Securities Cases: More Brokers Identified by SEC in Stock Rigging Case, Former Ameriprise Broker Gets Prison Term for Fraud, and Boeing Settles 401K Case for Almost $57M

SEC Names More Brokers in Penny Stock Rigging Case Filed Last Year
The Securities and Exchange Commission is charging three more people related to a $300M penny stock rigging case that it filed last year. In federal court, the regulator sought to lift the stay in its civil case to submit an amended lawsuit and now also name brokers Ronald Heineman and Michael Morris, as well as lawyer Darren Ofsink.

The SEC says that Morris and Heineman executed the scam through their brokerage firm awhile Ofsink made money illegally by selling unregistered shares even though no exemption for registration was valid. Meantime, the U.S. Attorney’s Office in New York is fling criminal charges against Ofsink ad Morris.

Per the amended SEC complaint, in 2013 Abraxas Discala, Marc Exler, and brokers Craig Josephburg and Matthew Bell were involved in a scam to raise the price of CodeSmart Holdings stock. The men intended to make money at the expense of Josephberg’s customers and Bell’s clients. Heineman and Morris, who own Halcyon Cabot Partners-the firm where Josephberg was employed-allegedly were involved in the securities scam. The two men are accused of secretly consenting to buy shares of CodeSmart at pre-set prices so that Discala could liquidate his positions at prices that were artificially raised. Meantime, Ofsink, who played a part in the execution of the company’s reverse merger into a public shell company, made money by illegally selling securities of CodeSmart that were not registered.

Trading in CodeSmart has been suspended because the company hasn’t submitted periodic reports since late 2014 and due to purportedly suspect market activity.

Former Ameriprise Adviser Gets Prison Term for Defrauding Clients of Over $1M
Former Ameriprise (AMP) adviser Susan Elizabeth Walker wills serve more than seven years behind bars for defrauding at least 24 retirement accounts of over $1.1M. Walker was convicted of tax evasion and mail fraud. She pled guilty last year to the criminal accounts.

Walker offered financial planning services through the firm from October 2008 through March 2013. She also was registered with the Financial Industry Regulatory Authority and was a securities agent under the Minnesota Department of Commerce.

Walker established investment brokerage accounts in her name and under the names of a number of clients without notifying them. She took money from retirement accounts and placed them in brokerage accounts that she used. The funds paid for her vacations and other personal expenses. Walker also is accused of making investment recommendations that were not suitable.

In July 2013, FINRA barred Walker and her mom Barbara Stark from the brokerage industry because they did not provide documents in the wake of allegations that they misappropriated client monies.

A lot of her victims were senior investors. Ameriprise paid back clients that were harmed.

Boeing Resolves Class Action Securities Case for $57M
The Boeing Co. will pay $57M to resolve a class action securities case that was filed in 2006. The plaintiffs alleged breach of fiduciary duty under ERISA that they say was partially caused by excessive investment management and recordkeeping fees in the Boeing Company Voluntary Investment Plan. The parties involved reached a provisional agreement in August and the amount was just disclosed.

Also, as part of the settlement, Boeing must hire an independent investment consultant assess whether a technology-sector fund is suitable for the company’s 401(k) plan.

Read the SEC’s Proposed Amended Complaint in the Penny Stock Case (PDF)

Boeing settles 401(k) suit for near-record $57 million, InvestmentNews, November 5, 2015

Former Ameriprise Advisor Receives 88-Month Prison Sentence, $1M Fine, Twin Cities Business, November 3, 2015