Is your financial planner a crook?

Can you predict if a financial planner is likely to cheat you? 

By Greg Wright, MBA, CFE, CFP, CLU, ChFC

FEB 20, 2017 UPDATE 

The following was submitted by the current resident of Redmond's former Carmel, IN home:

"Your article still states  “Here is his former gated residence in Carmel, IN that he purchased in 2007 and was sold on 10/18/2012 for $535,781.”  Redmond never bought the home he was leasing it from the home owner at the time, xxxx xxxxxx.  Look at the Record I sent – he never owned xxxxx xxxx Rd. home.  Also, we bought the home form xxxxx for $420,000, not $535,781 as you incorrectly state.  Please delete or change this to accurately reflect that facts.

Also, you state it is a “gated residence.”  It is not.  It is a modest home with a 3 types of fencing along the property lines.  The driveway gate is ornamental not for security, especially since the fencing can easily be scaled by any would be intruder.  Also, the north and south fence lines have unlocked gates on them as well, so we can get to neighbors’ homes easily.  Our children use them to play with neighbor kids all the time.

I request you not call our family’s home a “gated residence.”  “Gated residence” conjures up images of a home with automatic locking gates, swimming pools, pool houses, media rooms, fountains, etc.  We have none of that.  Again, our 3 bedroom home is far from luxurious and would not be labeled a “gated residence.” Even by a real estate agent.  I invite you to come and see for yourself how modestly we live and how modest the property really is."

UPDATE ON REDMOND'S STATUS:

According to the Indiana Department of Corrections website, a Thomas H Redmond,  prisoner #233036, is no longer in prison.  His release was scheduled by the DOC to be by July 15, 2015.

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“By the time a boy is twelve years old, his mother, a teacher, or the boy himself can predict with great accuracy his future behavior.”  [i]

Unless you live in a small community, few have known their financial planner  when he or she was 12 years old.  So how are we supposed to predict?  Let’s look at the case of convicted Carmel  securities fraudster Thomas Heflin Redmond, Jr. to see if there is anything in his background that might be a red flag alerting us to future wrongdoing.  

Thomas Redmond, Jr. mug shot

Redmond became a licensed insurance agent in 1999 and entered the securities industry in 2000.  He told investigators he began taking client funds for his personal use in 2004.[ii]

He met many of his victims at church and gained their trust through what they believed were shared beliefs.  He told clients that he would invest the money, but he often deposited the funds into his personal checking account.  He then sent out false account statements indicating that client funds were invested in securities and earning returns.   

An 86-year old victim invested her inheritance money with Redmond’s, Faith Financial Planners.  Redmond placed almost half of a 60-year-old widow’s funds in high-risk investments, including $100,000 in an oil and gas offering by Provident Royalties LLC. 

Other investors had their signatures forged on Provident oil and gas subscription agreements.  He falsely claimed that he had personally invested “a third of his assets” in Provident. 

He formed Faith Financial Planners in 2003 and later informed regulators that he had formed Velocity Capital, Inc. in 2009.  However, the Indiana Secretary of State had no record of Velocity. 

Year 2010 was a year of disputes with customers, disputes with regulators, and visits to small claims court.  In 2011, he was barred by regulatory authorities from selling securities; but, he continued to solicit securities sales. 

Two years later, in June 2013, Indiana securities regulators were contacted by Redmond’s employer, Provident Capital Management of Carmel, Indiana. Local securities investigators examined the allegations.  And, in July 2013 Redmond pled guilty to the charges and was sentenced to 15 years, ten years executed, and to pay restitution totaling $460,121.25.

Liberty Hall

Redmond, prisoner DOC #233036, currently is located in Liberty Hall located at 675 E Washington St, Indianapolis, IN 46204.  According to the Indiana Department of Corrections, his earliest possible release date is July 15, 2015.  Liberty Hall is shown at the left.

Is there anything in his early history that would indicate that he would become a fraudster?  Let’s take a look at “open source” (public) records.

Mr. Redmond  was graduated from Butler University in 1973 and finished his career in first place on Butler's all-time list for receiving yards with 1,933 on 117 receptions. Also, he was named 1971 Indiana Collegiate Conference Lineman of the Year.  Redmond was a “big man on his college campus.” 

We also know that he was close to his father, who had received a college athletic scholarship, been an insurance company executive, an equestrian, and served time in a federal prison. 

Redmond at Butler Univ.

Little public information is available about Redmond Jr. following his 1973 graduation from Butler until 1982.  When applying for a securities license, he told regulators that, on June 16, 1982, he engaged in a bar fight at the Holiday Inn South in Fort Wayne, Indiana where he was found guilty of a misdemeanor, received a 30 day suspended sentence.  He is quoted as follows, “There was a fight in the lounge which led to several hundred dollars of damage.  The credit card I tried to pay the bill with belonged to one of the guys I was with and he left me and the card was overlimit.”[iii] (SIC)  The address shown in the police report was that of a Noblesville horse farm owned by a relative.

