Justin Paperny Justin Paperny says he’s seen a sizable increase in financial advisor clients this year. (Photo: Philip Weung)

“I sold my soul for money.”

And it went downhill from there, says Justin M. Paperny, who served time in federal prison for conspiring to commit fraud when he was a UBS financial advisor. But his is a story of sin and redemption, as he tells ThinkAdvisor in an interview.

Since his release in 2009, he has put his calamitous experience to good use as a high-profile prison consultant to high-profile white-collar felons.

Founder of White Collar Advice — which he established while in prison — Paperny, 45, is the go-to guy for guiding defendants on how to prepare for sentencing, including trying to secure a reduced sentence; how to start rebuilding while incarcerated; and post-release, how to create the best outcomes. His third book is “Prepare: What Defendants Need to Know” (2019), co-written with Alec Burlakoff.

Amid the pandemic, Paperny now counts among his clients felons who have exploited the Paycheck Protection Program: Instead of funding payroll, they used the government money to buy Rolex watches, fancy cars and chartered private jets.

“It’s stealing. You go to prison for that,” he says in the interview.

The consultant’s clients are multimillionaires and billionaires — among them, many politicians and celebrities. Fees average in the $10,000 to $250,000 range. But he also helps financially struggling defendants.

Among his well-heeled clients are six families that are defendants in the sprawling college admissions scandal, he says.

In the last year, Paperny has had a sizable increase in clients who are financial advisors. The crimes center on pump-and-dump stock schemes, stealing from their clients’ accounts and insider trading.

Paperny founded White Collar Advice in 2008, while serving an 18-month sentence in Taft Federal Prison Camp in California, for aiding and abetting another UBS advisor who was running a lucrative Ponzi scheme.

The soul-selling he talks of relates to accepting a 7-figure signing bonus when he and his then-partner moved their practice from Bear Stearns to UBS.

After a 13 months of incarceration, Paperny was released on three years’ probation. By then, he was well on his way to reinventing himself as a prison consultant and ethics speaker warning about white-collar crime.

Today, he also trains financial advisors and FBI agents (Factoid: While under investigation, he lied in an interview with the FBI). Clients include Allstate, Grant Thornton, KPMG International, Morgan Stanley, Securities America and Wells Fargo.

A lecturer, Paperny speaks at (or Zooms to) Georgetown University, the University of San Diego and his alma mater, the University of Southern California, among others. Often, current clients join him to discuss — and perhaps bolster — their cases.

ThinkAdvisor recently interviewed Paperny, who was speaking by phone from Irvine, California, near his company’s headquarters in Dana Point. A brief email exchange followed.

A TV series based on his first two books — “Letters from Prison” and “Ethics in Motion” — is in the works for CBS All Access.

Produced by actor-comedian-producer Will Arnett and penned by a TV comedy writer, it’s “kind of a comedy” loosely based on Paperny’s life after prison, the consultant explains. He has read some of the in-process pilot script. “It’s actually pretty funny,” he says.

As comedians Steve Allen and Lenny Bruce noted: “Tragedy plus time equals comedy.”

Here are highlights from our interview:

THINKADVISOR: Have you any clients seeking your services because of pandemic-related issues?

JUSTIN M. PAPERNY: We currently have two defendants who have been indicted for misusing Paycheck Protection Program funds. People are exploiting that government program.

And they’re going to prison?

Oh, good God! You get a $500,000 loan from the government and say you’re going to fund your payroll with it — but you use it to buy Rolexes, cars, clothes and fly on private jets. That’s fraud — it’s stealing. You go to prison for that.

Do you try to help many clients get a reduced sentence?

Yes. As a result of our mitigation work, our clients frequently get sentences that are lower than what prosecutors recommended. Mitigation consulting helps develop a strategy to influence a better outcome. Done well, it will show that the defendant is far more than the wrongdoing. But they must build a compelling case. We help them frame a story that contextualizes the totality of their life and makes them more human and relatable.

To what extent do you have clients in the financial services industry?

I’ve seen a bit of a pickup [in those] over the last year. I’ve had defendants indicted for more pump-and-dump stock schemes than I had in the previous four years. I’ve had more stockbrokers, financial advisors and marketers for penny stocks in the last year than I had in the prior couple of years combined. I’ve had clients with marketing schemes that defraud the average investor and [those who execute] market manipulations with penny stocks. I’ve had stockbrokers dipping into their clients’ funds. One hired me this morning after he was caught.

Any other examples of defendants who work in financial services?

I have two clients in the brokerage industry in New York who have been indicted for insider trading. Also, in the last year I’ve had more tax cases, involving accountants primarily, than I’ve had in a while.

Why has there been such an increase in clients that are in financial services?

A lot of it [comes to] what catches a U.S. Attorney’s Office’s attention and their priorities. Is it sexy enough for them to move forward? A lot of cases are from tipsters. That’s how the [Operation] Varsity Blues [code name for the investigation into the college admissions bribery scandal] case started.

Who was the tipster?

