A former Merrill Lynch broker is back in the hot seat after being indicted for an 18-year Ponzi scheme.
Former adviser Jane O'Brien, who is serving a 33-month sentence for securities fraud, faces additional charges for wire fraud, mail fraud and investment adviser fraud related to $1.3 million in misappropriated client funds, according to the U.S. Attorney's Office for the District of Massachusetts.
(See why there may be more Ponzi schemes uncovered by the SEC.)
From June 1995 to April 2013, Ms. O'Brien, 61, convinced several clients to take money from their bank and brokerage accounts and give the money to her for private-placement investments, according to the indictment.
Instead of investing that money, she allegedly used it for personal expenses and to pay back other investors.
“She used the misappropriated client funds for a variety of improper purposes, including paying personal expenses, and paying purported investment returns or repaying personal loans to other clients,” read the indictment, which was filed by Assistant U.S. Attorney Stephen Frank. “O'Brien made materially false statements and misrepresentations to clients … by making lulling payments to clients and otherwise providing them with false assurances of their financial security.”
(See also: Ex-Merrill adviser sentenced to 10 years in prison)
The charges pertain to three accounts that Ms. O'Brien served while at Smith Barney and later after she had moved to Merrill Lynch in 2007.
She had been in the industry 28 years, according to registration records with the
Financial Industry Regulatory Authority Inc.
In one case, Ms. O'Brien allegedly persuaded a client to invest in the Hollywood movie “Crooked Arrows.”
Ms. O'Brien promised the client a 25% return, but the money went to personal expenses and to make payments to other clients, according to the indictment.
Ms. O'Brien pleaded guilty in December 2012 to charges of securities fraud related to a separate investment of $240,000 in a security that didn't exist, according to the U.S. attorney's announcement.
She is serving her sentence at a federal prison camp for women in Alderson, W.V.
A spokesman for Merrill Lynch, William Halldin, said only one of the three investors in the indictment ever opened an account at Merrill Lynch and that investor had been compensated.
Last October, the firm settled with Massachusetts regulators for $500,000 with regard to allegations that they had failed to supervise Ms. O'Brien properly. Some of the settlement funds went to repay her clients.
Ms. O'Brien resigned from Merrill Lynch voluntarily in November 2011 after allegations surfaced that she had taken personal loans from customers without approval, according to Finra records.
Finra barred her from the industry in August 2012 and said that she had borrowed some $3 million from clients between 2004 and 2011 without approval, according to the regulator's disciplinary records.
The Finra case was separate from the fraud charges being brought by the U.S. Attorney's Office.
Ms. O'Brien's attorney in the original matter, Michael Andrews, declined to comment because Ms. O'Brien hadn't yet filed a response or officially named her attorney in this instance.
Citigroup Inc., which owned Smith Barney at the time that Ms. O'Brien worked there, declined to comment.
A previous version of this story incorrectly referred to the law enforcement agency that is bringing fraud charges against Ms. O'Brien. It is the U.S. Attorney's Office for the District of Massachusetts.