He also told securities licensing regulators that he was arrested on Dec. 13, 1984 and convicted of one count of possession of Cocaine and placed on probation for one year.  He said the following, “This was a very down time in my life.  I was divorced and my ex-wife was remarried with my two daughters that I missed every moment of the day.  Thanks to the treatments, I received through 1985, I was able to move on to very positive things in my life.”[iv]  (SIC) Again, the same horse farm address was used in court documents.

Lois Woodworth

In 1997, Redmond was sued by then 78-year-old Lois Patricia Woodworth, also of Noblesville, Indiana, as the executrix of the estate of her late husband, Stanley Woodworth.   The same horse farm address was used in these court records.  The case was dismissed because “plaintiff failed to show cause in writing . . . “

Thomas Redmond obtained a life insurance license in 1999 and a securities license in 2000.  From year 2000 to 2005, in rapid succession, he was employed by four different securities firms.  These firms provided him with securities products to sell to his customers.  Along the way, perhaps he tired of explaining all of the changes in broker-dealer business relationships and, in 2003, he formed Faith Financial Planners of Indiana, LLC. 

Registration Dates		Firm Name	CRD #
Feb. 2000	Dec. 2000	Tower Equities, Inc.	16195
March 2001	March 2002	SII Investments, Inc.	2225
March 2002	Nov. 2003	Freedom Financial, Inc.	45850
Nov. 2003	Aug. 2005	Empire Financial Group, Inc.	28795
August 2005	Nov. 2007	Capital Financial Services, Inc.	8408
Dec. 2007	Oct. 2009	Next Financial Group, Inc.	46214

  

My personal judgment is that Redmond’s employment broker-dealer history from 2000 to 2005 was a big red flag.   That information was available from public sources[v] and should have caused investors to ask Redmond tough questions.  According to court records, Redmond started taking client funds for personal use in 2004. 

Year 2010 was a tough year for Redmond when he experienced a series of customer complaints filed with the Financial Industry Regulatory Authority (FINRA).  In 2011 he was barred from selling securities by FINRA. 

Cash may have been tight because he was also hit by a small claims court case filed against him by a recovery firm.  Shortly thereafter, Indiana regulators were contacted by his employer and Redmond was investigated by the Indiana Securities Division.  He pled guilty and was incarcerated at the Indiana Miami Correctional Facility located in Bunker Hill, Indiana and later moved to Liberty Hall in Indianapolis.

This case is tragic or many reasons.  Mr. Redmond showed great promise as a college student and was an outstanding college athlete.  He obviously is intelligent, likeable, inventive, and articulate.  His victims were primarily older, trusting Christians.

Most investment fraud can be avoided.  In this case, a Google search of public sources would have thrown up several red flags.  Investors should check out their financial planners and ask tough questions.  Ask friends and relatives that may not be accountants, lawyers or fraud investigators.  If it does not make sense or seem too good to be true, run.

Feb. 6, 2017 UPDATE:  The current owner sent me the following email today that was edited by me in part:

"Mr. Wright, We request that you please remove the reference to Thomas Redmond's previous residential address at xxxxx Ditch Rd., and remove the picture as well from your blog: http://fraudstupid.blogspot.com/2015/03/is-your-financial-planner-crook.html My wife, xxxxx xxxxx, and I now own and live at XXXXX Ditch Rd. with our family. Since buying the home and moving in, we have received numerous visits from TV reporters, law enforcement agencies, collection agencies, attorney's representing victims, etc. We also receive mountains of mail addressed to Thomas Redmond and Faith Financial Planning. Putting evil Thomas Redmond's previous residential address, which is now ours, in your online article helps continue to exacerbate our frustrating situation. Please feel free to contact me about this." 

[i] Research project conducted by Ohio State university juvenile Delenquancy ResearchProgram directed by Walter C. Reckless.  Published in the Elementary Scool Journal, 1964, the University of Chicago Press.

[ii] Associaed Press; “Carmel financial advisor accused of using faith to prey on victims,” April 1, 2013.

[iii] FINRA BrokerCheck Report for Thomas Heflin Edmond Jr

[iv] Ibid

[v] Ibid

Other sources include:

1.       FINRA letter of accetance, waiver and Consent No. 2009020417501 dated Oct. 25, 2011

2.       SEC Administrative Proeedng File No. 3-15044 In the Matter of Thomas H. Redmond, Jr., Respondent. Dated June 25, 2014