Fake investment account scam claims victims
The stock market was on a roll. Investor accounts are growing.
Unless their accounts turn out to be false.
A stunned Terry Poulsen discovered that his Lawrence investment agent, Gregory A. Price, had given him a fake account number. Poulsen discovered there was no TD Ameritrade account in his name — and no $286,364.65 — while visiting a local branch.
“When the count wasn’t there, you could have knocked me down with a feather,” Poulsen said.
Others have complained about Price to the office of the Kansas Securities Commissioner, and an investigation is ongoing. Last week, the state issued a cease and desist order against Price, outlining his actions in the seven-page order.
It turns out that good times are dangerous times for investors. Few think of questioning their advisors, stock brokers and account managers when balances rise. What could go wrong, right?
Securities lawyers in the region confirm that complaints to financial regulators have dropped significantly as the market has risen.
Once the market turns, and eventually it will, many account holders may find that their nest egg, college funds, and other accounts were not what was advertised.
Falsification of investment accounts is an old scheme familiar to lawyers representing victims.
“I’ve had three or four of these (cases) over the years,” said John J. Miller, an attorney with Swanson Midgley LLC in Kansas City. “These are just falsified and fake account statements.”
Miller said a similar case involved a live account, but one of the documents didn’t look right. The word “discretionary” had been misspelled as “discretionary”. Miller said he learned that the broker forged a “corrected” form to convince Miller’s client that he was making money when a statement sent by the brokerage firm showed losses.
A decade ago, false claims convinced more than 100 investors that their Overland Park-based adviser was working for their financial security rather than his own.
The scheme by James A. Freese, whose company was called AFG Capital Management Inc., fell apart when a client became curious. Freese had created Charles Schwab accounts for his clients and sent them their account statements.
The curious customer noticed that his friends with Schwab accounts could see their information online, but he didn’t know how to verify his. When he went to a Schwab office to learn how to check his account online, he learned instead that he didn’t have an account.
Records show that Freese was released from prison in 2013 and was ordered to pay more than $7 million in restitution. Payment information in his criminal case credits him with paying only $3,016.18 in restitution.
Poulsen, who lives in Tennessee, obtained a judgment earlier this month against Price in Douglas County District Court in Lawrence. The attorney representing Price could not be reached.
Poulsen said he does not expect to see his money again.
“I found out it was all bullshit and a scam,” he said.
Financial recovery rarely happens in scams, and that’s the main reason investors should do their homework before handing over their hard-earned cash.
One place to look is BrokerCheck, an online site run by the Financial Industry Regulatory Authority, or FINRA. The best way to verify a broker is to ask for their CRD (Central Registration Depository) number and then enter it into BrokerCheck. Ditto with the firm’s CRD number.
FINRA identifies what it calls “high risk” brokers by reviewing information included in BrokerCheck reports as well as that broker’s “associations with problematic firms”, “links to previously disciplined individuals”, “informal actions imposed by FINRA” and other factors, the group’s CEO said during a speech in June.
Last year, FINRA excluded 1,244 people and 50 companies from the brokerage industry.
A Securities and Exchange Commission site provides additional reports, called Form ADV, on investment advisers and investment advisory firms.
State securities regulators will also help track information about brokers, advisers and companies. In Missouri, call the Missouri Securities Division at 800-721-7996 or its Vulnerable Citizen Services Unit at 855-653-7300. In Kansas, call 800-232-9580.
BrokerCheck reveals more than anyone needs to know to avoid investing with Gregory Allen Price, CRD # 2667678.
Price has not been registered to offer investments since 2003. His company, which he called Price Financial Group, was never registered.
Price’s registration ended in early 2003 when FINRA barred him from the industry for “excessive trading”, developing an “inappropriate” investment strategy for a client and other actions while working at a Morgan Stanley brokerage office in Kansas City.
Investors also need to be diligent even with properly registered brokers in legitimate firms, said Jane Stafford, a Prairie Village attorney who handles securities cases and consults with firms on regulatory compliance matters.
“A second opinion (on an investment offer) never hurts, even if it’s from a local broker or CPA, especially if it’s something different or unusual,” she said.
Investors must also:
▪ Make sure their account statements come directly to them from the companies that hold their funds. These are called custodial accounts when an advisor, such as Freese or Price, does not take custody of a client’s money but instead uses another company, or at least claims to use them.
▪ Send money for investments directly to the company that holds the account, never to the broker or advisor or their accounts. It would also be worth contacting the company to make sure the deposit was made and your account is there.
▪ Not letting their account statements come from or through the individual broker or advisor.