13 big crime, court and deception stories involving financial advisors in 2021

December 27, 2021 11:18 AM

While the world of wealth management is one of mergers, acquisitions and celebrating growing AUM totals, it is also one that occasionally includes client deception, federal indictments and criminal behavior.

The past 12 months have seen several new allegations brought to light, as well as a number of lingering cases finally reaching resolution after years of moving through the criminal justice system.

Many involve manipulation of investors in pursuit of a lavish lifestyle. Others involve loss of life or the most vulnerable members of the population becoming victims.

Here are some of the biggest crime and court cases covered by the Financial Planning team in 2021.

Financial advisor with prior rap sheet charged with child sex abuse

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Gregory F. Estes

Tom Green County Sheriff's Office

A financial advisor slated to drop his sex offender status in 2022 was hit with new charges of child sex abuse and indecent assault to begin 2021. Authorities arrested SA Stone Wealth Management representative Gregory Frank Estes on Jan. 19 on charges of aggravated sexual assault of a child and indecency with a child by contact, according to the Tom Green County Sheriff’s Office in San Angelo, Texas. Two of the four new felony counts against Estes stemmed from alleged incidents in 2004 and 2009 when he was on probation from a 2002 conviction for attempt to commit sexual assault. The child sex assault charges allegedly involve a victim younger than 14 years old who reported inappropriate comments and touching from Estes. Nearly a year later, his case is still pending in Taylor County Texas.

Troubled $1.8B alts manager hit with federal, state and SEC charges

GPB Capital Holdings founder David Gentile and Ascendant Capital founder Jeffry Schneider face a raft of charges in multiple jurisdictions. A grand jury in New York’s Eastern District

charged

Gentile, Schneider and GPB managing partner Jeffrey Lash with securities fraud, wire fraud and conspiracy. A federal indictment unsealed on Feb. 4 alleges the defendants defrauded clients who invested $1.8 billion in GPB’s limited partnerships. The indictment came the same day as

SEC

and

state-level

cases against the alts manager

that’s been under scrutiny

for nearly three years. Wealth managers acting as “downstream broker-dealers” made $187 million, 10.6%, in commissions or other selling fees on the investments over a five-year span, according to the SEC.

Advisor gets 8 years for $5.7M advance fee ‘Chimera’ scam

James Michael “Mike” Johnson and at least three other conspirators bilked entrepreneurs for $5.7 million in a complex fraud case investigators describe as an international advance fee scheme. The plan involved soliciting loans from clients to an entity called Chimera Group Ltd. in exchange for promised interest payments, the principal and subsequent business capital. The clients received a few interest payments that a lawyer tied to the conspiracy paid to them out of their purported loans. The clients then lost all of the rest of their investments. After a jury convicted Johnson on charges of wire fraud and money laundering conspiracy in fall 2020, he received a 97-month sentence in March 2021. In sentencing memos before the hearing, prosecutors argued Johnson “played a crucial and central role” in the scheme.

Ex-advisor convicted of fraud gets 17.5 years and a scolding from judge

An ex-financial advisor received a sentence of 17.5 years in prison after a federal judge said the former registered rep “lied through his teeth” during his trial on fraud charges. A jury had convicted Anthony Diaz on 11 counts of wire and mail fraud after a two-week trial in January 2020. At his sentencing in March 2021, District Court Judge Malachy Mannion took Diaz to task. Calling Diaz a “sophisticated criminal” showing no remorse for racking up millions of dollars in commissions and losses to ordinary clients from alternative investments, Mannion asked him a rhetorical question: “Are you such a con man that you don’t know you’re a con?” Some clients entitled to 37 arbitration settlements and awards for $2.16 million have received compensation from the 11 brokerages that employed Diaz over his 14-year career. He has 62 disclosures, and prosecutors say that six firms fired Diaz or permitted him to resign before FINRA barred him in 2015. His past employers include Edward Jones, Raymond James, SII Investments and Kovack Securities.

