Fraudsters face SEC charges

The Securities and Exchange Commission today charged five brokers in the Los Angeles area with securities fraud, alleging that they told their clients to refinance their homes with subprime mortgages to buy unsuitable securities that they couldn’t afford. Kederio Ainsworth, Jesus Gutierrez, Guillermo Haro, Gabriel Paredes and Angel Romo, all registered representatives with Duluth, Ga.-based World Group Securities Inc., paid themselves high commissions for the subprime mortgages and the securities that they sold — primarily variable universal life policies, according to the SEC. Most of their clients had neither the money nor the income to buy the securities, but the brokers allegedly told them to raise the money by refinancing their fixed-rate mortgages into subprime adjustable-rate negative-amortization mortgages, the SEC alleged. Those clients were also told that the variable universal life policies that they bought with the lump sum from the refinancing had a 12% annual return, which wasn’t true, the SEC alleged. Generally, the customers had little investment experience, little formal education past high school, and some didn’t speak English fluently or at all, the SEC said. The five reps also allegedly falsified consumer account forms and knowingly prepared order tickets with inaccurate information. The SEC, which filed its complaint in U.S. District Court in Los Angeles, is seeking injunctions, disgorgement and financial penalties.