The Financial Industry Regulatory Authority Inc. has filed a complaint against a broker who allegedly took advantage of a client with Alzheimer's disease in attempt to inherit nearly $2 million.
The regulator said that in 2009 John Waszolek, who was at UBS Wealth Management at the time, “took unfair advantage” of an 81-year-old client, identified only by the initials JL, by having her assign him the role of beneficiary for her trust — even though he knew she “lacked testamentary capacity” and was “completely unable to protect herself from exploitation.”
Most firms have rules against brokers being beneficiaries on clients' estates in order to prevent possible conflicts of interest, according to an attorney, Marc S. Dobin of an eponymous firm.
“It makes firms nervous,” said Mr. Dobin, who was not involved in the case. “Eyebrows are raised and you wonder how much undue influence the broker used to get into the estate plan, and clearly this broker appeared to have used lots of influence.”
Mr. Waszolek, who now works at Raymond James & Associates Inc. in Scottsdale, Ariz., did not respond to requests for comment.
JL, a widow who lived alone in Arizona, had been a client of Mr. Waszolek since 1982, Finra said. Until 2007 he was “not close with JL” and would only visit her once a quarter to review her portfolio and twice a year for lunch, as he did with most of his clients, according to the complaint.
In 2008, however, as JL's condition continued to decline, Mr. Waszolek drove her to a doctor's appointment where she was diagnosed with Alzheimer's. A month later, he met with an estate planning attorney to have himself named as JL's agent and to give him power of attorney. In addition, her trust was to be amended to name him as a residual beneficiary, Finra said.
When the attorney declined because of JL's capacity issue, Mr. Waszolek referred her to a second attorney to amend the trust and appoint him as a beneficiary. According to the amendment, around $1.3 million that was set to be split among four charities would go to Mr. Wasolek, Finra said. The value of that amount eventually rose to around $1.8 million.
The complaint alleged that the day after the amendment took effect, Mr. Waszolek resigned from UBS after 30 years at the firm and transferred his business to Morgan Stanley Wealth Management.
He did not inform Morgan Stanley or UBS that he had been named beneficiary, in violation of Finra rules and firm policy, according to Finra.
His role came to light in 2010 after JL died, Finra said. A bank that was set to distribute funds from the trust refused to do so unless Morgan Stanley approved the transfer of the assets from the trust account at Morgan Stanley to the broker.
Morgan Stanley denied the request, and reprimanded Mr. Waszolek, according to Finra. He was discharged from the firm in December 2011 for “concerns regarding failure to follow policies and disclosures regarding a client's testamentary bequest to the adviser,” according to his U5.
Two months later, in February 2012, he was hired at Raymond James & Associates. He and his son together managed some $200 million in assets and generated $800,000 in annual revenue at the time, according to a press release from Raymond James announcing the move in March 2012.
“It's an honor to welcome John and Eric to Raymond James,” Raymond James' president Tash Elwyn said in the release. “They share our firm's values of independence and conservative management and will enhance our ability to deliver excellent service and professional advice to our clients.”
Raymond James representatives did not return requests for comment about whether they knew of the allegations against Mr. Waszolek.
Mr. Waszolek ultimately did not receive any of the $1.8 million from the trust. After being denied by Morgan Stanley and the bank distributing the assets, Mr. Waszolek filed a petition in the Superior Court of the State of Arizona Maricopa County seeking to compel the bank and the charities to distribute his funds.
The action ultimately resulted in a settlement in which Mr. Waszolek received $50,000. Finra did not specify who paid the $50,000 but said that the funds did not come from JL's estate. As part of the settlement, however, Mr. Waszolek agreed that the JL trust amendment was “invalid by reason of [JL's] incapacity.”
A Morgan Stanley spokeswoman, Christine Jockle, declined to comment, as did a spokesman for UBS, Gregg Rosenberg.