Ex-MassMutual rep gets 7 years after victims’ poignant testimonies

A barred ex-MassMutual representative and financial wellness entrepreneur who pleaded guilty to fraud received a seven-year prison sentence in July. Nearly a dozen victims out of the 23 that Isaiah L. Goodman defrauded for a combined $2.34 million over a four-year span submitted statements cited by federal prosecutors in making their case for the significant term. Along with being a former broker with MassMutual’s MML Investors Services, Goodman operated a Minneapolis-based RIA called Becoming Financial Advisory Services and a financial education app and website called MoneyVerbs. He pleaded guilty in February to mail fraud after investigators alleged he spent clients’ money on cars, homes, luxury items and the wellness business, as well as Ponzi-like payments, between 2017 and November 2020. Besides the financial losses, victims are struggling with depression, uncertainty about caring for children and other loved ones, humiliation and heartbreak in the wake of the scheme, their statements show.

LPL Financial advisor arrested, charged in fatal hit-and-run

A financial advisor registered with LPL Financial was arrested in July and accused of fatally striking a pedestrian and then fleeing the scene on foot, leaving his wife, also injured, and the victim behind. Timothy Hamano was been charged with two counts of a felony hit-and-run involving injury or death and a singular count of vehicular manslaughter with gross negligence. Hamano was seen driving his car on Park Boulevard in Oakland, California, on May 9 around 5:15 p.m. when he allegedly hit a pedestrian who was standing on the sidewalk. The pedestrian, a 41-year-old man out on his daily walk three blocks from his home, later died in the hospital. Hamano’s wife told police her husband had been drinking prior to the collision, but by the time Hamano was arrested, officers were unable to perform a sobriety test, court documents showed. Hamano turned himself in to authorities the day after the deadly accident. His case is pending in Alameda Superior Court.

Florida advisor charged with kidnapping and battery, fired from RBC

Boca Raton Police Department

Royal Bank of Canada Wealth Management fired an advisor facing kidnapping and battery charges after he allegedly beat and imprisoned a woman in his Parkland, Florida, home just three weeks after being arrested for domestic violence against another woman. Scott Jay Matalon was accused of throwing his girlfriend of two months into the shallow end of his pool, beating her and dragging her back to his home when she fled to a neighbor’s doorstep during an argument. The July 5 incident came less than a month after Matalon was arrested for beating another woman who also claimed to be his girlfriend of two months in Boca Raton. Matalon was charged with kidnapping, false imprisonment, domestic battery by strangulation and battery in connection to the July incident. Police said a neighbor’s RING doorbell camera shows the victim asking for help before Matalon drags her away. He is set to return to court for a hearing in January 2022.

Bank of America executive found dead, colleague charged with murder

Michelle Avan via LinkedIn

Michelle Avan, a senior vice president at Bank of America and Merrill Lynch veteran, was found dead in her Reseda, California, home in early August. Just hours after her death, Los Angeles police took her ex-boyfriend and colleague, Anthony Duane Turner, into custody for the crime. Police said Avan was brutally beaten and found with severe injuries by a family member. Turner, who also worked at Bank of America and Merrill, was charged with one felony count of murder and one count of first-degree residential burglary. He is slated to next appear in court in January 2022. Avan was named as one of the top professionals in their 40s by the Los Angeles Business Journal in 2020. She was also recognized by the Los Angeles Sentinel as one of the city’s Powerful and Influential Black Women Leaders, according to her LinkedIn profile. She had taken a role as head of Global Women’s and Under-represented Talent Strategy in June.

