Close Close

Regulation and Compliance > Federal Regulation > FINRA

Ex-Rep, in Prison, Ordered to Pay Wells Fargo $3M

Your article was successfully shared with the contacts you provided.

A Financial Industry Regulatory Authority arbitration panel ordered an ex-Wells Fargo broker who is serving five years in prison for securities fraud to pay the firm $3 million in compensatory damages.

According to a FINRA arbitration award document posted on the industry self-regulator’s website Monday, Wells Fargo Advisors Financial Network filed a claim in August 2019, saying ex-rep John Gregory Schmidt misappropriated customer funds while he was with the company. The firm also accused him of breaching a license agreement.

Wells Fargo requested $3 million in compensatory damages; fees, costs and expenses; and “such other relief as may be deemed just and proper.” The three-person FINRA arb panel ruled Schmidt was liable and must pay the firm $3 million in compensatory damages, but denied other relief.

Asked for comment on the award, Wells Fargo said Wednesday it had “nothing to add.”

Schmidt was with Wells Fargo from 2006 to 2017, according to his report on FINRA’s BrokerCheck website. In October 2017, the firm “disaffiliated with Mr. Schmidt after allegations of unauthorized money movement between clients, and after the Firm was notified of an allegation of the existence of inaccurate account statements which appear not to have been generated or approved by” Wells Fargo, according to a disclosure — one of 13 — on his report.

FINRA and the Securities Exchange Commission barred Schmidt from the industry.

Mat Heck Jr., Montgomery, Ohio prosecuting attorney, announced June 25, 2019 that Schmidt was sentenced to five years in prison after his conviction on 128 felony counts related to securities fraud from his work as an advisor.

The defendant operated Schmidt Investment Strategies Group in Washington Township while affiliated with Wells Fargo Advisors FiNet, Heck noted. During that time, he “stole money from investment accounts in order to cover for stolen money” in other investors’ accounts as part of what Heck said was a Ponzi scheme.

Schmidt also “created and falsified financial statements to investors in an effort to cover for the missing investments,” Heck said. The defendant sold securities “without the knowledge or authorization of the investors and the defendant received commissions on those transactions of nearly” $250,000, according to the prosecutor.

After the Ohio Department of Insurance noticed irregularities in Schmidt’s activity, an investigation was conducted by the Ohio Department of Insurance and the Ohio Department of Commerce, Heck noted.

Schmidt went on to enter a plea of no contest and was found guilty as charged on: 124 counts of forgery; two counts of theft from an elderly or disabled adult; one count of telecommunications fraud; and one count of fraud or deceit by investment advisor.

In addition to the prison sentence, Schmidt was ordered to pay one victim $34,446 in restitution. Wells Fargo previously paid about $3.7 million to the victims of the defendant’s thefts, Heck said.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.