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The Blotter Report: Where Did it All Go Wrong?

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Digging Up More Dirt

A Long Island financial planner is facing up to 25 years in prison for allegedly stealing $1.6 million from a special needs camp and others—and the evidence keeps mounting.

The Nassau County District Attorney’s office arrested the president of DKM Financial Corp. Drew Morgan last October, claiming the financial planner embezzled over $1 million from Camp ANCHOR (Answering the Needs of Citizens with Handicaps through Organized Recreation) while acting as the non-profit’s treasurer.

In addition to allegedly stealing from ANCHOR, Morgan is also facing allegations he swindled several investment clients out of more than $500,000. The district attorney’s office claims Morgan spent the stolen funds on a membership in the Hempstead Golf Club, travel and restaurants.

On Tuesday, prosecutors hauled Morgan back into court, alleging the ongoing investigation uncovered an additional $73,500 in theft from a special needs camp. Morgan, who was formerly with AXA Advisors until 2006, is not registered with securities regulators, nor is his firm DKM Financial.

AXA terminated Morgan’s employment with the firm in April 2006 due to “document integrity issues found in client files,” according to BrokerCheck. Morgan had five disclosure events listed, including several client complaints over alleged forged signatures on documents, inappropriate recommendations and improperly diverted funds.

If convicted Morgan faces a maximum of 8 to 25 years in prison.  Currently, Morgan is out on a $240,000 bail and is due back in court on Sept. 19.

 

“Maybe I Didn’t Want to Know”

FINRA barred a former Houlihan Lokey Capital associate from associating with any member firm in any capacity on Thursday after he allegedly lied to investigators during an insider trading case.

A FINRA hearing panel found 31-year-old Jonathan Kohanof engaged in serious misconduct that warranted the ban. According to the decision, investigators approached Los Angeles-based Kohanof after the analyst and his cousin (who was not named) purchased stock in clothing retailer Volcom Inc. in April 2011, just prior to its merger with distributor PPR.

A price spike in Volcom’s stock drew FINRA’s attention to the deal and the watchdog started investigating those who purchased stock prior to the merger. A corporate attorney working on the deal recognized the name of Kohanof’s cousin from a list FINRA’s office of fraud detection and market intelligence circulated, indicating she dated him during the time of the deal. While she stated that she didn’t reveal details about the proposed merger, she did have documents pertaining to the deal with her during times when she stayed over.

FINRA set up an interview with Kohanof in January 2012, in which he claimed he had considered investing in Volcom for over a year, having been familiar with the brand. He also denied speaking with anyone before his stock purchase.

But OFDMI didn’t buy his story. Upon further investigation, investigators discovered Kohanof had been in contact with his cousin and had even taken a trip to Las Vegas with him and his then-girlfriend working on the deal. Upon pressure from his firm and its chief compliance officer who noticed inconsistencies between Kohanof’s testimony and his phone records, the analyst agreed to another interview with FINRA in March 2012 to “set the record straight.”

This time, Kohanof came clean, acknowledging his cousin told him to invest in Volcom. And while Kohanof denied insider knowledge, he admitted he did note the curious timing, but didn’t push his cousin, saying, “I guess maybe I didn’t want to know.” Kohanof left Houlihan in October 2012, saying he felt pressured to leave.

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Compliance, regulatory and legal issues, with a fair amount of cops and robbers for fun.

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