Kevin O’Brien’s past has come back to haunt him. After learning the former Robert W. Baird & Co. broker was kicked out the brokerage industry, a group of Cincinnati residents have waged a campaign to get O’Brien to resign from his position as the newly elected trustee of Anderson Township.

O’Brien took office in November. As trustee, he shares management responsibilities for overseeing the town’s finances.

The residents who are calling for O’Brien’s resignation cite the former broker’s records with the Financial Industry Regulatory Authority (FINRA). On Sept. 14, O’Brien was banned for life from the working in the securities industry over allegations that he misappropriated for his own use some of the $378,000 he transferred from a client’s account. O’Brien accepted the sanction without admitting or denying FINRA’s findings. He was later fired from Robert W. Baird & Co., the brokerage firm where he worked when the alleged violations occurred.

O’Brien’s records can be viewed here.

As reported Jan. 15, 2010, by Investment News, a group of Anderson Township citizens have filed a subpoena requesting O’Brien’s records from Robert W. Baird. According to the article, the information will offer additional evidence as to why a court should order O’Brien to significantly increase the $1,000 bond all Ohio township trustees must have before they take office. The higher bond would give the township greater protection in the event possible legal action against O’Brien occurs from the securities case.

“The right thing for him to do would be to resign,” said Courtney Laginess, an Anderson Township resident, in an article posted on Cincinnati.com. “To be permanently barred from practicing securities is a very big deal. It really goes to the honesty and trust issue.”

Former San Antonio broker Jeremy McGilvrey allegedly used the money he fleeced from investors to take care of personal business, which apparently included a bevy of Las Vegas casino debts, credit card bills and the purchase of a new Mercedes Benz.

McGilvrey’s fancy living came to an end in August 2009, following an investigation by the Texas State Securities Board and the Texas District Attorney’s Office. According to the indictment, McGilvrey promoted himself as a “prudent, conservative financial advisor” who employed “sound principles” to protect client funds and investments. Instead, McGilvrey later admitted that he diverted investors’ funds for his personal use.

In one instance, McGilvrey solicited a $100,000 check from 85-year-old Anthony Knopp. According to authorities, it was Knopp’s understanding that McGilvrey would invest the money on Knopp’s behalf. As it turns out, McGilvrey used the investor’s cash to pay off other investors, as well as to pad his own pockets.

Thomas and Dorothy Crouch were two of the investors McGilvrey tried to pay off. The couple had previously filed a lawsuit against McGilvrey, charging they lost about $1.5 million after McGilvrey steered them into investments that included stock purchases in McGilvrey’s now-defunct investment firm – Hill Country Wealth – and supplying him with a substantial loan.

In December, Judge Maria Teresa Herr sentenced McGilvrey to 20 years in the Texas Department of Corrections. McGilvrey also was ordered to pay in excess of $1.9 million in restitution to the client he scammed. The restitution amounts could increase if other defrauded investors are identified.

If you had investment dealings with Jeremy McGilvrey, we encourage you to contact our securities fraud team. We can evaluate your situation to determine if you have a viable claim.

Jeremy McGilvrey, a former broker with Next Financial Group and LPL Financial and one-time CEO of the now-defunct Hill Country Wealth investment firm, had a reputation for extravagance: A black Bentley convertible, exotic vacations and celebrity parties. Today, McGilvrey is trading his fancy suits for a different kind of fashion wear: a prison uniform.

On Dec. 1, 2009, Bexar County state District Judge Maria Teresa sentenced the former high-flying investment adviser to 20 years in prison for swindling clients out of millions of dollars. McGilvrey also was ordered to pay a $10,000 fine and nearly $2 million in restitution to his victims. The amount could increase if authorities identify additional clients taken in by the Texas broker.

In October, McGilvrey, 32, pleaded guilty to felony theft and misapplication of fiduciary property of clients, most of whom were elderly. Two victims, Thomas and Dorothy Crouch, were taken for an estimated $1.6 million. Their son, Houston attorney James Crouch, has since filed a lawsuit against McGilvrey.

The 94-year-old Crouch, who once served as deputy surgeon general of the U.S. Air Force, died Nov. 30, 2009. He suffered from Alzheimer’s.

McGilvrey was fired from Next Financial in May 2009 for “borrowing money from a client,” according to records with the Financial Industry Regulatory Authority (FINRA).

Before joining Next Financial, McGilvrey was affiliated with LPL Financial of Boston. FINRA records state that he was “permitted to resign” from LPL last year after failing to properly supervise a registered representative and for not reporting a business transaction.

