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  • Writer's pictureJenny Rozelle, Host of Legal Tea

Cautionary Tales - Under the Microscope: Financial Advisors - Episode

Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle! Today we have a “cautionary tales” type of episode. Now, on these “cautionary tales” episodes of Legal Tea, we NORMALLY talk about real-life cases with real-life clients that are things me or my office have worked on. Today, though, is going to be a bit different. Now, if you look up the definition of a cautionary tale, the Cambridge dictionary defines a cautionary tale as a “story that gives a warning.” THAT is what we’re going to talk about – a story that gives you all a warning.

Unfortunately, it is inspired by a story that recently hit the news about a local financial advisor that allegedly misused client funds for personal gain – and sadly, this is NOT the first time this has happened, and in fact, I’m going to talk about a few cases where this has happened … so, unfortunately, if you catch my drift, it won’t be the last time either, which is a reminder to all of us to do due diligence when selecting the professionals in our lives to work with. Now, all three of these stories are based out of Indiana because, well, if you don’t know, that is where I live – and since I hear so many of my firm’s clients and friends tell me they listen (and they’re all based out of Indiana), I figured I’d use examples out of this state. Though, hear me loud and very clear, this stuff happens all over the place!

Another note before we get started – I hope this episode doesn’t come across like I’m bashing the financial services profession. That is NOT my intention at all and in fact, I personally have a financial advisor that I trust. As we ALL know, there are bad eggs in every single profession – my legal profession, included. Maybe I should do an episode on attorneys going rogue! Anyway, … you can call me Mr. Nice Guy, but I’m not going to use their personal names in these real-life stories. I’ve chosen to use “fake names” but keep the stories factual. Though, if you REALLY care that much, all of these stories are on the internet and if you put in 2 minutes of time, you’ll be able to connect the dots … and get names. I’ve just made an intentional decision to not use their real names.

Alrighty, here goes Story #1: This story came out in 2008/2009-ish. Let’s name this financial advisor, Paul. According to ABC News and CNN, Paul owned three companies in the northern Indianapolis-area – all three were financial services. Things really started in late 2008 when Paul, personally, and his financial service company were sued by another company because they were trying to “get back $1.4 Million for commissions it had paid to [Paul] for selling insurance and annuity policies.” In January 2009, the Indiana Department of Insurance sought to revoke Paul’s license and fine him, too. They “cited a string of complaints from clients, some charging that he forged signatures and withdrew investment money causing large surrender penalties.” Yikes! Oh, and Maryland was even involved when another insurance company (based out of Maryland) sued Paul for recovery of over $500,000 which related to commissions again.

Well, this story took a WILD turn because all of these lawsuits, charges, and investigations were occurring – in January 2009, Paul (who had a plane) hopped in the plane, made a distress call, and bailed out of the plane. Minutes felt like hours which felt like days because people were wondering if Paul died. Nope, it was later confirmed that the distress call was made-up and false – and Paul essentially was on the run. A Hamilton County Judge, when things were starting to get pieced together, ordered that he and his then-wife’s assets be frozen. Eventually, he was captured and then subsequently charged with multiple counts of unlawful acts. He ended up paying restitution, some money to the victims of his bad acts, as well as sentenced to years in prison. According to CNN, he got released from prison in 2015.

Let’s go to Story #2: This story is more recent (last year) and let’s name this financial advisor, Polly. According to Fox 59, Polly transferred money out of a client’s account in mid-2019. Prior to doing so, Polly had created an LLC and actually transferred the money into an account in the name of the LLC. Polly, after the money went into the LLC account, transferred it into her name, personally, to end up using to pay her own personal debts off. Unfortunately, Polly did her bad act again – and again and again. The Fox 59 article stated that she used the money also to do sports betting and later, another time she used it to pay towards a HELOC (home equity line of credit). According to the Court records, the client at-issue believed Polly was using the money for investing in real estate.

