Bad Broker Blog

Dallas-based broker Brion Randall pleaded guilty Tuesday to a fraudulent Ponzi scheme involving $6 million of investor money.

In a perfect world, the punishment would always fit the crime. In this perfect world, bad brokers who intentionally led their clients towards financial ruin would need to find another career. But as we can see from Los Angeles-based WestPark Capital, this certainly is not the case.

Richard Alan Pizzuti, a former stockbroker based in Lake Mary, Florida, was expelled from the securities industry six months ago for failing to comply with regulators' requests for information. Now, nearly a half-dozen of Pizzuti's former clients are still wondering where their investment money went, according to the Orlando Sentinel.

Last week InvestmentNews interviewed Jim Shorris, the executive director of enforcement for FINRA, and asked him what—or who—the federal regulator would be specifically targeting in 2010.

The SEC's decision last month to file civil suit against Goldman Sachs for the firm for fraud related to the housing market collapse has already resulted in additional investor and shareholder lawsuits, according to the Los Angeles Times.

Yesterday FINRA announced it was permanently barring Florida broker Michael J. DiMare from the securities industry. The former registered representative was found to have misappropriated $1.9 million in client funds, in addition to forging account statements.

The dust is far from settling with the Goldman Sachs case. As more individual investors are filing civil lawsuits against the firm, mostly involving its subprime mortgage CDO deals in 2007, details have continued to emerge as executive emails-and federal testimony-have been released publicly.

In March 2004, the Securities and Exchange Commission filed a formal complaint against Universal Express and its executives for marketing-and selling-unregistered penny stocks in a fraudulent manner. According to the SEC, the firm had issued billions of shares worth millions of dollars after issuing fake news releases which boasted of fictitious revenues.

Susan G. Slovak, a registered stock broker in Corsicana, Texas who had been employed by several large independent broker-dealers, was given a lifetime ban from the securities industry last week. According to the Securities and Exchange Commission, and Texas state regulators, Slovak committed Texas securities fraud by embezzling hundreds of thousands of dollars from at least three of her clients' accounts.

Goldman Sachs was charged last week by the Securities and Exchange Commission for fraud related to subprime debt offerings, and has since been lambasted by both politicians and the press. Goldman Sachs executives' e-mails were leaked ahead of U.S. Senate testimony, which admitted prior knowledge of how dangerous John Paulson' s hedge funds really were. Even though the spotlight being shown on Goldman Sachs is appropriate considering how they harmed investors, we should not lose sight of the fact that many other major banks sold billions in subprime collateralized debt obligations (CDOs), and that more information is being learned about these deals every week.

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