Next Financial also is one of a number of independent broker/dealers with advisers connected to sales of private securities of an oil and gas partnership, Provident Asset Management LLC. In July, the Securities and Exchange Commission (SEC) charged Provident of committing a $485 million fraud.

Our lawyers are actively pursuing Jeremy McGilvrey and Next Financial Group. Please tell us about your investment losses by leaving a message in the comment box, or the Contact Us page. We will counsel you on your options.

Eighty years after Charles Ponzi made the word Ponzi a household name by scamming investors out of more than $10 million, the same schemes continue to thrive today. In 2009, there were nearly four times as many Ponzi schemes uncovered in comparison to 2008. In total, more than 150 Ponzi scams occurred this year, with investors defrauded out of more than $16.5 billion, according to an Associated Press analysis of Ponzi scams in all 50 states. 

The dollar figure for 2009 didn’t include the $50 billion-plus Ponzi scheme orchestrated by Bernard Madoff, who was arrested in 2008 and pled guilty in 2009. 

Among the 2009 Ponzi statistics that the AP cites: 

• The FBI has more than 2,100 corporate and securities fraud investigations pending across the country. Many of the cases involve losses exceeding $100 million and several have losses of more than $1 billion. That is up from 1,750 securities fraud cases in 2008.
• The Securities and Exchange Commission (SEC) saw an 82% increase in the number of restraining orders issued against Ponzi schemes and other securities fraud-related cases in 2009 versus 2008.
• The Commodity Futures Trading Commission filed 31 civil actions in connection to Ponzi cases in 2009 – twice the amount filed in 2008.

The Securities and Exchange Commission (SEC) has charged Harold. H. Jaschke, a former broker with First Allied Securities, with fraud for allegedly churning accounts held by the city of Kissimmee, Florida, and the Tohopekaliga Water Authority and lying to both government bodies about his trading practices.

Churning is a fraudulent practice that occurs when a broker engages in excessive trading as a way to generate commissions and other revenue without regard for a customer’s investment objectives.

The complaint against Jaschke was filed in federal court in Orlando on Dec. 29. According to the documents, Jaschke was associated with First Allied Securities when the alleged violations occurred.

The SEC alleges that Jaschke employed a high-risk, short-term trading strategy involving zero-coupon U.S. Treasury bonds. According to the complaint, the broker sometimes bought and sold the same bond within a matter of days, and occasionally on the same day.  The practices exposed the municipalities to millions of dollars in losses while yielding more than $14 million in commissions for Jaschke, according to the SEC.

The SEC also alleges that Jaschke knew the municipalities’ ordinances prohibited his trading strategy and required that their funds be invested with “the paramount consideration to be safety of capital.”

San Diego-based First Allied Securities fired Jaschke late last year. Jaschke then started his own firm, HHJ Capital Partners G.P. LLC.

In a related enforcement action, the SEC charged Jeffrey C. Young, the former vice president of supervision for First Allied Securities, of failing to reasonably supervise Jaschke during his employment with the firm. Without admitting or denying the findings, Young settled the case and paid a $25,000 penalty. Young also is barred from acting in a supervisory capacity for a period of nine months.

Kevin O’Brien’s flight from the securities industry serves as a reminder to investors that rogue brokers don’t go away, they just find new jobs. O’Brien, a former registered representative with Robert W. Baird & Co., was barred on Sept. 14, 2009, from working in the securities industry. The reason, according to records from the Financial Industry Regulatory Authority (FINRA), had to do with allegations that O’Brien misappropriated for his own use some of the $378,000 he transferred from a client’s account.

On Dec. 17, 2009, O’Brien was sworn in as the trustee of Anderson Township, a suburb of Cincinnati. Among O’Brien’s responsibilities as trustee: helping to manage the township’s $35 million budget.

As reported Dec. 23 by Investment News, O’Brien reportedly still dispenses financial advice via his own financial consulting business, O’Brien Private Wealth Management. The firm, however, is not listed in the Securities and Exchange Commission’s database of financial advisory firms.

Ironically, despite the fact that FINRA permanently revoked his brokerage license, O’Brien touted “Leadership With Integrity” as part of his campaign platform during his bid for the position of Anderson Township Trustee.

Equally ironic is O’Brien’s belief that his financial background will be a benefit to the residents of Anderson Township.

“I have extensive knowledge of municipal financing and budgeting that will greatly assist the township in going forward in difficult economic times,” he said in a Dec. 17 article by Cincinnati.com.

In that same article, O’Brien said he never tried to keep his legal problems with FINRA a secret during his campaign for trustee. Instead, he says the issue “was never brought up.”