Do you want to even hear how much Polly sucked out of this account? According to Fox 59, over $4.5 Million Dollars. Technically, $4,692,500. And to confirm, all of the money went to personal use and not to real estate investment. Unbelievable, right? Well this probably goes without being said but he’s no longer affiliated with the financial services company he was with. Because this was such a recent happening, things are still getting settled, but of note, according to the Fox 59 article, Polly: 1) pleaded guilty to wire fraud, 2) pleaded guilty of filing a false tax return, and 3) the plea agreement shows that Polly agreed to pay the entire $4.6 million dollars in restitution to the client/victim and an additional $1.7 Million to the IRS. There’s a possibility of imprisonment, too, but the sentencing date has not been set. So, definitely some stuff still happening with this one.

And for the most recent story, the one that really inspired me to talk about this stuff on today’s episode – Story #3: This story is BRAND new, so here we are in the beginning of 2024 (I’m recording this at the end of January, but it’ll get released at the beginning of February). With this story, it’s SO new that many of the details of the story are still being sorted out, so I’ll probably say the word, allegedly, a million times. Let’s name this financial advisor Todd. Anyway, according to WTHR station, the Indiana Securities Division has issued something called a cease-and-desist order against Todd, his financial firm, as well as one of Todd’s underlings.

Now, you may be wondering, “What is a cease-and-desist order?” Great question! According to Wikipedia, a cease-and-desist order is a “warning of impending judicial enforcement.” So, in non fancy terms, it’s a governmental way of saying, “We’re about to come after you!” The Indiana Secretary of State, Diego Morales, also confirmed that legal action will be coming against Todd. So what happened, you ask? Well, primarily two things – first, according to WRTHR, Todd took client funds to the tune of $2 Million Dollars … and bought a house in the name of one of Todd’s businesses. So yeah, that was bad thing #1 – and bad thing #2, according to WTHR, is that he technically speaking is not a registered investment advisor in the State of Indiana. That’s not okay because he, himself, is one of the people that clients met with and discussed with him to get their funds invested and structured. Because of this type of advising, Todd is supposed to be registered with the State of Indiana – and he isn’t.

Of course, like I said, this story is BRAND NEW and the facts are still being sorted, but at the end of the day, ALL of these stories I shared today are cautionary tales and like WTHR shares, “should remind all consumers to be cautious and vet investors and financial planners, to ensure your money is going where it is supposed to.” They further shared a very help resource online to check financial advisors’ credentials through Finra (Financial Industry Regulatory Authority) called Broker Check. I linked their website on the source links for this episode or you can simply just google, “Finra Broker Check” and it’ll probably be at the top of the search results.

The WTHR article shared some brief comments from a gentleman by the name of Greg Renn, who is a CFP Professional (CFP is called a Certified Financial Planner) and a Professor at IU Kelley School of Business. Now, regarding the Broker Check website, he said, “It’s free, it takes seconds to do. Really easy to verify if somebody is actually who they say they are. And if their name’s not there, they don’t have a legal obligation to be a fiduciary. Verify, verify, verify, especially when it comes to your money.” I couldn’t say it better myself – of ALL the professionals in our lives. The attorneys in our lives, too. ALL of the professionals. Remember what I said earlier? There are unfortunately bad eggs in EVERY SINGLE professional – and that’s not being pessimistic or glass-half-empty. That’s being realistic.

On that, if any of my Legal Tea Listeners want helpful resources to vet the professionals in their lives, feel free to reach out to – I’d be happy to help. That’s exactly why I spend time doing this podcast – to get good and factual information “out there” with a hope and desire that this information helps at least one person make a better or the best decision for them. I make $0 off this podcast. It’s simply a way I can give you all a peak into my brain – things I’ve seen, things I’ve heard, things that I want you to be aware of. Anyway, I’ll get off the soapbox now, my friends.

Alrighty, time is up, my friends! I hope this was an interesting episode for you. Let’s shift to a sneak peak of next week, which we’re circling back to the “current trends” topic where we talk about things that are going on currently that impact my estate and elder law world – or maybe, things that I have stumbled upon on the news or social media that is relevant to this podcast. Well, next week, we’re going to talk about something going on with Jay Leno and his wife. I stumbled upon some articles discussing Jay seeking guardianship over his wife – she suffers from Alzheimer’s. So, I thought I’d talk a little bit about what’s going on, what’s causing the guardianship, why it’s different than, say, Britney Spears’ guardianship, etc. So, talk to you then, Legal Tea Listeners! Take care and be well!


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