In December 2019, Hannes was terminated by Woodbury Financial for cause after the firm received notice from a client that funds were paid to the representative for purchase of a life insurance contract that were not forwarded to the life insurance company.
Thereafter, FINRA investigated Woodbury Financials’ disclosures and Hannes refused to cooperate with FINRA. FINRA found that Hannes consented to sanctions and findings that he failed to produce documents and information requested by FINRA during its investigation into allegations that he converted customer funds.
In March 2020, the Securities Division of the State of Washington filed a complaint against Hannes alleging that from approximately 2003 to 2019, Hannes engaged in an extensive, long-term fraud against his Woodbury Financial clients by convincing them to write checks to Hannes Financial Services, Inc. for off-the-books investments and then used the money for other purposes. In total, Hannes is alleged to have defrauded at least nineteen clients out of at least $2.9 million.
The State of Washington alleges that Hannes generally approached existing clients and misrepresented to them that he had an opportunity for a fixed-rate investment in either a bond, or in a unit investment trust which functioned similarly to a bond. It is alleged that Hannes did not provide investors with any offering documents for to the investments or financial statements and in some cases did not even identify the company in which the client would be investing. Instead, it is alleged that Hannes most commonly stated that the investments offered a return of 5% to 7%, and could be rolled over into new investments at the end of their fixed terms in the two-to-five-year range. Investors are then alleged to have been solicited to roll over their investments rather than requesting withdrawals. Hannes is alleged to have had the clients write the checks to HFS, whose bank accounts he controlled as the owner of the company. Hannes is then alleged to have created false account statements and company names to provide the appearance that actual investments had been made.
Our law firm has significant experience bringing cases on behalf of defrauded victims when their advisors engage in receiving loans from clients or selling securities sales through OBAs. The sale of unapproved investment products – is a practice known in the industry as “selling away” – a serious violation of the securities laws. In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. Sometimes those investments have some legitimacy but often times these types of investments can end up being Ponzi schemes or the advisor can be engaging in the conversion of funds.
However, federal securities laws and the FINRA rules require firms to monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.
In cases of selling away the investor is unaware that the advisor’s investments are improper. In many of these cases the investor will not learn that the broker’s activities were wrongful until after the investment scheme is publicized, the broker is fired or charged by law enforcement, or stops returning client calls altogether.
Hannes entered the securities industry in 1986. From 1994 through December 2019 Hannes was associated with Woodbury Financial out of the firm’s Spokane, Washington office location.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. Investors may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors in cases of selling away and brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.