David Steven Forman, a former rep with The Private Consulting Group Inc., has settled with Finra following allegations that he sold a client’s life insurance policy to investors without the client’s consent.
Mr. Forman neither admitted nor denied the
Financial Industry Regulatory Authority Inc.’s allegations, but he did consent to its decision to ban him from the securities industry, according to Finra’s announcement of February’s disciplinary actions.
Finra alleged that Mr. Forman took control of a client’s $5 million policy, submitted payments to keep it in force without the client’s consent and then sold it with phony documents. He kept a total of $942,000 for himself and a second associate, according to Finra.
The circumstances relate to claims in a civil suit that was filed against Private Consulting and Mr. Forman in Illinois in 2006 and settled in 2008.
According to that suit, Mr. Forman recommended that a married couple — Ken and Norma Spungen — purchase a $5 million life insurance policy on Ms. Spungen, with the intention of using the policy to pay taxes upon her demise. Mr. Forman recommended that Ms. Spungen create an irrevocable
trust in order to buy the policy and leave it to the benefit of her descendants, according to the suit.
Through 2001 and 2002, the
trust paid some $501,400 in premiums on the policy, according to the suit. The following year, Mr. Spungen allegedly asked Mr. Forman whether it made sense to continue paying the premiums for the policy, given upcoming changes to the estate tax laws. Mr. Forman purportedly recommended a sale of the policy for the benefit’s
trust, selling it to Coventry First LLC for $900,000 and a commission.
However, Mr. Forman did not advise Mr. Spungen of the sale, and pocketed the proceeds of the sale, according to the complaint. The client also alleged that signed documents that indicated Mr. Spungen gave Forman permission to keep the proceeds were forgeries. The case was settled for $506,000, according to Finra records, and dismissed in 2008.
Mr. Forman has been named in other civil suits, including one involving the sale of allegedly fraudulent thoroughbred horse breeding interests.
A call to Mr. Forman’s attorney Alan Kane was not immediately returned.
(This article has been modified November 23, 2010 from the original version posted on March 3, 2010)
