Barred broker Claus Foerster indicted for fraud

Indictment alleges clients were defrauded of $2.8 million over a 14-year period

Mar 9, 2016 @ 1:47 pm

By Christine Idzelis

Claus Foerster, a former broker in South Carolina, was indicted by a grand jury for defrauding clients of $2.8 million over a 14-year-period.

Mr. Foerster perpetrated his fraud from 2000 to June 2014 while employed as a financial adviser at Smith Barney & Co., Morgan Keegan & Co. and Raymond James Financial Inc., according to an indictment filed Tuesday in the U.S. District Court in Spartanburg, S.C.

The charges follow the Financial Industry Regulatory Authority Inc.'s 2014 decision to bar Mr. Foerster from the brokerage industry due to allegations he was running a Ponzi scheme.

Mr. Foerster would tell clients he had an “excellent investment” for them at SG Investments, a fictitious company that Mr. Foerster said would provide higher returns than the brokerage firms that employed him, according to the indictment. Once clients agreed to invest in SG, Mr. Foerster told them to withdraw funds from their brokerage accounts and deposit the money into their personal banking account, according to the court document. The deposits were then transferred to him in the form of a check.

Mr. Foerster kept the $2.8 million for his own use and benefit, but would sometimes provide “bogus earnings statements” to conceal his scheme and make his clients believe the money was invested and producing profits, the jury charged.

Mr. Foerster began defrauding clients at Smith Barney & Co. from 1997 to 2008, according to the indictment. He then worked at Morgan Keegan & Co. Inc. until 2012, when the firm was acquired by Raymond James.

“Raymond James terminated the employment of financial adviser Claus Foerster in 2014 after he admitted to misappropriating funds from a handful of clients through a phantom private investment fund he created outside of Raymond James and before he joined the firm,” Anthea Penrose, a spokeswoman for the St. Petersburg, Fla.-based broker-dealer, said in an emailed statement. “We have since made complete restitution to all involved clients.”

The firm fully cooperated with investigations conducted by law enforcement and regulatory agencies, she said, and “at no time did these activities involve Raymond James, its systems or other firm personnel.”

0
Comments

What do you think?

View comments

Most watched

Events

Finding innovation in your firm

Adam Holt of AssetMap explains how advisers understand they need to grow, but great innovation may be lurking right under your nose.

Events

Finding your edge from Tony Robbins

Guru Tony Robbins has helped a lot of people, but armed with his psychology Financial Advisor Josh Nelson has helped his practice soar.

Latest news & opinion

SEC sets June 5 date for vote on Regulation Best Interest

Commission adds new item to agenda: Interpretation of broker guidance that qualifies as advice

House passes SECURE retirement bill with massive bipartisan support

The measure allows small employers to band together to offer plans and raises the RMD age. Another provision eases use of annuities in 401(k)s, which critics say goes too far

10 IBDs with the most annuity revenue

Here are the independent broker-dealers that brought in the most annuity revenue last year.

DOL sets date to propose new fiduciary rule

The regulation, expected in December, likely will be contoured to the SEC's new advice standards.

LPL expanding platform to include employee brokers

The largest IBD in the country has agreed to buy a small broker-dealer in Florida to kick off the new effort.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print