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Regulation and Compliance > Federal Regulation > FINRA

Ex-Commonwealth Rep Pleads Guilty to Stealing Over $3.7M From Clients

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A former Commonwealth Financial rep pleaded guilty Wednesday to stealing more than $3.7 million from more than 20 clients of his investment advisor business, Heritage Financial Group, according to Andrew E. Lelling, U.S. attorney for the District of Massachusetts.

Related: FINRA Fines Ex-Merrill Rep Who Took Client Info to New Firm

Gerald Allan Eaton, 51, pleaded guilty to one count each of wire fraud, mail fraud and aggravated identity theft, as he agreed to earlier in the month as part of a plea agreement filed Sept. 21 in U.S. District Court for the District of Massachusetts in Boston.

“Commonwealth immediately terminated Gerald Eaton and contacted the US Attorney’s office after learning about his criminal activity,” the company said Monday by email, adding: “Commonwealth worked closely with the US Attorney’s office during its investigation and is pleased Mr. Eaton has been brought to justice.”

“Justice was served when Mr. Eaton admitted to his immoral and criminal behavior in court and pleaded guilty to the charges,” Commonwealth CEO Wayne Bloom said in a statement. “Commonwealth stands firm in its belief that financial advisors should be held to a high standard of trust, and will continually work to protect investor assets.”

Eaton was affiliated with the firm as an advisor from 1995 to 2019, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck website. He was discharged from Commonwealth due to allegations of forgery and wrongful taking of property, according to a Oct. 28, 2019, disclosure on the report.

Without admitting or denying FINRA’s findings, Eaton signed a letter of acceptance, waiver and consent on Nov. 12, 2019, in which he agreed to be barred by FINRA for refusing to provide documents and information it requested as part of an investigation into his conduct, according to FINRA. The bar became effective Nov. 20.

U.S. District Judge Douglas P. Woodlock scheduled sentencing for Jan. 26, 2021, according to court documents.

Eaton was most recently a certified financial planner, running Heritage, a company with an office in Acton, Massachusetts. In that capacity, Eaton invested his clients’ funds in securities and various insurance products, including life insurance policies and annuities. From at least 1999 through October 2019, Eaton stole millions of dollars from clients’ accounts, Lelling alleged. Eaton did so mainly by selling securities, insurance policies and annuities in clients’ accounts, and causing the proceeds to be sent to accounts he owned or controlled, according to Lelling.

Related: CFP Board Is Now Enforcing New Code of Ethics and Standards of Conduct

“As part of his scheme, Eaton forged clients’ signatures on checks and documents, or caused clients to sign documents by falsely representing that the proceeds of transactions would be used for the clients’ benefit,” according to Lelling.

Eaton also falsely represented to the brokerage firm with which he was affiliated, and to insurance companies, that the transactions he requested on his clients’ behalf were for the benefit of his clients, Lelling alleged.

In reality, Lelling said, Eaton caused proceeds to be sent to his own credit card accounts to pay off his personal and family expenses, as well as to his home equity line of credit. To avoid detection, Eaton defrauded clients he knew were unlikely to notice what he had done, either because they were elderly or in poor mental or physical condition, according to the U.S. attorney.

The charges of mail and wire fraud provide for a sentence of up to 20 years in prison, three years of supervised release and a $250,000 fine or twice the gross gain/loss, whichever is greater, according to Lelling. The charge of aggravated identity theft provides for a mandatory sentence of two years in prison to be served consecutive to any other sentence imposed, one year of supervised release, a fine of $250,000 and restitution.

In a parallel action, the SEC entered an order barring Eaton from the securities industry based on the same conduct, effective Sept. 30, according to BrokerCheck.


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