A federal judge in Illinois ordered a financial adviser to return $1.2 million to four retirement plan clients after the adviser used the money to fund his own pet projects.
On June 5, Judge Edmond E. Chang in the U.S. District Court for the Northern District of Illinois entered a default judgment against Steven Salutric, a director of a registered investment advisory shop called Results One Financial LLC.
The suit, which was filed by the Labor Department, alleged that Mr. Salutric had discretionary authority over group of retirement plans, which held their assets in accounts at Charles Schwab & Co. Inc.
The Labor Department claimed that from 2005 to 2009, the adviser transferred plan assets to ventures in which he had an interest, including a film distribution company, a restaurant, a real estate partnership and a church where he had served as treasurer.
These side businesses weren't authorized investments in the plan clients' portfolios, according to the suit. The department argued that Mr. Salutric violated his fiduciary duty to the plan participants and acted on the behalf of a party whose interests were adverse to those of his plan clients and participants.
The plan clients, Howard Concrete Inc., Supreme Auto Transmissions Inc., Kramer Tree Specialists Inc. and Ramsco Profit Sharing Plan, lost a total of $1.2 million in these ventures, including lost opportunity costs, through May 1.
Mr. Salutric has had other run-ins with regulators. In January 2010, the Securities and Exchange Commission sued him in the Northern Illinois federal district court, alleging that going back to 2007, he had misappropriated at least $1.8 million from 17 clients “to support businesses and entities linked to him and, as part of a Ponzi scheme, to make payments to other clients.”
In that case, the SEC also charged that Mr. Salutric “misappropriated over $400,000 from a 96-year-old client who resides in a nursing home and suffers from dementia.”
Jim Kopecky, who is representing Mr. Salutric in that case, did not immediately return a call for comment.
In December 2011, the U.S. Attorney's Office in Chicago filed criminal charges against Mr. Salutric and Results One, alleging that Mr. Salutric fraudulently obtained about $3 million from clients by forging and submitting to Schwab letters of authorization that falsely represented to the custodian that the clients wanted to transfer their money into bank accounts held by the adviser's personal business associates and entities in which Mr. Salutric had an interest.
A trial date in the case filed by the U.S. Attorney's Office has been set for Aug. 20. The SEC case is pending.
Mark A. Flessner, who is representing Results One, referred questions on Mr. Salutric's latest development with the DOL to the adviser's attorney, Thomas Leinenweber.
Mr. Leinenweber, who is defending Mr. Salutric in the criminal case filed by the U.S. Attorney's Office, did not immediately return a call and e-mail requesting comment.