monopoly jail Image courtesy of Ken Teegardin

Image courtesy of Ken Teegardin

The Blotter Report: No April Fools Jokes Here

This week, an Indiana advisor is facing fraud charges after he used religion to connect with victims, while a Michigan father and son have allegedly made real estate investment fraud a family affair. Elsewhere, Bank of America’s investing arm paid $18 million to put claims of inappropriate investment advice in its rearview mirror.


Is Scamming Missionaries a Fast Track to Hell?

Indiana prosecutors claim a former Provident Capital Management financial advisor swindled a number of elderly clients, including a pair of missionaries, out of over $580,000. As early as 2004, Thomas Redmond Jr. used investments from at least 10 clients—two of whom spent their life working overseas to counsel survivors of Auschwitz—for personal use, according to the Marion County Prosecutor's Office. Redmond allegedly used his Christian faith to bond with clients and secure their investments, even after he was permanently barred from selling securities by FINRA in 2011, a fact he neglected to mention to clients or his employer.

Redmond's previous FINRA sanctions came as a result of findings that he allegedly recommended an elderly widow with minimal investment experience to invest almost half of her available funds in high-risk ventures, as well as evidence that he forged client signatures on purchase agreements.

In the charges brought Monday, prosecutors claim Redmond continued to work with clients on his suspended license, falsely telling investors that he would put their funds toward various securities. Instead, he allegedly used the money for personal business and living expenses. To keep the fraud going, Redmond sent fake statements to clients showing their purported returns, prosecutors say. Redmond is facing 10 counts of securities fraud.


Keeping Fraud All in the Family

A Detroit federal jury convicted a former broker and his son of 15 counts of conspiracy and wire fraud on Monday after prosecutors claimed the duo talked almost 450 investors into investing $50 million in a flimsy real estate investment fund scheme.

Through their company, BBC Equities, the father-and-son team—along with their partner Richard J. Trabulsy, who previously pleaded guilty—lured investors into purchasing membership interests in BBC by claiming it was a safe investment vehicle with annual returns of 8-12 percent.  But in reality, the real estate portfolio was never profitable and less than half of the money raised was spent on real estate acquisitions.

The rest of the money was spent marketing the scheme to other investors and using new funds to pay Ponzi-like dividends to earlier investors, the SEC claimed. The duo also allegedly spent $7.2 million of investors’ money for their personal benefit.


Pharama Co. Gets Big Payday From Former Broker-Dealer

Biopharmaceutical company Immunomedics wrested an $18 million settlement out of its former (and unnamed) broker-dealer on Monday in order to end a FINRA arbitration. Of course, the only FINRA arbitration it currently had pending was against Banc of America Investment Services and Banc of America Securities, according to its most recently quarterly report filed in February. 

Immunomedics claimed that its former investment advisor and broker dealer made false representations and inappropriately advised that the company invest in auction rate securities, which the company says it sold for $2.9 million. The New Jersey-based company—which focuses on cancer and autoimmune disease treatments—also alleged the BofA unit failed to properly supervise its employees. The complaint sought to recover the difference between the ARS value and the amount Immunomedics received when it sold the investments on the secondary market.

Monday’s settlement stipulates that Immunomedics drop its allegations in exchange for the cash settlement. The company says it values the settlement at $16.7 million, after expenses and legal fees are deducted.



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