Apparently it is now.

Kelvin Koma, a former financial adviser with JP Morgan Chase Bank, has been barred from associating with any member of the Financial Industry Regulatory Authority (FINRA). FINRA imposed the sanction over allegations that Koma obtained ATM cards belonging to customers of his member firm’s affiliated bank and then used the cards to make unauthorized withdrawals from customers’ accounts for his own personal use.

Other recent disciplinary actions taken by FINRA include those against:

• William J. Gray, former financial adviser for AXA Advisors LLC. Gray was barred from association with any FINRA member in any capacity for allegedly forging the signatures of a customer, as well as those of brokers of his member firm, on paperwork related to the customer’s purchase of a variable annuity.

• Dermot A. Graham, former registered representative with PFS Investments. Without admitting or denying the allegations, Graham consented to FINRA’s entry of findings that he wrongfully and without authorization converted $8,666.12 in funds for his own use by securing debit or credit cards linked to customers’ accounts and used the cards for his personal benefit without the individuals’ knowledge or consent.

• Ronald Dwayne James, former registered representative with TD Ameritrade. James was barred from associating with any FINRA member over allegations that he conducted securities transactions in a customer’s account without that customer’s prior authorization or consent.

If you suffered investment losses because of fraud, unauthorized trading, conversion or misrepresentation on the part of the above individuals, please contact us.

MetLife Securities and three affiliates – New England Securities Corp., Walnut Street Securities, and Tower Square Securities – are facing a fine of $1.2 million by the Financial Industry Regulatory Authority (FINRA) for failing to properly monitor and review their brokers’ email correspondence with the public. One of those brokers is Mark Salyer, who stole nearly $6 million from his customers through private securities transactions he initiated to raise capital for various real estate development companies.

In January 2009, the Securities and Exchange Commission (SEC) barred Mark Salyer from associating with any broker, dealer or investment adviser.

The $1.2 million fine also resolves allegations that MetLife supervisors failed to properly monitor brokers’ participation in outside business activities and private securities transactions.

According to FINRA, the failures allowed Salyer and another MetLife Securities broker to engage in undisclosed outside business activities and private securities transactions while working at MetLife Securities. Eventually, those failures cost MetLife Securities customers millions of dollars.

Investors who had accounts MetLife Securities and its three affiliates – New England Securities Corp., Walnut Street Securities, and Tower Square Securities are encouraged to contact us and tell us your story. Please leave a message in the Comment Box below or on the the Contact Us form.

The Financial Industry Regulatory Authority (FINRA) has won approval from the Securities and Exchange Commission (SEC) to expand its BrokerCheck Service and make the disciplinary records of brokers permanently available online to the public.

Previously, a broker’s record generally became unavailable two years after he or she left the securities industry. FINRA estimates there are more than 15,000 individuals who have exited the securities industry after being the subject of a final regulatory action and whose disciplinary history is not currently available via BrokerCheck.

Disclosure records for former brokers will be available on BrokerCheck beginning Nov. 30.

“This is an important step for investors and for investor protection,” said FINRA Chairman and CEO Richard Ketchum. “Individuals previously barred by FINRA and other regulators have surfaced in a number of recent frauds in other parts of the financial industry that cost unsuspecting investors millions of dollars. It has never been more critical for investors to research the backgrounds of the financial professionals they deal with than it is today.”

In approving the BrokerCheck expansion, the SEC said “it is possible that a (former broker) could become a financial planner or work in another related field where his securities record would help members of the public decide if they should accept his financial advice or rely on his advice or expertise.”

In 2008, individuals used BrokerCheck to conduct 11.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck.

Individual arbitration claims filed with the Financial Industry Regulatory Authority (FINRA) totaled 5,545 through Sept. 30 – up 60% from the same period last year. Linda Fienberg, who serves as president of dispute resolution for FINRA, told Barron’s last month that she expects to see 7,500 cases filed by the end of the year.

The record of cases filed was set in 2003, with 8,945 cases filed.

In other investor news, the proposed Investor Protection Act of 2009 is up for a vote on Nov. 4. The bill, among other things, would give the Securities and Exchange Commission (SEC) the ability to ban mandatory arbitration.

Separately, FINRA has expanded a pilot program that allows investors who are filing eligible claims the opportunity to select an arbitration panel composed of three public arbitrators instead of two public and one non-public.

In its second year, the program will expand from 11 to 14 broker/dealers, and the number of eligible cases will increase from 276 to 411, a rise of nearly 50%. Only the investor filing the claim can elect to participate in the program and the firms cannot choose which cases are eligible.