Thursday, August 18, 2016

Veros Partners Reach Agreement With SEC

By Greg Wright
Certified Fraud Examiner
Certified Financial Planner™

Earlier this week, the SEC reached an agreement with Veros Partners' executives Matthew D. Haab and Jeffery B. Risinger.  Defendant Tobin Senefeld is scheduled for trial later this year. 

On April 22, 2015, the Securities and Exchange Commission filed charges[i] against Veros Partners, an Indianapolis investment adviser, its president, Matthew Haab, two associates, attorney Jeffery Risinger and former stock-broker Tobin J. Senefeld, and several affiliated companies for engaging in fraudulent farm loan offerings, in which they made Ponzi scheme payments to investors in other offerings and paid themselves hundreds of thousands of dollars in undisclosed fees.

According to the SEC's complaint, they fraudulently raised at least $15 million from at least 80 investors, most of whom were Veros Advisory clients. According to industry sources, many of these clients were Indiana dentists. 

The investors were informed – according to court documents -- that their funds would be used to make short-term operating loans to farmers, but instead, significant portions of the loans were to cover the farmers' unpaid debt on loans from prior offerings.  According to the SEC, “Haab, Risinger and Senefeld used money from the two offerings to pay millions of dollars to investors in prior farm loan offerings and to pay themselves over $800,000 in undisclosed "success" and "interest rate spread" fees.”  The SEC also charged Tobin Senefeld’s registered broker-dealer (Pincap LLC) Pin Financial LLC.

On August 16th, according to SEC filings, Matthew Haas agreed and signed a Final Judgment agreeing to pay $183,640.[ii]  Haab also agreed in a separate SEC proceeding, to be instituted shortly, “barring him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent or nationally-recognized statistical rating organization.”
Similarily, Jeffery Risinger agreed to pay $100,000.  Likewise, Risinger agreed to similar stipulations that he be barred from any future association with any broker, dealer, investment advisor, etc.

Tobin Senfeld currently does not hold a securities license (FINRA CRD #2120820).  Further, his broker-dealer, PIN Financial LLC (CRD #132876) was expelled from the securities industry in June 2016. 

I understand that the court-appointed receiver, William Wendling, has recovered 20% of investors’ funds.

 Veros Partners first came to my attention a year ago when I received a tip that Mr. Haab was not a Certified Financial Planner and at least one of Veros Partners' CPAs were not licensed CPAs.  The facts at the time were that -- indeed -- Mr. Haab was not a Certified Financial Planner.  

This, in part, led me to construct a short instruction course that I deliver to Senior groups: "Is your financial advisor a crook?"  I teach Seniors how to use public sources and verify the professional credentials and complaints that may have been filed against one or more of their financial advisors.  

