Former Morgan Stanley advisor Elias Herbert “Bert” Hafen faces up to five years in prison after pleading guilty to stealing $1.6 million from his clients to fund his own “lavish” lifestyle.
Hafen, 64, of New Canaan, Connecticut, is “every client’s worst nightmare,” according to the SEC. The veteran advisor, who started his career in 1979, convinced clients to transfer money into his own personal bank account by telling them they were investing in a high-yield investment fund with guaranteed returns.
To support his ruse, he created fictitious investors’ statements bearing the name of a non-existent investment company, according to a release from the U.S attorney’s office for the Southern District of New York, which brought criminal charges against him in a parallel case.
“In reality, however, there was no investment fund at all,” the commission said in a statement. Instead, “Hafen was using the victims’ funds to pay for a lavish lifestyle including custom men’s accessories and an expensive collection of artwork.” He also used funds to cover expenses for his house, car and credit card bills for himself and family members.
Hafen did not return phone calls left at his office at Morgan Stanley, which, as of last week, maintained a voicemail for him, though FINRA BrokerCheck records indicate he has not been employed there since early last year. Reached by phone, one of his family members said “no comment” to a request to speak with him. His lawyer did not respond to messages.
A spokeswoman for Morgan Stanley says the wirehouse is paying Hafen’s victims back for their losses.
“We have fully cooperated with law enforcement in their investigation,” Morgan Stanley’s Susan Siering said via email, “and we are committed to making restitution to the limited number of impacted clients.”
The Justice Department case says he preyed on 11 of his financial advisory clients.
Hafen ran his scam from 2011 to 2018, during which time he worked for the wirehouse, according to BrokerCheck. He then moved to Wells Fargo Clearing Services for part of last year until Wells fired him in August. FINRA barred him from the industry in October.
“At Wells Fargo Advisors we hold our advisors to the highest professional standards,” a spokeswoman for Wells said via email. “The advisor involved in this matter is no longer with the firm.”
Hafen surrendered to law enforcement officials on Sept. 4 and pled guilty that day to one count of investment advisor fraud, which carries a maximum penalty of five years in prison, before a judge in Manhattan federal court.
He is scheduled to be sentenced on Jan. 14, 2020.
