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Category Archives: E-M Management

SEC Charges Financial Adviser Frank Bluestein In $250M Ponzi Scheme

Frank Bluestein, a Detroit-area financial adviser, has been charged by the Securities and Exchange Commission (SEC) of luring elderly investors into refinancing their home mortgages in order to fund investments in a $250 million Ponzi scheme operated by Edward May and his company, E-M Management Company LLC (E-M). Bluestein’s latest run-in with authorities isn’t “new” news, however. More than two years ago, Michigan state securities regulators and the SEC were investigating Bluestein for the very crime he now is alleged to have committed. Bluestein denied similar allegations in a 2008 class-action lawsuit filed by investors who allege Bluestein bilked them out of millions of dollars. That case is still pending.

According to the SEC’s Sept. 28 complaint, regulators allege that Bluestein acted as the single largest salesperson in May’s Ponzi scheme and that Bluestein’s “role” was to specifically target retirees and elderly investors into attending so-called “investment seminars” held in Michigan and California. The purpose of the seminars was to lure potential investors into putting their money into May’s company, E-M.

“Bluestein convinced elderly investors to refinance their homes to invest in securities that he falsely claimed were safe,” said Merri Jo Gillette, Director of the SEC’s Chicago Regional Office. “His lies, false assurances, and unscrupulous tactics put many investors at risk of losing not only their life savings, but also their homes.”

Bluestein’s past gets even more sordid. A Nov. 27, 2007, article by Registered Rep reports that after Bluestein was fired from the brokerage firm GunnAllen Financial in October for reportedly selling unregistered securities, Bluestein set up shop down the street and began working under a new name, “Frank Julian,” as part of a so-called “research team” at a company called Freedom Road. (The name listed now, however, on Freedom Road’s Web site is, in fact, Frank Bluestein.) According to the Web site, Freedom Road provides stock selection and market education to individuals. Its advertising moniker is: Luck is not an investment strategy.

Information posted by Freedom Road on its Web site touts Bluestein as “picking hot stocks for over 40 years,” with a “unique approach [to finding] big opportunities in both dividend paying stocks and growth stocks with limited risk.” “After many years as one of the nation’s leading financial advisors, Frank is now sharing his million dollar secrets exclusively with members of Freedom Road. Frank’s vision is to share his hard earned experience and success with investors on a global scale.”

It’s what Freedom Road didn’t say about Frank Bluestein that has come back to haunt investors. Bluestein isn’t even registered with the Financial Industry Regulatory Authority (FINRA). According to the Registered Rep article, Bluestein’s CRD report shows that in October 2007, 10 customer disputes had been logged against him totaling some $1.6 million in alleged damages. On Oct. 12, the Michigan Office of Financial Regulation notified GunnAllen, Bluestein’s former employer, that Bluestein was under investigation. Shortly thereafter, Bluestein was fired from GunnAllen.

Fast forward to Sept. 28, 2009. The SEC charges Bluestein of civil fraud, sale of unregistered securities and other violations in connection to helping orchestrate a multimillion-dollar Ponzi scheme. Specifically, the SEC alleges that Bluestein facilitated May’s fraudulent scheme by raising approximately $74 million from more than 800 investors through the sale of E-M securities over a five-year period. Bluestein, through his company Maximum Financial, conducted numerous investment seminars to find new E-M investors.

Based on the SEC’s complaint, Bluestein, 59, allegedly misrepresented to investors that the investments he pitched were low-risk and falsely claimed he had conducted adequate due diligence about the investments. He also apparently left out one other key detail: Bluestein received at least $2.4 million in commissions from May and E-M, in addition to the $1.4 million in disclosed compensation he received from investor funds.

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