Saturday, May 30, 2015

Carmel insurance agent found guilty of fraud

May 22, 2015 – the Jury found insurance agent, Edward A. Young of Carmel, IN., guilty of forgery, insurance fraud, and theft.  Sentencing to be held on July 17, 2015.   Details to follow.  

Friday, May 22, 2015

Insurance Agent Steals Identity Information

By Greg Wright, 
Certified Fraud Examiner
Certified Financial Planner™

Lake County IN Mug Shot
Insurance Agent Marlon Leon Underwood advertised himself as representing American Freedom Financial, “The #1 Ranked Independent Boutique Broker-Dealer in the Country.” 

Mr. Underwood was convicted of taking personal information from policyholders and applied for credit cards and committed other financial crimes in Indiana.  According to prosecutors, his victims were primarily the elderly included a 79-year-old woman confined to a nursing home.

He was arrested for racketeering, forgery and identity theft.  According to court records, Underwood was sentenced to prison in Indiana for Identity Deception.  Once he is finished with Indiana's hospitality, the authorities in Kenner, Louisiana want to talk to him for allegedly opening a personal bank account at the local Iberia Bank and transferring funds from a Kenner resident’s account into his account. 

Underwood had continued his crimes even after his insurance license had been revoked by the Indiana Department of Insurance.

Insurance and financial planning professionals are often the sources of personal identifiable information used by identity crooks.  When you purchase any form of insurance or investments, the financial advisor will receive enough information from you to apply for credit in your name and steal your identity.  Identity theft costs us more than home break-ins. 

Many firms don’t train their staff to be as vigilant as needed. I have visited insurance agencies and accounting offices where employees leave post-it notes with client information on desks, client files are left stacked against the wall in unsecured file rooms and some even send Social Security numbers over unencrypted emails. Until a financial organization experiences a data breach, many are too busy running their businesses to be concerned about your personal information and potential identity theft.

Thanks to the Lake County Sheriff Department for its assistance.

Thursday, May 14, 2015

Fraudster Tom Brady Tribute

To welcome Tom Brady back to Indy, I just purchased a Pinocchio Liar nose.  

I plan to wear it to the October 18, 2015 Colts vs Patriots Sunday night game.   Unless he wins appeal, Tom Brady will return from suspension when he plays against the Colts. I have a feeling that the Pinocchio Liar Nose will be sold out soon.  

Like most fraudsters, Brady won’t accept personal responsibility for his crime.  In Brady’s case, the poor ball boys Jim McNally and John Jastremski have lost their jobs.    

Multi-millionaire Brady needs a Hoosier welcome on October 18th!.

Monday, May 11, 2015

Has Veros Partners reach agreement with the SEC?

By Greg Wright, 
Certified Fraud Examiner
Certified Financial Planner™

Last Wednesday, Veros Partners sent an email to its clients stating that they had reached an agreement that would allow them to continue to work with clients.  The letter does not identify the name of the regulatory body that gave them that permission. The letter does not inform clients if their assets continue to be frozen?

That email was from Matthew D. Haab, CPA and was dated May 6, 2015.  The last paragraph has been reproduced below in part. 

“Subject: A Heartfelt Message to Our Clients.”

At the end of last week we reached an agreement that allows for us to continue to work with each of you within our core wealth management services (investment management, financial planning, goal planning, tax planning, etc.) just like we have always done.  We will be proactive in communicating with each of you as we make continued progress and will keep you updated on a regular basis.  We greatly appreciate the outpouring of support we have received and look forward to continuing to add value and provide great service to all our clients.”

The Veros Partners' client that sent me the email said that past emails and marketing letters had Mr. Matthew D. Haab indicating that he was both a Certified Public Accountant and a Certified Financial Planner; however, this email contained only the CPA designation. 

According to the Certified Financial Planning Board, Haab is not a CFP.  Was he a CFP in the past?  If so, what happened to his certification?   When did it happen? Haab has not responded to my questions.

