Articles Tagged with Wells Fargo

SSEK Investigating Stephen Klinger, ex-Wells Fargo Advisor

Shepherd, Smith, Edwards & Kantas (“SSEK”), a law firm specializing in representing wronged investors, is looking into allegations against ex-broker Stephen Klinger for trading options for a client in his own account.

He then proceeded to lose the client’s money.  Klinger was fired earlier this year by Wells Fargo. The client then sued Klinger and Wells Fargo. According to the broker’s CRD, his official record, Klinger then settled the lawsuit without telling Wells Fargo.

Our investor fraud lawyers at SSEK Law Firm are looking into claims involving former Wells Fargo (WFC) broker Leonard Kinsman (Kinsman). Kinsman currently still faces at least two customer complaints that were brought before the Financial Industry Regulatory Authority (FINRA), one claim involves a New Jersey widow and mother of three who is accusing him of defrauding her family of their life savings.

Until July 2019, Kinsman belonged to the Wells Fargo Financial Network of brokers that operate independently, even as they use the bank’s compliance software and investment systems. No details have been provided into how or why he is no longer affiliated with the firm’s broker network.

According to the New York Post, the widow began working with Kinsman in 2012 when he was still a Merrill Lynch broker and after her husband had passed away. She requested that Kinsman place her money, a $2.27M life insurance settlement, in conservative, diversified investments that promoted long-term growth so she could support her family off the interest.

The Financial Industry Regulatory Authority (FINRA) has taken action against two former Wells Fargo (WFC) representatives. Ex-broker Michael Garris has been suspended for a year after the self-regulatory organization found that he made 26 unauthorized trades in the account of a client who he knew had died.

Garris was fired by Wells Fargo over a year ago. According to FINRA, he made more than $9K in commissions from the unauthorized transactions in late 2017, several months after the client’s nephew had notified him of the death. Garris failed to tell the brokerage firm of the client’s passing.

Wells Fargo has since refunded the commissions that Garris made from the transactions, reversed the transactions that were not authorized, and placed the account back to its former positions from before the customer died.

The Federal Housing Finance Agency (FHFA) has filed a more than $1B residential mortgage-backed securities (RMBS) fraud lawsuit against Wells Fargo (WFC) on behalf of Freddie Mac. The government-owned mortgage company had invested in over $1B in RMBSs backed by NovaStar loans prior to the 2008 financial crisis. NovaStar, once a subprime lender, is no longer in operation.

While several banks underwrote the securities, the investor fraud case is targeting Wachovia Capital Markets, LLC, an ex-Wachovia brokerage firm, that is now Wells Fargo Securities, LLC. Wachovia was a Wells Fargo acquisition in 2008.

According to the RMBS fraud case, FHFA claims that offering documents sent to Freddie about the quality of the loans backing the RMBSs were misleading. The independent federal agency contends that Wachovia, which played a part in packaging these securities, put out registration statements that were also allegedly misleading and included misrepresentations that eventually resulted in Freddie Mac sustaining huge financial losses.

Just a few weeks after former Wells Fargo (WFC) broker John Gregory Schmidt consented to a final judgment in the US Securities and Exchange Commission’s (SEC) investor fraud case against him, the regulator announced that it has barred Schmidt for misappropriating more than $1.3M from clients, most of them elderly retired investors. Schmidt, who also ran Schmitt Investment Strategies Group in Ohio and was already barred by the Financial Industry Regulatory Authority (Finra), was fired by Wells Fargo in 2017. In a parallel criminal case, he is also charged with 128 felony counts over the same fraud allegations.

The SEC’s complaint notes that at the time that Wells Fargo fired Schmidt, he had about 325 retail brokerage customers. At least half of them had worked with him for over a decade, and a “significant percentage” were retirees who depended on regular withdrawals from their brokerage accounts to cover their living expenses. Many of them were unsophisticated, inexperienced investors, some of whom were suffering from dementia, including Alzheimer’s disease.

