Broker Theft

Advisor John Schmidt Accused of Stealing Client Funds By SEC

November 27, 2018 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) former advisor John Schmidt (Schmidt), formerly associated with Wells Fargo Advisors Financial Network, LLC (Wells Fargo) in Dayton, Ohio has been accused by the Securities and Exchange Commission (SEC) of misappropriating over $1.16 million from at least seven clients.

In September 2018 the SEC filed a complaint alleging that for the past 35 years Schmidt has been a registered representative in the brokerage industry. The SEC found that from at least 2003 through 2017, Schmidt betrayed his customers’ trust by perpetrating a classic fraudulent scheme, acting without customer authorization, and repeatedly selling securities belonging to some of his brokerage customers and secretly transferring the sale proceeds to cover shortfalls in the accounts of other customers. The SEC alleged that Schmidt misappropriated over $1.16 million from accounts belonging to seven customers and transferred that cash to at least ten other customers whose accounts were experiencing shortfalls. In addition, the commission found that rather than tell those customers the truth about their dwindling funds, Schmidt sent them fake account statements and falsely assured the customers that their investment returns could fund their withdrawals without jeopardizing their principal. Most of Schmidt’s customers were elderly retirees with little to no financial expertise and several of Schmidt’s victims were suffering from Alzheimer’s disease or other forms of dementia. The SEC claimed that at least five of Schmidt’s victims passed away during the course of his fraud. Further, Schmidt’s allegedly profited from the scheme and received over $230,000 in commissions from customers who were either the source of, or recipient of, misappropriated funds.

Financial Elder Abuse Attorney

September 21, 2018 | by Staff Attorney

There is a need for strong protection of the elderly investing population. About one out of every five Americans 65 years and older has been a victim of financial abuse. The elderly are estimated to lose up to $2.9 billion per year from scams. In fact, these figures are likely lower than the actual incidence of fraud since only reported accounts of frauds are considered and seniors are “less likely” to report being scammed.

Elders are abused by a variety of persons including family members, caregivers, and scam artists. Unfortunately, financial advisers, fiduciaries (such as agents under power of attorney and guardians), and brokers also have known to take advantage of the elderly. Usually the person is already in a position of trust or is able to acquire a high level of trust due to the diminished capacity of the victim.

Brokerage firms are in the perfect position to recognize the signs elder abuse and elder fraud. Firms should be able to recognize diminished capacity and dementia, decreased ability to handle finances, questionable purchases or transfers, and the inability of their clients to understand or comprehend their financial assets. When there are reasonable grounds to believe a firm client is being financially exploited the member firm must report potential exploitation to proper authorities and otherwise hold transactions pending review and determination.

Former Voya and Ameriprise Broker James Knee Accused of Misappropriating Nearly $500,000 in Client Funds

July 29, 2018 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor James Knee (Knee), formerly associated with Voya Financial Advisors, Inc. (Voya) and Ameriprise Financial Services, Inc. (Ameriprise) in Concord, New Hampshire was terminated for cause by Voya concerning allegations that Knee failed to cooperate in an internal investigation relating to potential receipt by the representative of a cash gift from a customer. Thereafter, in May 2018, FINRA barred him from the financial industry after Knee consented to the sanction due to his refusal to appear for testimony requested by FINRA in connection with their investigation into allegations that he misappropriated customer funds.

At the same time a Merrimack County grand jury returned 11 indictments against Knee relating to conduct between 2014 and 2017. Knee was charged with theft by misapplication, theft by deception, financial exploitation of the elderly, and investment adviser fraud. He allegedly stole over $490,397 for personal expenses. In addition, Knee was also indicted on perjury charges in connection with statements he made to the Bureau of Securities Regulation while it was investigating him in 2016 and witness-tampering.

Knee disclosed a number of outside business activities including Sterling Financial Services, LLC which appears to be his d/b/a through which Knee operated. In addition, Knee also disclosed involvement with Opulencia Dressage, certain real estate rental properties, and an insurance agency.