employer, ING Financial Partners.

The lawsuit, which was filed in U.S. District Court in Seattle, claims ING licensed Breard and Brown and then failed to properly supervise them. The suit also alleges that ING has a history of failing to supervise brokers, paying “huge fines and/or state-ordered restitution to clients” over the years.