Saturday, August 13, 2016

Universities Sued by Employees Over High Pension Plan Fees

By Greg Wright
Certified Fraud Examiner
Certified Financial Planner™

This past week, MIT, Yale, and NYU were accused of charging employees excessive fees on their retirement savings.   The dirty little pension plan secret is that, in many pension plans, the employee pays almost all the plan’s expenses.  Employers experience little or no cost except for the contribution match that may cost them little out-of-pocket.  Especially when the match is paid in company stock.
The universities — the Massachusetts Institute of Technology, Yale University, and New York University  — each have retirement plans holding more than $3 billion in assets -- are each being sued by a number of their employees in cases seeking class-action status. 
Over the last decade, lawyers have filed numerous lawsuits against organizations including Anthem, Cigna, Caterpillar, British Petroleum, Boeing, Wal-mart, and New York Life on behalf of employees enrolled in 401(k) retirement plans.   Most have been settled in multi-million dollar awards. 
With the latest suits filed in federal courts this past Tuesday, the focus has turned from the corporate retirement savings market to non-profit organization 403(b) plans. These accounts are similar to 401(k) plans but are offered by public schools and nonprofit institutions like universities and hospitals.
The latest complaints allege that the universities failed to monitor excessive fees paid to administer the plans and did not replace more expensive, poor-performing investments with cheap ones.  Lawyers argue that participants could have collectively increased their retirement holdings by tens of millions of dollars.
The stated aim of the suits is to reduce conflicts of interest and the fees consumers pay.  In many cases, they argue, employers have not acted in the best interest of employees.  Pension administrators and investment managers have been chosen using arbitrary criteria and because of personal relationships with company executives and Board members.
Even modest reductions in costs can have a significant effect on retirees’ savings. According to the Labor Department, paying one percentage point more in fees over a 35-year career — say 1.5 percent instead of 0.5 percent — could leave a worker with 28 percent less at retirement. An account with $25,000 — and no further contributions for those 35 years — would rise to only $163,000 instead of $227,000, at an annual rate of 7 percent.
The complaint against N.Y.U. Charges that participants were offered too many investment choices  - there were more than 100 options for some employees, and many of them were too expensive.
The suit also argues that even the cheapest funds offered could have been provided for less, given the enormous size and bargaining power with $4.2 billion in assets for more than 24,000 participants.  The complaint also alleges that the university did not use its negotiating powers and overpaid for administrative services for many years. 
The issues concerning Yale’s 403(b) retirement plan — which held nearly $3.6 billion in assets follow a similar pattern.  According to the New York Times, “Yale eventually consolidated to one provider, TIAA, in April 2015, and swapped in some lower-cost investments, but the suit claims that the changes did not go far enough to fully protect the interests of its employees.”
The suit alleges that MIT, because of its longstanding relationship with Fidelity, did not conduct a thorough search for a plan provider, which might have provided better service for less. The complaint said that Fidelity had donated “hundreds of thousands of dollars” to M.I.T., while Fidelity’s chief executive, has served as a member of M.I.T.’s board of trustees, giving influence over the institution’s decision-making.
As I pointed out earlier this year, the courts may be interested; but, the regulators appear to be less interested – especially in the smaller plans.  Smaller employers have even higher fees.  Your boss’s relative or golfing buddy may receive a major part of his income from your pension plan. 

Here is a list of fees 401K and 403B participants may be paying:

·                Investment advisor fees for managing the fund’s portfolios
·                Marketing fees
·                Shareholder service fees
·                Custodial expenses
·                Legal expenses
·                Accounting expenses
·                Sub-accounting fees
·                Transfer agent expenses
·                Brokerage Commissions
·                Sales loads
·                Redemption fee
·                Exchange fee
·                Account fee
·                Purchase fee
·                Maintenance fee
·                Plan set-up
·                Portfolio management fees
·                Educational materials and services expenses
·                Recordkeeping services
·                Employee enrollment services
·                Customer service
·                Legal advice to employer
·                Compliance testing expenses & audits
·                Fees for investment seminars, investment advice, loan fee

Ask for a copy of your company’s retirement plan document.  Check out your employer’s obligations and your rights

Friday, August 12, 2016

Assoc. of Certified Fraud Examiners Elects New Officers and Board

Newly elected Assoc. of Certified Fraud Examiners Indy Chapter Officers and Board members at last night’s meeting (from left): David Grannan, Erik Buchenberger, Jack Armstrong, Jo Griffiths, Greg Wright, Markita West, David Fink, Bonnie Brunton. 

Here is a complete list of the Officers and Directors:
President          Greg Wright
Vice President:   Jack Armstrong
Secretary:            Teri Dervenis
Treasurer:           David Fink
At Large:              Dan Boylan
At Large:              Bonnie Brunton
At Large:              Erik Buchenberger
Membership:      David Grannan
Training:               Jo Griffiths
At Large:              Troy Janes

At Large:              Markita West

Greg Wright & Greg Garrison
Also (shown at left) is the speaker, Greg Garrison, and ACFE Chapter President, yours truly, Greg Wright. Garrison taught a two-hour ethics course and, at dinner, shared his predictions for the upcoming elections.