Someone in the case had been indicted for stock fraud — a pump-and-dump stock scheme. When they arrested him, the first question the FBI asked was: “Is there anything you’d like to tell us?” Many investigations begin with a cooperating witness.

What did he say?

“I don’t know if this is a big deal, but I’ve been paying some coach to get my kid into school.” They were like, “Hmmm, tell us more about that.” And he did because he wanted to cooperate and avoid going to prison.

What’s another of your recent cases in which the defendant was an FA?

A stockbroker mistakenly made like, a $4,000 deposit into her own account instead of her client’s. The broker noticed it but didn’t correct it and then began working with the compliance officer to have some smaller checks go into her account, too. Over two or three years, it turned out to be several hundred thousand dollars.

What portion of your clients are women?

About 15%-20%. That’s grown dramatically in the last two years. There are many more women in the workforce now and more opportunities [for potential wrongdoing]. With opportunities, come bad decisions — like stock fraud.

What’s the biggest mistake defendants make once they’ve been indicted?

Defendants don’t seek to prove the government wrong. The government’s agenda is to indict you, send you to prison, destroy you, continually focus on the worst decision you’ve ever made in your life, destroy you online with Justice Department press releases under the guise of alerting the public to scammers [etc.]

How do you work with defendants to try to overcome all that?

Defendants that are successful [that way] seek to prove the government’s agenda wrong: They work to create a new narrative and demonstrate that through their efforts, they can become better and overcome this experience. That’s the key to success as a convicted criminal.

Why don’t most defendants realize that they should do that? 

Too many of them outsource that work to lawyers. The majority of defendants don’t take the initiative to convey why they’re worthy of a shorter sentence or more time in the half-way house or worthy of getting their license back. Our team helps them convey why they’re worthy of the best outcome.

When defendants initially contact you, what is it that they often want you to do for them?

Depends on where they are in the criminal justice process. For example, a New York physician called me today who learned he’s going to be indicted for health-care fraud. He asked about how he can prepare for sentencing. If someone has [already] been sentenced, my work focuses on how to have the most productive prison term and how they can reconcile with their victims.

What if the client is released and has returned home?

Their questions may include how to rebuild their reputation and reconnect with family and how to [build] a new career.

How do you help defendants get ready for life behind bars?

People think that, as a prison consultant, I prepare defendants for how to shop in the prison commissary or how to run track. Nonsense!

Why?

You retain our team to answer the question: How will this impact the rest of my life? How can I begin telling my story in a way that doesn’t blame or excuse my conduct but [shows that] I accept responsibility? You’ve got to own it. That’s not always easy because some clients think they’re not guilty or that their case shouldn’t have been handled criminally.

What advice do you give defendants about starting to rebuild while they’re incarcerated?

If they’re not productive in prison, how are they going to succeed when they come home? They’ve got to create a routine on the inside where they’re growing their network and working to change the narrative. With the right preparations, they’ll have less fear as they release. They’ll recognize that this is a [short] period in their life — not a “life sentence” — and understand that without proper preparation, life on the other side is going to be harder.

How do you develop a network when you’re in jail?

Become resourceful. There’s pen and paper in the prison library. When I was in prison, I wrote letters introducing myself: “I’m writing to you from federal prison,” and I told my story. I formed connections that way. Some of the letters were to business schools, letting them know that as an educated executive with UBS, I never imagined I would end up in federal prison and that I’ve learned a valuable lesson and would love to be a resource for them. That led to a response from DePaul University, who flew out from Chicago to film me.

What else did you do to start over while you were inside?

I began writing a daily blog and during the last five months of my term, wrote my first book, “Lessons from Prison.” I encourage all our clients to follow a path similar to the one I’ve demonstrated. The only way to work your way back successfully is to create a long-term plan.

How did you get involved with criminal activity as a UBS FA?

I sold my soul for money when I went from Bear Stearns to UBS. It was that damn bonus check they put in front of me. You don’t think it through, and you take it. I regretted it after about nine seconds.

But how did your sign-on bonus cause you to conspire to commit fraud?

As soon as I got that big bonus, I felt pressure to prove worthy of it. I felt pressure to keep my name at the top of the production-level board every single month. I felt pressure from my bosses, from my senior partner. When I was falling behind, I began to make bad choices and then rationalize them. I thought, “My God, if I don’t produce, I’m going to get fired.”

So you went to prison for aiding and abetting a hedge fund client who was running a Ponzi scheme. When the news broke that Bernie Madoff’s sons turned him in for running a huge Ponzi scheme, what went through your mind?

What interested me were the enablers — the people that allowed his crime to take place. I was an enabler: I helped my client who was running the Ponzi scheme. I let it go on. I was a stockbroker executing the trades. And once I learned that he was losing money and then raising more, I turned the other way. So when I thought of Madoff, besides feeling heartbroken for the victims, I focused on all the people that would eventually get arrested because they helped enable the fraud.

What was the key to your transformation?

That I accepted responsibility. I blamed no one but me for my bad decisions.

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