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Ex-Wells Fargo Rep Arrested, Charged With Stealing $2.9M

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What You Need to Know

  • A former Wells Fargo broker used clients' money to gamble and buy luxury items, DOJ alleged.
  • The SEC filed a separate complaint against him in New Jersey on Thursday.
  • If found guilty on all four counts of wire fraud and one count of advisor fraud, he faces a maximum prison sentence of 85 years.

A former Wells Fargo broker and investment advisor was arrested Thursday for allegedly stealing over $2.86 million from five clients to pay for personal expenses, according to Rachael A. Honig, the acting U.S. attorney for the District of New Jersey.

Kenneth A. Welsh, of River Edge, New Jersey, was charged by complaint in U.S. District Court for the District of New Jersey with four counts of wire fraud and one count of investment advisor fraud.

The Securities and Exchange Commission filed a separate complaint against Welsh in the same court Thursday over the same scheme.

Welsh was arrested Thursday at his home and was scheduled to appear by videoconference Thursday afternoon before U.S. Magistrate Judge Leda Dunn Wettre, Honig said.

Welsh was a registered broker with Wells Fargo from September 2012 until he was terminated by the firm June 17, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck website. “Allegations were made that Mr. Welsh may have misappropriated funds from Wells Fargo Clearing Services, LLC clients,” according to a disclosure on his report.

In a statement provided to ThinkAdvisor on Thursday, the wirehouse said: “At Wells Fargo we hold our employees to the highest ethical standards. We notified regulators of this matter, the financial advisor was terminated, and we are working directly with clients to reimburse them.”

Funds Used to Gamble, Buy Luxury Items

According to documents filed in the case and statements made in court, from July 2017 through March 2021, Welsh, “while serving in his capacity as an advisor employed by a large brokerage firm, misappropriated at least $2.86 million from five clients,” Honig said. As is usual in cases like this, Honig didn’t identify the firm by name in a news release or the complaint.

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Welsh had been entrusted to manage the client funds responsibly but instead “perpetrated a scheme to defraud the five clients by diverting money from their brokerage accounts to accounts under his control,” Honig alleged.

Welsh then used the unlawfully obtained funds to pay for his gambling and to “fund extravagant personal expenses, including luxury gifts and items,” according to the complaint. Some of the funds were used to pay for gold or coins, the complaint alleged.

If found guilty on all counts, Welsh faces a maximum prison sentence of 85 years. Each of the wire fraud counts carries a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense, whichever is greatest, according to Honig. The investment advisor fraud count carries a maximum potential penalty of five years in prison and a $10,000 fine, or twice the gross gain or loss from the offense, whichever is greatest, Honig said.

Older Clients Among Victims

At least two of the five clients were older adults, according to the SEC complaint, which noted one was 88 years old and another 76.

“Welsh fraudulently obtained at least 14 checks drawn on clients’ and customers’ accounts at Financial Institution A to buy gold coins and other valuables for himself, as well as to pay for his own personal expenses,” the SEC complaint alleged. The purchases included other precious metals and funds were funneled to family credit card accounts that Welsh controlled, according to the SEC.

Welsh misappropriated at least $268,740 from his clients using those fraudulently obtained checks, the SEC complaint said. Three clients were victims of that specific, check-based scheme. In at least seven cases, the checks were paid to a New Jersey coin and stamp dealer to buy gold coins and other precious metals, the SEC alleged. “Welsh kept these coins for himself,” the complaint alleged.

He “frequently sold securities in his clients’ and customers’ accounts — sometimes only days before the fraudulent transfers — so that cash would be available in the accounts for him to steal,” the SEC alleged. “Welsh did not disclose to his victims that the purpose of these securities sales was to facilitate his scheme, rather than to maximize their investment returns and total assets.”