Finra panel directs broker to pay $600,000 for siphoning money from two older adults

A broker who worked for First Heartland Capital Inc. must pay $600,000 in damages to an elderly couple after allegedly siphoning money from them, according to the Financial Industry Regulatory Authority Inc. Joyce and Keith Reuter, both in their 80s, were awarded the payment after claiming broker Jerome Scott Krause used his position of trust and their vulnerability as older adults to take more than $150,000 from them under the guise of loans, according to a Finra arbitration document. The hearing was in Milwaukee, Wis. The Reuters claimed that from 2010 to 2014, Mr. Krause borrowed more than $150,000 from them, liquidating some of their investments to finance his loans without their consent, according to the document. They alleged that his employer, First Heartland, a brokerage firm in St. Louis, Mo., neglected to supervise Mr. Krause. Mr. Krause was the long-time broker of the Reuters, according to Stacie Rosenzweig, the attorney at Halling & Cayo who represented them in the Finra arbitration case. “He borrowed money with the intent not to pay it back,” she said. First Heartland denied the allegations and requested that the claims asserted against the firm be denied in their entirety, the document shows. The broker-dealer discharged Mr. Krause in 2012 after a client alleged he borrowed from her by liquidating a variable annuity, according to Finra's BrokerCheck. First Heartland stated on BrokerCheck that it prohibits borrowing from clients. David Hoff, president at First Heartland, didn't return a phone call seeking comment. Efforts to reach Mr. Krause, who filed for bankruptcy in April and didn't appear at the hearing, weren't immediately successful. In addition to the award for damages, the Finra arbitration panel decided that Mr. Krause is liable for about $18,000 of the Reuters' attorney fees, according to the Finra document.