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Regulation and Compliance > Litigation

Ex-LPL Rep Pleads Guilty to Witness Tampering, Fraud

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What You Need to Know

  • An ex-LPL broker pleaded guilty last year to three counts of wire fraud and one count of aggravated identity theft, then canceled the plea deal.
  • After the initial charges were filed, he sent false information to at least one victim and created fake documents, according to the Justice Department.

A former LPL Financial broker has pleaded guilty for a second time to charges related to a scheme in which he allegedly stole more than $2.8 million from six clients — only this time, he has also pleaded guilty to witness tampering.

James K. Couture, 42, of Sutton, Massachusetts, pleaded guilty in 2021 to three counts of wire fraud and one count of aggravated identity theft, according to the U.S. Justice Department and court documents in U.S. District Court for the District of Massachusetts.

As part of a plea agreement, he was to be incarcerated for a total of not less than 66 months and not more than 91 months.

However, Couture decided about one month later to cancel a scheduled hearing and scrap the deal, according to a court filing on July 6, 2021.

Couture was initially charged in connection with the scheme in June 2021. However, after those initial charges were filed, he “engaged in witness tampering by creating fake documents purported to be for his clients’ accounts and providing false information to at least one victim in the case for approximately six months,” the Justice Department said Thursday.

As a result, Couture was “subsequently charged with witness tampering in connection with his efforts to deceive” that victim on Jan. 14, 2022, according to the Justice Department. Consequently, he now faces a longer prison sentence.

On Thursday, Couture pleaded guilty to one count of witness tampering, four counts of wire fraud, four counts of aggravated identity theft and one count of investment advisor fraud.

The charge of witness tampering provides for a sentence of up to 20 years in prison, three years of supervised release and a fine of $250,000, according to the Justice Department.

Each charge of wire fraud provides for a sentence of up to 20 years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater, the Justice Department noted.

The charge of investment advisor fraud provides for a sentence of up to five years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. And the charges of aggravated identity theft each provide for a mandatory consecutive term of two years in prison.

U.S. District Judge Nathaniel M. Gorton scheduled sentencing for Jan. 11, 2023, at 3 p.m. in U.S. District Court for the District of Massachusetts, according to a court document.

8 Disclosures in Over 18 Years

Couture was a broker for LPL from 2009 to 2020, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck website.

He first became a registered broker in 2001, as a rep for Morgan Stanley, where he stayed for just one year. He then became a rep for New England Securities and Lincoln Financial Securities, each for three years, before joining LPL.

Couture also founded his own firm, The Private Wealth Management Group, in 2010, with offices in Springfield and Worcester, Massachusetts, to provide investment advisory services and sell insurance products.

LPL terminated Couture on June 17, 2020, after he allegedly altered identifying information, account balances and distributions in a customer account statement, “maintained comingled customer funds” and used an unapproved email address, according to one of eight disclosures on his report, most of which were client complaints alleging misappropriation of their funds.

Without admitting or denying FINRA’s findings, Couture signed a FINRA letter of acceptance, waiver and consent on Oct. 16, 2020, in which he agreed to be barred from associating with any FINRA member in any capacity. FINRA signed the letter on Oct. 21, 2020.

LPL did not immediately respond to a request for comment on Friday about its former broker’s second guilty plea and witness tampering.

Imaginary Mutual Funds

In its initial action, the Justice Department said Couture also started a firm called Legacy Financial Group in New Hampshire in or about September 2009 and operated a third-party administrator of retirement plans that managed the retirement plan of a law firm based in Worcester.

From about 2009 to 2020, Couture misappropriated about $2.8 million from his clients by transferring funds out of his clients’ accounts, investing in fictitious mutual funds and then selling other clients’ holdings to pay investment returns, according to the charges filed against him.

In June 2016, Couture liquidated one client’s variable annuities to fund withdrawals by another client, according to the Justice Department. Similarly, in December 2019 and January 2020, Couture paid a client he previously defrauded by selling other clients’ mutual funds.

As part of the scheme, Couture forged clients’ signatures on documents, or caused clients to sign documents by falsely representing that the proceeds of transactions would be used for their benefit, the Justice Department said. Couture also stole from clients using their own profit-sharing plans and conducted transactions in their names to disguise his fraudulent transactions.

SEC: Couture ‘Lulled’ Clients

In a parallel action that the Securities and Exchange Commission filed against Couture on the same date as the initial Justice Department action, in the same court, the SEC also alleged he defrauded his advisory clients.

From about 2009 to December 2019, Couture, while operating his investment advisory and brokerage business, fraudulently convinced his advisory clients to sell portions of their securities holdings to fund large money transfers to an entity that, unknown to his clients, he owned and controlled, the SEC charged in its complaint.

According to the SEC complaint, for each transaction, Couture obtained client authorization by falsely claiming the proceeds would be reinvested for his clients’ financial benefit. In reality, however, his alleged purpose in arranging the transactions was to divert the sale proceeds for his own benefit, the SEC alleged.

To further his scheme, Couture “lulled clients into believing that their sale proceeds had been reinvested by providing them with fabricated account statements,” the SEC said in announcing its complaint.

When clients requested withdrawals, Couture allegedly took assets from his other clients to cover the withdrawals, according to the SEC complaint. To hide that misappropriation, he transferred client money via a web of third-party accounts to cover up the fact that he was misappropriating money from one client to replace funds he had previously stolen from another, the SEC alleged.

Through his actions, Couture violated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, the SEC alleged.

(Image: Shutterstock) 


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