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Regulation and Compliance > Litigation

Ex-Schwab Client Arrested for Refusing to Return $1.2M Transferred by Mistake

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What You Need to Know

  • Kelyn Spadoni, a former 911 dispatcher, was charged with theft, bank fraud and illegal transmission of monetary funds, according to a news report.
  • Spadoni had refused to return money the firm mistakenly transferred to her Fidelity account, Schwab says.
  • Spadoni was accused of shifting the funds to another account and using some of the money to buy a new car and a house.

A former Charles Schwab client that the company recently sued, alleging she would not return more than $1.2 million that was “inadvertently transferred” to her Fidelity Brokerage Services account by Schwab, was arrested last week, according to Captain Jason Rivarde, a spokesman for the Jefferson Parish Sheriff’s Office in Louisiana.

The ex-client, Kelyn Spadoni, 33, of Harvey, Louisiana, was taken into custody Wednesday on charges of theft valued at more than $25,000, bank fraud and illegal transmission of monetary funds, Rivarde told ThinkAdvisor on Tuesday. Spadoni, a 911 operator and dispatcher for the Jefferson Parish Sheriff’s Office for more than four years, was fired after her arrest, he said.

Spadoni was accused of shifting the funds to another account of hers and using some of the money to buy a new car and a house, he said. “She immediately moved about a quarter of the $1.2 million,” he explained. “Schwab was able to recover over $800,000 from the original account but over $300,000 was moved by Spadoni… to prevent Schwab from being able to recover it.”

Spadoni was released on a $150,000 bond on Thursday, he said. Spadoni and Fidelity did not respond to requests for comment.

Mistaken Transfer

In a complaint filed March 30 in U.S. District Court for the Eastern District of Louisiana, Schwab alleged Spadoni was guilty of breach of contract because of her refusal to return the money that was mistakenly sent to her.

On Feb. 23, “due to an issue created by a software enhancement, Schwab mistakenly transferred these funds” to the defendant, according to the complaint. “Immediately after learning of the transfer, Schwab has contacted Fidelity and Spadoni repeatedly to request return of the funds.”

On or about Feb. 18, Schwab installed an enhancement to the software it uses for transferring assets to other broker-dealers, according to the complaint. The enhancement “inadvertently caused excess cash to be added to a pending transfer request to Spadoni,” Schwab explained.

Of the $1,205,619.56 accidentally transferred to Spadoni, “only $82.56 was properly transferred,” so she ended up receiving an overpayment of $1,205,536.84, according to the complaint.

“Fidelity has reported it is unable to return the funds because they are not available” and “Spadoni has refused to take Schwab’s calls, and instead, she has taken steps to prevent Schwab from recovering the funds,” according to the complaint.

Therefore, Schwab says it is “seeking a writ of sequestration to prevent Spadoni from rendering” arbitration before a Financial Industry Regulatory Authority panel “a hollow formality by dissipation of the funds in question before a panel of arbitrators can be assembled to rule on Schwab’s claims.”

According to Schwab, the account agreement that Spadoni signed provides that any ”controversy or claim arising out of or relating to” the agreement, her account, transactions in the account or “in any way arising from the relationship with Schwab … will be settled by way of arbitration” before FINRA Dispute Resolution.

 

Kelyn Spadoni  (Image: Jefferson Parish Sheriff’s Office)