As 2013 unfolded, the schemes, scams and bad behavior of that small percentage of advisors and investors filled up our weekly listings of SEC and FINRA enforcement actions. We decided to look back at some of the most interesting cases.
If there was a common thread among the cases, it's only that the perpetrators thought they could get away with their misdeeds.
Alas, the agencies watching out for misbehavior were too vigilant, at least from the perspective of those who were caught. Fines and censure often followed.
Check out our Calendar of Woe: 9 Nasty Enforcement Cases of 2013:
1. January: No Sunshine in This State
Investors thought they were getting in on a good deal: providing $300 million for the development of five-star resorts in Florida. Unfortunately, the deal was allegedly nothing more than a Ponzi scheme. Fred Davis Clark Jr., president and CEO; David Schwarz, chief accounting officer; Cristal Coleman, manager and sales agent; Barry Graham, sales director; and Ricky Lynn Stokes, sales director, were accused by the SEC of using money from one investor to pay others. In addition, the SEC said they kept $30 million to themselves from 1,400 investors. The case has dragged on while the quintet has denied any wrongdoing.
2. January: The Eyes of Texas
The SEC accused a day trader based in Sugar Land, Texas, of targeting Druze and Lebanese investors through a high-volume trading program. The SEC said Firas Hamdan was well known in those communities in Houston. He promised his program would generate profits, but instead posted losses of $1.5 million on the $6 million he garnered from 33 investors. He claimed the program was working as advertised and that payments were being delayed by the Greek financial crisis. The agency also claimed he lied about having his investments secured by "key-man" insurance and other business details.
3. March: Penalty on the Play
Some say investing is a form of gambling, and if that's true, 31 NFL players found that out the hard way when they were bilked out of a collective $40 million or more in a casino deal. Jeffrey Rubin (above) of Lighthouse Point, Fla., was barred from trading after the SEC charged him with misrepresenting illiquid, high-risk securities in gambling emporiums. One player was enticed to invest most of his net worth, $3.5 million, in the Alabama casino. Rubin's employer was unaware of the deal. Among the players who lost money were Terrell Owens, Ray Lewis, Frank Gore, Plaxico Burress, Clinton Portis and Santana Moss. Rubin was banned by FINRA, sued by the players but, as of September, was reportedly still living a life of luxury.
4. May: All in the Family
Many scams involve partners in crime, but it's almost heartwarming to think of a father and son broker team working together to rip off their clients. OK, maybe not. Charles J. Dushek and Charles S. Dushek, and their advisory firm, Capital Management Associates, based in Lisle, Ill., garnered almost $2 million in illicit profits by executing undeclared trades in the accounts of clients and moving the profitable ones to their own portfolios. In October, the duo was ordered to pay restitution and fines, the amounts to be determined later.
