Numerous Brokers Disciplined for Theft

Recently, a number of brokers have been permanently barred from the securities industry by the Financial Institute Regulatory Authority (“FINRA”) as a result of outright theft, although the complexity of the scheme and the person being stolen form varies somewhat.  These include Teresa Dorenkamp, Kirk Archibald, Angelo Barcello III, Sandra Cardenas, Jaime Diaz, Ann Ferrao, Michael Frew, and Kevin Hamilton.  Often, brokers that resort to outright theft have also committed other illegal acts in an effort to increase their income.  This can include things like churning client accounts to generate additional commissions and making unsuitable sales to clients in complicated products that pay significantly higher commission rates.  As such, if you are or were a client of any of these individuals, it is in your best interest to carefully review your accounts to check for inappropriate and/or illegal activity.

  • Teresa Dorenkamp, a former broker of Eagle One Investments, LLC, stole approximately $116,000 from two of her customers by forging wire transfer requests and wiring the funds to accounts that she controlled, which included a bank account in her name.  In a somewhat unusual turn of events, FINRA also disciplined the clearing firm that processed these transfers, Mesirow Financial, Inc.  According to FINRA, Mesirow failed to establish proper supervisory systems which would have detected and prevented these fraudulent transfers.  Specifically, FINRA stated that the systems in place should have, but did not, include requirements that the authorization letters be thoroughly reviewed to determine who controlled the accounts receiving the funds, and a requirement that the customer be notified in a documented manner of the transfer.
  • Kirk Archibald was a broker for J.P. Morgan out of Brooklyn, NY from late 2012 until January 2014.  He was also dually employed as a personal banker with J.P Morgan Chase Bank, which is a separate legal company from the brokerage company.  This sort of dual employment is fairly common, particularly with J.P. Morgan.  However, in Mr. Archibald’s case, he was accused of creating fraudulent ATM cards in the course of his personal banking job.  During that investigation, Mr. Archibald refused to provide the documentation and/or information that FINRA requested, which is, in of itself, a FINRA rule violation.  As a result, he was permanently barred from the securities industry.
  • Angelo Barcelo III, a broker with Wang Investment Associates, Inc. out of Saint Louis, Missouri, went to significant lengths to steal from his employer.  Mr. Barcelo created a fake client account, then fabricated paperwork which indicated that money had been deposited into that account, and then submitted a check which was supposed to be drawn from that account.  The check got cut, Mr. Barcelo cashed it and spent it for his personal expenses.  
  • Sandra Cardenas, a former broker for Wells Fargo out of Las Vegas, Nevada, also stole from her employer.  Specifically, FINRA found that Ms. Cardenas took money out of her branch office of Wells Fargo’s operating account by making cash withdrawals at ATMs, writing herself checks drawn on that account, and electronically transferring money from the account to her personal account.  
  • Jaime Diaz, a former broker with National Securities Corp. out of Westbury, NY, used a somewhat more involved process to steal his clients’ money than the preceding brokers.  Mr. Diaz became involved in two efforts to start new restaurants.  Mr. Diaz then approached a number of clients, including one of his co-workers, about investing in these start-ups.  In doing so, he convinced many of his clients to sell securities they already owned, or to borrow money against those securities through a margin loan.  A margin loan is not appropriate for many if not most investors, as it dramatically increases the risks of investing.  This conduct in of itself would have been egregious, but Mr. Diaz went further and simply took roughly $600,000 of the $900,000 his clients had entrusted to him to make these purchases, and stole it.  He spent that money to pay various debts and expenses for himself and his office, and then hid those losses and facts from his clients.
  • Ann Ferrao, a former broker with HSBC Securities (USA) Inc. out of Miami, FL, was being investigated over allegations that she had stolen money out from various clients’ bank accounts and used that money for some of her other clients as well as her own personal benefit.  She refused to give testimony to FINRA as part of that investigation, a violation of FINRA rules in and of itself.  As a result, Ms. Ferrao was permanently barred from the industry.
  • Michael Frew, a former broker of Wells Fargo out of San Francisco, CA, was being investigated by FINRA over allegations that he had received loans from customers, which is generally prohibited.  However, the allegations continued that Mr. Frew had simply stolen those funds and apparently was not making required payments.  Mr. Frew refused to provide FINRA testimony as a part of that investigation, a violation of FINRA rules in and of itself.  As a result, he was permanently barred from the industry.  
  • Kevin Hamilton, a former broker of Philadelphia Brokerage Corp. out of Radnor, PA, apparently established a company outside of his brokerage firm that was supposed to invest money as a business venture.  In practice, companies like this operate like hedge funds, where investors put money into the company, the person in charge then goes and invests those funds in various other securities according to whatever investment strategy they choose, and the company rises or falls on the success of those investments.  However, in Mr. Hamilton’s case, he apparently stole over $500,000 of the money investors were entrusting to him and his company.  According to FINRA, Mr. Hamilton used that money for personal use, as well as using some of it to make payments to previous investors, which is effectively how Ponzi schemes operate.  FINRA also found that Mr. Hamilton made numerous misrepresentations to investors about his company in order to obtain more investors.  

Again, it is rare that events like these are the first and only instance of a broker’s misconduct.  There are usually many other clients who have been mistreated if not outright defrauded in the brokers’ attempts to make more money.  If you were a client of any of these individuals, whether or not you were outright stolen from, you should carefully review your account statements to ensure there were not problems.  If you have any concerns, contact the offices of Shepherd, Smith, Edwards, & Kantas LLP for a free, no obligation consultation.  You may have a right to seek to recover some or all of your losses in court or arbitration.

Shepherd Smith Edwards & Kantas LLP has a team of attorneys, consultants and staff with more than 100 years of combined experience in the securities industry and in securities law. Since 1990, we have represented thousands of investors nationwide to recover losses. We have represented clients in Federal and state courts and in arbitration through the Financial Industry Regulatory Authority (FINRA), the New York Stock Exchange Inc. (NYSE), the American Arbitration Association (AAA) and in private arbitration actions. Collectively, we have represented over 1,000 investors over the last 18 years in negotiation, mediation, arbitration and litigation.

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