Oh, the deceitful web scammers weave to make a fast buck. From stealing from the elderly to conning pro athletes, 2016 had its fair share of fraud charges and prison sentences against scammers who acted as investment advisors. And the bar was set low: One fraudster had already been kicked out of the industry and declared bankruptcy, yet still managed to raise funds from gullible investors. Another scammed his mother. As usual, Ponzi schemes were abundant. All have something in common: They all lost their clients a ton on money.
Each year ThinkAdvisor searches through the Securities and Exchange Commission and Financial Industry Regulatory Authority enforcement actions as well as local news outlets to find some of the worst advisors of the year.
(Check out 12 Worst Financial Advisors in America: 2015.)
Many of these were finally sentenced this year for earlier charges, and others are pending sentencing. There were many fraudsters to choose from, but here are some of the dirtier dozen from 2016:
12. Joe Bonnett, $1.3 million
Jerome “Joe” Bonnett Jr. of Nebraska had his investment advisory registration revoked in May after the state’s banking and finance department stepped in stating he failed to account for $1.35 million of client funds and charged him with first-degree forgery and insurance fraud. But Bonnett saved the state some money: While he was out on bond he committed suicide.
11. Michael Donnelly, $2 million, 8+ years
Michael Donnelly of Pennsylvania was found guilty of bilking “elderly and unsophisticated clients” of $2 million that he took for his own personal use, including car payments and his kids’ private-school tuition. President of Coastal Investment Advisers of Wilmington, Del., when he committed the fraud, Donnelly was sentenced to 99 months in prison and was banned for life from the securities industry.
10. Bradley Smegal, $5 million, Pending
Wells Fargo had a bad 2016, but one of its former investment advisors, who it fired in 2011 and who was permanently barred form the securities industry by FINRA in 2012, still claimed to be with the bank while bilking clients. Bradley Smegal faced two counts of securities fraud for allegedly stealing more than $5 million from clients and making “Ponzi-type payments” to investors. Apparently, background checks weren’t a priority for clients as Smegal filed for Chapter 7 bankruptcy in 2013, claiming Rolex watches, Cartier gold bracelets and a Mercedes-Benz as assets, and liabilities including money owed previous clients.
9. Levi David Lindemann, $4.3 million, 6+ years
After pleading guilty to mail fraud and money laundering, Levi David Lindemann of Minnesota was sentenced to 74 months in prison and ordered to pay $1.9 million in restitution. Lindemann told clients he would invest their money, including retirement funds, in conservative products, but instead used the money for personal purchases, such as a car. Lindemann’s firm, Alternative Wealth Solutions, solicited about $4.3 million from 50 investor clients, making Ponzi-like payments to early investors.
8. Robert Lunn, $20 million, 3 years
Scottie Pippen, known for his outstanding basketball play with the Chicago Bulls, hit a losing streak as he left the game. Pippen invested $20 million with Robert Lunn, a financial advisor, who was convicted on five counts of bank fraud for several schemes including forging Pippen’s signature on a $1.2 million loan that he used to pay off personal debts. Lunn was sentenced to three years in prison and was ordered to forfeit $2.7 million in addition to another $1.5 million in restitution, which includes a $400,000 payment to Pippen. Lunn had been a money manager with Morgan Stanley and Lehman Brothers before opening his own firm, Lunn Partners.
7. Charles Banks, $20 million
Scottie Pippen isn’t alone in his bad choice of advisors as former San Antonio Spurs star Tim Duncan ran afoul of “venture capitalist and investment counselor” Charles Banks, who worked for the investment firm CSI when Duncan first met him. After leaving the firm, Banks still advised Duncan, who says he lost $20 million in investment fraud. Although Duncan recouped the losses, Banks was charged with securities fraud by the SEC. He pleaded guilty to wire fraud in early April and will be sentenced in June.
6. Ash Narayan, $33 million