While already behind bars for investment fraud, a former Merrill Lynch and Smith Barney financial adviser recently pleaded guilty to additional charges related to a nearly 20-year-long scam to defraud clients of hundreds of thousands of dollars.
Between 1995 and 2013, the Needham, Massachusetts, woman cheated several clients for whom she provided investment advisory services. She misappropriated funds entrusted to her in a variety of ways, including persuading clients to withdraw money from their bank and brokerage accounts and give the money to her to invest on their behalf.
After gaining control of her clients’ money, however, she failed to make the investments. Instead, she used the client funds for improper purposes, such as paying personal expenses, paying purported investment returns, or repaying personal loans to other clients.
False statements to clients
In order to continue her fraud and conceal it from her clients, the adviser made false statements and misrepresentations to clients, including by making lulling payments to clients and otherwise providing them with false assurances of their financial security.
In one instance, she caused a client to empty her Smith Barney brokerage account, then borrow an additional $1 million on her home and give much of that money to the adviser to invest.
With a second client, the adviser caused the client to empty her Merrill Lynch brokerage account and give the proceeds to her, supposedly to invest in a Hollywood movie called “Crooked Arrows.”
Failed to keep her promises
Another time the adviser caused a client to withdraw $190,000 from her bank account and give the proceeds to her to invest. She made none of the investments she promised.
Jane E. O’Brien, 62, was previously convicted of securities fraud after pleading guilty in December 2012 to a scheme to defraud a client of $240,000 by selling her a security that did not exist. She is currently serving a sentence of 33 months in prison.
This time, O’Brien pleaded guilty to three counts of mail fraud, two counts of wire fraud, and two counts of investment adviser fraud. Sentencing is scheduled for August 2015.
The charges of mail and wire fraud provide for a sentence of no greater than 20 years in prison, three years of supervised release, and a fine of $250,000 or twice the gross gain or loss, whichever is greater. The charge of investment adviser fraud provides for a sentence of no greater than five years in prison, three years of supervised release, and a $10,000 fine.