Schmidt’s scam purportedly involved making unauthorized sales and withdrawals involving variable annuities from certain customers’ accounts and then using fraudulent authorization letters to move the money to the other clients’ accounts. According to the Commission’s complaint, between ’03 and ’17, Schmidt took money out of seven clients’ accounts and moved the funds to the accounts of other clients to conceal shortfalls there.

The city of Philadelphia, Pennsylvania is suing Bank of America (BAC), Goldman Sachs (GS), Citigroup (C), Wells Fargo & Co. (WFC), Barclays Plc (BAR), JPMorgan Chase & Co. (JPM), and Royal Bank of Canada (RBC) for allegedly rigging rates for variable-rate demand obligations (VRDOs). Philadelphia had issued over $1.6B of these bonds.

VRDOs are tax-exempt municipal securities that can be redeemed by investors early because they are tendered to banks. The banks can then remarket the bonds to other investors while charging issuers a fee.

According to InvestmentNews, the city is looking to represent a number of hospitals, municipalities, and universities with its lawsuit. The complaint contends that the banks worked with each other to manipulate the VRDO rates in secret so they could make hundreds of millions of dollars in unearned fees. The alleged rigging occurred between 2/2008 and 6/2016. The collusion purportedly involved the banks agreeing not to compete against each other for re-marketing services.

John G. Schmidt, an ex-Wells Fargo (WFC) broker, is now facing 128 felony counts over his alleged running of a $1M Ponzi scam. Criminal charges include:

  • 124 counts of forgery
  • 1 count of telecommunications fraud

The Financial Industry Regulatory Authority announced this week that it is barring three former brokers. They are ex-Morgan Stanley broker (MS) Kevin Smith and former Wells Fargo (WFC) brokers Wilfred Rodriquez Jr. and Thomas A. Davis.

According to the self-regulatory authority’s order, the bar against Smith comes after he wouldn’t appear before FINRA to testify regarding allegations involving a structured products trade in a family member’s trust that he may have executed without checking with the client first.

Morgan Stanley fired Smith in 2016 in the wake of the broker fraud allegations.

The Financial Industry Regulatory Authority (FINRA) has barred J. Gordon Cloutier, Jr. (Cloutier), a former Wells-Fargo (WFC) broker based in the Dallas area of Frisco, Texas, after he allegedly tried to make an unauthorized trade and requested a loan from a client.  Cloutier, who had worked at the firm for seven years, was fired in 2016.  Previous to working with Wells Fargo, Cloutier was  a Merrill Lynch broker, which is now a division of Bank of America (BAC), from 1996 to 2009.  FINRA ultimately barred Cloutier after he failed to respond to numerous attempts by the self-regulatory organization to interview him for its probe. It is FINRA’s policy to open an investigation after a broker is let go from a firm. It was Cloutier’s lack of response that led to FINRA issuing the  default bar from the industry.

At Shepherd Smith Edwards and Kantas LLP, our Texas broker fraud law firm represents investors in helping them to recoup their losses sustained due to broker misconduct, negligence, or carelessness. Over the years, we have successfully helped thousands of investors from our Houston offices. If you were an investors who worked with Cloutier, our Wells Fargo investor fraud attorneys want to hear from you.

Broker Fraud

According to Yahoo Finance, a number of Wells Fargo (WFC) advisors who used to work for the Private Bank’s wealth management unit are claiming that the firm pushed them to place client funds in investments that charged higher fees to clients. The ex-bank employees contend that they were pressured to cross-sell products and bill clients for fees that they would not have had to pay otherwise.

Yahoo Finance reported that there are internal company documents verifying the former employees’ claims. The media outlet said that it conducted interviews with a number of these former advisors.

The ex-Wells Fargo advisors were reportedly encouraged to place clients’ funds in complex products and separately managed accounts. The advisors claim that they were told that if they did not meet sales quotas for certain products, their compensation would suffer.

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