Rulebook

The Blotter Report: Mischief Managed

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Deep in the Heart of Utah

A former Houston-based investment manager pled guilty to participating in a $72 million insider investment fraud scheme involving Winsome Trust.

Robert J. Andres, who was once a FINRA registered advisor with H.D. Vest, operated Winsome Investment Trust with his partner Robert Holloway from October 2005 until January 2011. The trouble began when the two misled investors regarding the fund’s assets and asset allocation strategy. Additionally, Winsome began using funds from new investors to pay off earlier participants, all while diverting approximately $2.2 million for his hotel bills and living expenses.

The SEC previously froze Holloway’s assets in 2007, but Andres continued to operate out of Winsome until his arrest in Houston in December 2011. If convicted, Andres faces up to 20 years in prison and a $250,000 fine. He is scheduled to be sentenced in January.

One Sneaky Southerner

The net continues to close around a former LPL-financial advisor accused of swindling $2 million out of at least seven clients. A Georgia federal judge on Tuesday barred Blake Richards from further securities laws violations. 

According to the SEC, Richards operated Lanier Wealth Management, an LPL branch office, from 2009 until May. He defrauded investors by instructing them to write out checks to his various entities, but instead of investing the funds, he spent the money on personal expenses. Most of the money taken constituted retirement savings and life insurance proceeds from deceased spouses, the regulator says.

The judge held off ruling on issues of restitution and civil penalties on Tuesday, saying they will be resolved at a later date.

A ‘Holy’ Investment

A former Georgia-based financial advisor charged with running an $11 million Ponzi scheme targeting church congregations has apparently been hiding out in Kansas. Ephren W. Taylor II’s caught up with him outside a massage parlor in Lenexa, Kan., when ABC News crew confronted him and his wife. The news crew reported the two were attempting to keep a low profile after the SEC had previously reported his location was unknown.

The SEC charged Taylor—who was not a registered financial advisor—and his firm, City Capital in April 2012 with fraud, claiming the self-proclaimed “social capitalist” misled investors.

Taylor came to a partial settlement with the regulator in August 2012, meanwhile a final judgment was entered against City Capital in March after representatives refused to respond summons or answer for the firm’s actions. Under the order, City Capital must pay $11 million in restitution and over $765,000 in interest.

According to the suit, Taylor derided traditional investment products, instead promising high returns for his clients using promissory notes supposedly funding various small businesses, and interests in “sweepstakes” machines. But the SEC claims neither yielded high returns and instead, Taylor diverted funds to promote his self-help books, hire public image consultants and fund his wife’s singing career. 

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