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September 23, 2014 at 06:59 AM
(Ed. Note: Check out the 2015 version of this story, 12 Worst Financial Advisors in America: 2015, on ThinkAdvisor.)
It’s been a year since we picked though the landscape of miscreant financial advisors to choose the worst among them. Unfortunately, a recent Google search turned up all too many that served themselves rather than their clients.
The list of Ponzi schemers, scammers and those who just flat out stole investors’ money seems endless. Reading about the cases that led to convictions since last September is a mind-numbing exercise. Where one case ends another seems to pick up. Unfortunately, we found the same thing when we first compiled this list in 2012.
Still, some stand out. Some got away with huge amounts of money until they were nabbed, others made victims of military veterans and those who faced a devastating natural disaster.
(Related on ThinkAdvisor: 12 Worst Financial Advisors in America: 2013)
In the end, the advisors that made our 12 Worst Financial Advisors in America: 2014 are paying the price: facing time in prison, as well possible fines and court-mandated restitution.
12. Redonda Russell
(Fort Worth, Texas)
Fraud: $316,000 from client accounts.
If a fraud occurs and no one realizes it …
Russell, the only woman to make this year’s list, used a medallion stamp so her fraud could be conducted electronically. In her scam, she closed 18 client accounts, eight of which were inactive. That made the fraud harder to detect. But someone did figure it out, after all. Russell, who worked for First Command Financial for more than two decades, faces up to 20 years in prison and $250,000 fine.
11. John Montague
(Mantua, N.J.)
Fraud: Stealing more than $900,000.
Investors beware
We include this one because it’s a cautionary tale for investors on more than one level. First, Montague promised guaranteed returns for the investments (which he admitted he was not licensed to sell). Guaranteed returns ought to be a red flag by now. Then there’s the manner of payment. Montague had his clients submit checks made out to him. Montague, who was licensed to sell mutual funds and annuities other than the ones he peddled in the scheme, faces 20 years in prison and a fine of up to $250,000.
10. Lynn A. Simon
(Evansville, Ind.)
Fraud: $1 million securities fraud
He couldn’t run far enough to escape the long arm of the law.
Simon made our list not for the amount he took or the creativity of scheme he operated, which was a Ponzi scheme, which relied on new investors money to pay off older investors who wanted out. Rather, Simon took it on the lam when his fraud was discovered and wasn’t caught until after he had made it all the way to New Mexico. In the end, he pleaded guilty and faces two to eight years in the big house.
9. James R. Holdman
(Zachary, La.)
Fraud: Multi-million dollar hedge fund losses.
The cover up is always worse than the original problem.
Holdman pleaded guilty to defrauding investors of millions of dollars through his Greenwing Capital Management hedge fund. He didn’t care who he stole from: among his victims were military veterans, retirees and survivors of Hurricane Katrina. Holdman’s troubles started with the stock market downturn of 2008. As his investments continued to sink, he told his clients their investments were doing fine. Because of that misrepresentation, he continued to collect fees and investors left their money with him. Eventually, all the money was gone. Holdman added another lie, telling clients their investments were all lost within a one-month period. He faces a maximum sentence of 40 years, as well as millions in fines and restitution payments.
8. Dana Giacchetto
(New York)
Fraud: Bilked celebrities of $9 million.
Putting the touch on the rich & famous.
He did his scamming of the stars more than a dozen years ago, before Facebook and iPhones, but he gets a retroactive placement on this list because he was arrested for fraud earlier this year. Giacchetto was charged with running up $10,000 in food, liquor and dental charges on someone else’s American Express card. He faces 25 years in prison.
As for Giacchetto’s eariler shenanigans: He pleaded guilty in 2000 to defrauding Matt Damon, Cameron Diaz, Leonardo DiCaprio, Alanis Morrisette and others of $9 million. He was sentenced to 57 months in prison. Giacchetto had said he was an artist as a youngster, which probably appealed to other artists. The creativity of his earlier scam, though, wasn’t in the complexity but in the simplicity. Giacchetto placed some of his clients’ money in an account registered to his business, Cassandra Group, so he could spend it as he wished–simple; there were no fancy investment vehicles to gum up his withdrawals.
7. Frank Preve
(Coral Springs, Fla.)
