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Regulation and Compliance > Litigation

Ex-Broker Used Client Funds to Pay Taxes, Buy Race Car Items: DOJ

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What You Need to Know

  • A federal grand jury returned a seven-count indictment against the former broker.
  • He was charged with conspiracy to commit mail and wire fraud, conspiracy to commit securities fraud, mail fraud, wire fraud and securities fraud.
  • The ex-broker was also charged with engaging in a monetary transaction in property derived from criminal activity.

A former broker has been charged with multiple counts of fraud after he used the funds of older adult and other clients for his own benefit, including to make “large race car-related purchases” and to pay his own taxes, according to Bridget M. Brennan, acting U.S. attorney for the Northern District of Ohio.

A federal grand jury returned a seven-count indictment charging Thomas Brenner, 58, of Orrville, Ohio, with conspiracy to commit mail and wire fraud, conspiracy to commit securities fraud, mail fraud, wire fraud, securities fraud and engaging in a monetary transaction in property derived from criminal activity, Brennan said Tuesday.

The defendant was a financial broker and president of First American Securities in Orrville. He was registered as a broker with that firm from 2011 to 2016, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck website.

According to the indictment, in March 2015, the defendant and others allegedly conspired together to recruit the defendant’s clients to “invest” in United RL Capital Services, a company that purportedly financed medical laboratory developments.

It was alleged that Brenner and “Person-1” solicited investors over the phone, via letters and in person.

The two of them misrepresented material information to the clients, such as statements about  their money being used to finance medical laboratory developments, that they would receive their money back with interest after three years, and that United RL was a safe firm to invest in or safer than other investments, according to the indictment.

Clients Conned Out of IRA Funds

Some investors, allegedly at the defendant’s and Person-1’s encouragement, removed money from their IRAs to invest in URL and Brenner and Person-1 misrepresented that doing so wouldn’t result in tax penalties, the indictment says.

The indictment describes how the defendant, instead of using the investors’ money as promised, allegedly used those funds for his own benefit.

When investors asked about their investments, Brenner and Person-1 allegedly misrepresented that their investments were secure and provided some investors with sporadic, small payments, disguised as installments of earned interest, in order to lull the investors into believing their money was safe and being used as promised.

Brenner knew that he was being investigated by FINRA in 2015 and 2016 for selling URL securities, but neither he nor Person-1 told prospective investors about the investigation, that First American Securities could face closure and that the defendant could be suspended from associating with any FINRA-registered firm, which he eventually was, the indictment points out.

The defendant and Person-1 also allegedly didn’t disclose they were related as family members, according to the indictment.

FINRA Barred Him

FINRA expelled First American Securities in March 2017, according to the industry self-regulating group.

In 2016, Brenner agreed to pay a $30,000 fine and disgorgement of $189,000 after he allegedly “engaged in two separate private placements which were rife with supervisory and substantive violations,” according to a disclosure on his report.

In 2017, he was barred by FINRA from associating with any FINRA-affiliated firm after he refused to appear for FINRA-requested, on-the-record testimony regarding his involvement in the sale of three different private placements issued by people or entities with which he had personal or business relationships, according to a second disclosure on his report.

Not cooperating with a FINRA investigation is a surefire way to be barred by it.

FINRA “received tips or complaints from numerous investors who invested in one or more of these private placements, and who were concerned about their inability to contact the issuers, and the issuers’ failure to liquidate or redeem their investments and return the funds to these investors,” the disclosure went on to say.

“These investors were generally members of Brenner’s hometown community in Ohio, and many of them were seniors,” it added.

(Image: Adobe Stock)