Saturday, May 9, 2015

Veros’ Farm Investment Recovery

By Greg Wright, 
Certified Fraud Examiner
Certified Financial Planner™

In response to questions from Veros Partners, Inc., investors, I offer my opinion on the likelihood they will see the return of even a small portion of their investment principal.

Based on other investment fraud schemes in past years, one might assume that these investors would be lucky to get pennies on the dollar. The funds appear to have been loaned to farmers for them to pay for the cost of seed, chemicals and if they were tenant farmers, cash rents.  It may be that there are few if any, collateral assets supporting the partnership notes and loans.  Farming is a pretty risky business. 

However, it may be that investors could receive more than what is thought by many. 

In the case of Veros, we saw a quick and decisive asset freeze and we may see an aggressive Securities Commissioner Carol Mihalik and SEC act in other areas as well.  In another Ponzi scheme, Keenan Hauke, they were able to recover almost a third of investor’s money.  This high salvage was due to prompt action and looking for deep pockets.

Commissioner Mihalik said of Hauke’s CPAs, “As the fund’s accountants, they had a responsibility to the investors to check Hauke’s work before issuing client account and tax statements.” The Commissioner thus was able to find $1,8 million from Hauke’s CPAs.  With several more CPAs involved in Veros than Hauke, there may be even more “deep pockets” and potential proceeds available from errors and omissions insurance policies.

The regulators may also “clawback.” funds from previous investors.  In a “clawback,” the receiver or trustee will seek the recovery of repayments of principal and any “false profits” that had been paid out to prior investors.  This potential clawback might result in the clawback of funds from 2012 and other prior investors. 

Whenever CPAs cross the line when providing investment advice, things can get pretty messy.  If your CPA is also your investment advisor and insurance agent, aren’t you left with only two legs on the stool?  Just asking.  

Recent SEC comments may be found at “SEC Actions”:

Offering fraud: SEC v. Veros Partners, Inc., Civil Action No. 14-cv-659 (S.D. Ind. Filed April 22, 2015).

The complaint alleges that at least $15 million was raised from over 80 investors in a series of offerings in 2013 and 2014. The defendants in the action include: Veros Partners, Inc., a registered investment adviser; Matthew Haab, an accountant and financial planner who founded Veros, continues to own a significant percentage of the firm and serves as its President, Treasurer and a director; Tobin Senefeld, the CEO and a registered representative at Pin Financial LLC who previously settled a Commission free riding case; Veros Farm Loan Holding LLC, the issuer for the 2013 offering; FarmGrowCap LLC, the issuer for the 2014 offering; and PinCap LLC, the issuer for the 2014 Bridge Loan offering.

Veros has about 300 advisory clients. Matthew Haab manages the advisory business. In 2012, Veros began offering farm operating loans. Those loans were extended to farmers to pay for seed, fertilizer, equipment and related expenses for a particular crop cycle. The offerings were intended to fund twelve to fourteen-month operating loans for farmers during a particular crops season. They were to be repaid at the end of the season. Beginning in 2012, and continuing through 2014, the defendants solicited largely Veros clients to purchase interests in entities that held farm loans. In the 2012 offering about $4.8 million was raised from 59 investors. Those investors were told that the offering proceeds would be used to fund farm loans for the crop season. Investors would be paid 12% interest and repaid at the end of the season. By the end of the season, the underlying farm loans were not repaid in full nor were investors. For the 2013 crop season, the process was essentially repeated but investors were not told that portions of their funds would be used to pay investors from the 2012 offering or about certain fees. When the 2013 offering matured, investors were entitled to receive about $10.8 million. Funds were not available. Investors in a subsequent bridge loan program and the 2014 offering also were not paid because all the underlying loans were not repaid, and portions of their funds were diverted to pay for the shortfall in earlier offerings.

The complaint alleges violations of Exchange Act Section 10(b), each subsection of Securities Act Section 17(a) and Advisers Act Sections 206(1), 206(2) and 206(4). The complaint is pending. See Lit. Rel. No. 23246 (April 24, 2015)