Ethics Center: Business Ethics
By: Harry J. Lew, NEA Chief Content Officer on August 24th, 2017
- A Central Florida investment advisor perpetrated a Ponzi scheme that cost consumers $3.6 million. According to the Orange County Sheriff’s Office, Justin Troy Spearman, 29, convinced mutliple Florida residents to invest in a fraudulent Texas oil and gas scheme. To buttress his case, he provided them with phony documents and then covered the returns of prior investors with money from new investors. In 2014, several clients confronted him about his failure to generate promised returns. In response, he confessed on-camera to his crimes and then checked himself into a hospital for a psychiatric evaluation. Officials say Spearman used the money to buy luxury cars, private airplanes, and extravagant gifts. Charged with grand theft, securities fraud, and sale of unregistered securities, Speaman had also been sentenced to 27 months in prison in July 2016 for another Ponzi scheme he masterminded in Texas.
- A Virginia financial advisor who allegedly operated a fraudulent investment scheme that cost victims about $6 million is now under federal indictment. The advisor, Roger Odell Hudspeth II, owned an investment advisory with offices in Norfolk and Virginia Beach, Virginia. According to federal officials, Hudspeth sold securities to 58 clients between 2012 and 2015 that he never registered with the SEC or state investment regulators. Hudspeth also admitted to state regulators that he sold unregistered securities to 58 investors between 2011 and 2015. He was ordered in that case to pay $1 million in restitution. The advisor also had a third strike against him: He referred clients to an associate’s highly speculative and illiquid offerings and then continued to promote them after the associate and three of his securities came under SEC investigation.
- A San Diego, California life insurance agent violated the trust of his senior clintele by stealing $1.1 million of their retirement funds. According to the California Department of Insurance, life agent Shawn Heffernan, 42, of San Diego was arraigned on multiple felony grand theft and elder fraud charges. Heffernan’s modus operandi was to convince his elder clients to replace their existing annuities, generating commissions for himself and surrender fees for his clients. He also urged clients to cash out their annuities to generate funds to purchase other vaguely defined investments. When he had their money in hand, he used it for his living expenses instead of investing as promised. If a client requested a withdrawal, Heffernan used funds from new clients to satisfy their requests.
For information on affordable E&O insurance for low-risk insurance agents, investment advisors, and real estate broker/owners, please visit EOforLess.com. For information on ethical sales practices, please visit the National Ethics Association’s Ethics Center.