Financial advisor charged with possessing and distributing child pornography

Andrew Harrer/Bloomberg

A financial advisor affiliated with LPL Financial and Wealth Enhancement Group was accused in August of viewing and sending child pornography through the Kik Messenger app. Nicholas Spagnoletti was arrested after investigators acting on a tip from the app and the National Center for Missing and Exploited Children found “images and videos depicting the sexual exploitation and/or abuse of a minor” on his phone, according to court documents in Morris County, New Jersey. He faces charges of endangering the welfare of children through the distribution and possession of child pornography. Wealth Enhancement, a private equity-backed hybrid RIA with LPL, fired Spagnoletti. After the report from Kik that a user uploaded five files with child pornography, investigators traced the IP address to Spagnoletti’s cellphone, his Madison home and his office. They found the files on his iPhone, according to court documents.

Advisor charged with ‘massive and ongoing’ Ponzi scheme

Bloomberg News

An alleged Ponzi scheme perpetrated by a Georgia-based advisor, his RIA and the fund he controlled for over a decade was found to involve 400 investors, 20 states and $110 million in lost principal. A late August SEC complaint filed in the U.S. District Court for the Northern District of Georgia said advisor John Woods and his associates at Southport Capital based in Chattanooga, Tennessee, raised more than $110 million from their victims by offering and selling membership units in the Horizon Private Equity Fund. The parties allegedly told the investors — many of them elderly retirees — that their investments were safe; would pay a fixed, if not extravagant, rate of return; and that the investors could get their principal back without penalty after a short waiting period. The SEC says in reality, the fund returned scant profits and most of what it did bring in was paid out to earlier investors in classic Ponzi style.

Edward Jones fighting $30M Craigslist sex ad cyberbullying settlement

Officials from Edward Jones say they plan to fight a recent jury decision that awarded $30 million to one of its former brokers who became the target of an online smear campaign involving fake Craigslist sex ads. In early September, a six-year legal legal battle came to a point of resolution when Dalas Gundersen was awarded eight figures from his former firm and an additional $8 million from Paul Betenbaugh, an ex-colleague who was the alleged mastermind behind the Craigslist scheme. Lisa Rodriguez, an Edward Jones broker who is still with the firm, was also ordered to pay $937,500 in punitive damages for her alleged role in the defamation and intimidation lawsuit. But officials from Edward Jones say the firm has already started the process of seeking judicial review, stating that neither Edward Jones nor any of its financial advisors had any knowledge of Betenbaugh's misconduct and are not responsible for it.

Ex-Raymond James rep slapped with 31 criminal charges over $2M fraud

Mark J. Boucher was charged with 31 counts of fraud, identity theft, money laundering and obstruction of justice in October. Boucher, a former registered representative of Raymond James Financial Services and the founder of a Carlsbad, California-based RIA called Strategic Wealth Advisor Group Services, defrauded three clients for more than $2 million during a 10-year span, according to investigators from the SEC and the Department of Justice. Investigators say Boucher provided “false, fraudulent and misleading” documents to the SEC while invoking his Fifth Amendment rights. In addition, they detail the moment a widow, who was the first to grow suspicious, confronted her longtime friend and advisor. Boucher also stole $60,000 from a client whose mother was in the hospital on her death bed, used the money to buy a Chevy Camaro ZL1 and sold it to the same victim a year and a half later for $52,000, according to investigators.

Ex-Ameriprise advisor sentenced to 14 years in $12.5M fraud scheme

A former Ameriprise advisor who conned elderly clients he met through church out of millions of dollars has been sentenced to 168 months in federal prison. Paul Ricky Mata was given his 14 year sentence in December, along with an order to pay $12,560,385 in restitution to his more than 100 victims. This summer, Mata pleaded guilty to 11 counts of mail fraud, three counts of wire fraud, one count of making a false statement in a bankruptcy proceeding, one count of concealing assets in bankruptcy, and one count of making a false oath or account in relation to a bankruptcy case. Mata ran a real estate scheme from August 2008 to September 2015 that allowed him to defraud clients of more than $12.5 million. It involved Mata convincing his victims to pour their savings into several of his businesses and then using their investments to live a comfortable life.