More On Legal & Compliancefrom The Advisor's Professional Library
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
The Securities and Exchange Commission (SEC) on Thursday charged a purported money manager and two of his chief marketers with defrauding investors in a fake company he created. Nearly $1 million of the money they siphoned from investors was given to three Las Vegas call girls.
The SEC alleges that Geoffrey H. Lunn of Sheridan, Colo., operated the $5.77 million investment scheme with assistance from Darlene A. Bishop of Odessa, Texas, and Vincent G. Curry of Las Vegas.
Lunn portrayed himself as the vice president of Dresdner Financial, a firm whose executives he claimed had connections to Dresdner Bank in Germany, and was purportedly planning to purchase several other banks to expand its operations.
The SEC says that Lunn, Bishop, and Curry solicited investors throughout the U.S. and in several foreign countries for their “.44 Magnum Leveraged Financing Program” that they promised could turn an investment of just $44,000 into $2 million within 10 to 12 banking days. However, the SEC says, “Dresdner Financial was not a real company and investor money was not used for any investment purpose. Lunn withdrew the money in cash and Western Union transfers, paid hundreds of thousands of dollars to Bishop and Curry, and gave nearly a million dollars to three Las Vegas call girls.”
In a bizarre twist, the SEC’s complaint says that Lunn also testified to SEC investigators that it was a “one-eyed man” using the alias “Robert Perello” who actually created Dresdner and the Magnum program, and that he forced Lunn to participate in the scheme by threatening to kill him and his family.
Robert Burson, associate regional director of the SEC’s Chicago Regional Office, said in the same statement that “Lunn, Bishop and Curry created an aura of credibility by inventing a fictitious firm with a name similar to a legitimate company. But their 100% guaranteed investment program and the astronomical returns they promised were nothing more than an elaborate hoax.”
According to the SEC’s complaint filed in federal court in Denver, the scheme occurred between February 2010 and February 2011, and the securities offered were never registered with the SEC as required under the federal securities laws. Lunn, Bishop and Curry told investors that Dresdner offered 100% guaranteed rates of return through a process involving the lease and monetization of bank instruments. “Curry and Bishop marketed the program directly to potential investors through phone calls, emails and other communications,” the SEC says, while “Lunn held conference calls with marketers and investors to explain the workings of the program.”
According to the SEC’s complaint, Lunn admitted in sworn testimony during the SEC’s investigation that “it was a con, basically.” Lunn admitted that he did not lease any bank instruments, obtain any insurance wraps, monetize any bank instruments or place any money into trading platforms as represented to investors. Nor did he return the money to investors.
When Lunn, Bishop and Curry were unable to repay investors after the promised 10 to 12 days, they perpetuated the scheme by repeatedly postponing the payout dates and claiming the delays were due to holds placed by banks or the government, the SEC says.
In November 2010, the SEC says that Lunn used investor money to make a $1 million Ponzi-like payment to a favored investor who he thought “was a deserving person.” Lunn paid $1.3 million to marketers of the scheme, including more than $650,000 to Bishop and Curry. Lunn used the remaining investor funds to pay for his personal and business expenses.
Regarding the one-eyed man, the SEC’s complaint said, “Lunn testified that Perello told him that he named the program accordingly because ‘when people found out they’d been ripped off, they would buy a .44 Magnum and shoot themselves in the head.’ Lunn claimed that Perello threatened to kill him and his family if he did not cooperate in the Dresdner scheme, and that he gave the cash he withdrew from investor funds and the Western Union transfers to Perello. Lunn is the only person who claims to have met Perello in person, saying he does not know Perello’s true identify or current whereabouts and that his only distinguishing characteristic is that he has just one eye.”
Despite Lunn’s assertions, the SEC says that no individual resembling Perello has been identified or located.