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Regulation and Compliance > Litigation

Ex-Broker Who Used Client Funds to Pay Taxes, Buy Race Car Items Gets 10-Year Sentence

By Jeff Berman

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A former broker who was charged in 2021 with multiple counts of fraud after he used client money for his own benefit, including to make “large race car-related purchases” and to pay his own taxes has been sentenced to more than 10 years in prison, according to court records and the U.S. Attorney’s Office for the Northern District of Ohio.

In addition to sentencing Thomas Brenner, 60, of Orrville, Ohio, to 125 months imprisonment on Tuesday, U.S. District Court Judge Donald C. Nugent ordered Brenner to pay $3.5 million in restitution and serve three years of supervised release.

A federal grand jury had returned a seven-count indictment against Brenner and, as part of a plea agreement, he pleaded guilty in April to 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.

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.

Medical Lab Scam

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 said.

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 pointed out.

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

FINRA Bar

FINRA expelled First American Securities in March 2017, according to the regulator.

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, Brenner 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. He is also no longer serving as an advisor.

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

Jeff Berman

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