Posted in: FINRA | Ponzi Schemes | Greedy Brokers | Breach of Fiduciary Duty |
Rhonda Breard, a well-known securities broker operating out of the Seattle area, is expected to plead guilty to charges stemming from an alleged $9.4 million Ponzi scheme. This comes on the heels of FINRA’s decision last Wednesday to permanently bar Breard from the securities industry.
Beginning in 2004, FINRA claims Breard, 47, began recommending to clients that they liquidate their investments to transfer the proceeds directly to her. Instead of investing the money in a new product, as she promised investors, she used the funds for her personal use.
In March the government seized millions in Breard’s assets three multi-million dollar homes in upstate Washington - including a $2.6 million home on Lake Washington - and eight cars, a boat, six snowmobiles, a motorhome and an expensive jewelry collection.
Last month Breard was federally charged with multiple counts of mail fraud, because the broker allegedly affected statements mailed to investors across state lines. Breard is also facing civil suits in her own state, the first of which was filed by an investor declaring more than $900,000 in losses.
According to local media in Washington, dozens of investors have lost their life savings in Rhonda Breard’s scheme. Prosecutors last week said Breard stole from no less than 38 clients, and the damages were higher than what was estimated
A spokesperson for the U.S. Attorney’s Office in Seattle told the Seattle Times documents had been filed in preparation for Breard’s likely plea agreement, but a hearing had not been set.
It is also too early to determine how Breard’s plea will affect future sentencing. With her mail fraud charges, Breard was facing up to 20 years in prison and a $1 million fine.
Breard was a minor celebrity in the Seattle area after appearing in numerous television infomercials, radio programs, and her own investment television program, “Help Me Rhonda.” Breard targeted affluent clients through seminars, and her televised infomercials touted lucrative retirement strategies.
All of Breard’s trading activity had been through ING Financial Services Inc., the Dutch financial firm that had licensed Breard to sell securities since 2002. Although Breard was a registered representative of ING Financial, she operated independently out of her waterfront office in Kirkland’ Washington.
Breard’s alleged fraud was uncovered after an ING Financial internal auditor made an unannounced visit to her office in Kirkland sometime last February. At the time, Breard told the auditor a locked file cabinet in the office held personal tax information-when the cabinet was opened, it was found to contain counterfeit account statements Breard had used to hide thefts from customers, the Times said.
While investigators ¬- working on behalf of federal regulators, and Breard’s victims - have yet to uncover all the details, or exactly how many investors were affected, many of Breard’s clients are now directing their anger at ING Financial, who learned of Breard’s alleged fraudulent activity more years after it began.
One such investor who claims he lost $800,000 to Rhonda Breard, Gordon Overbye, told the following to KOMO News in Seattle:
“They need to get really active, because they (ING Financial) look like idiots… Word goes out nationally that ING is not taking care of its investments, they’re going to be in big trouble. They need to put this story to bed.”
Several investors have filed suit against ING, in addition to Breard, claiming the broker-dealer failed to adequately supervise her. According to FINRA disciplinary records, Breard was forced to resign from Smith Barney in 1991 for trading on a customer’s account without permission. In 1993, she was fined $100,000 and her trading license was suspended.
ING Financial obviously wants to proactively address - and sidestep - any investor lawsuits relating to Breard. But one must question how a firm ranked eighth-largest in the word, according to Forbes Magazine, with 10,000 employees under its control can fail to spot a Ponzi scheme worth millions.
Perhaps because of Breard’s past successes, or her reputation in Washington, her firm Breard and Associates appeared to have flown under ING Financial’s regulatory radar for too long. Even if it was an ING auditor who first broke the news of Breard’s wrongdoing, investors surely wish the discovery had been made much sooner.
