For more than a decade, from at least February 1998 until June 2012, Dennis Fern Wright, a Lewistown, Pennsylvania stockbroker and insurance salesman associated with AXA Advisors, LLC., and, was entrusted with handling his customers’ retirement funds. However, at least according to the Securities & Exchange Commission, Wright lied to and stole over $1.5 million from at least 28 customers.
By way of background, it appears that Wright was not terminated for cause but was “permitted to resign,” from AXA in June 2012, notwithstanding that at least as of March 2012, several customers filed written complaints and alerted AXA to Wright’s theft. Since then there have been at least twenty-five claims filed against AXA based upon Wright’s conduct,
FINRA Barrs Wright & Criminal Charges Arise
The Financial Industry Regulatory Authority or FINRA also appears to be on top of things because a little more than a year after Wright left AXA, in June 2013, i.e. twenty five lawsuits later, Wright was barred by the Financial Industry Regulatory Authority not for “stealing,” but for failure to cooperate with FINRA.
Last week Wright agreed to settle the SEC’s charges and disgorge his ill-gotten gains, and also consented to the entry of an order permanently enjoining him from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The settlement is subject to court approval. In a parallel action, the U.S. Attorney’s Office for the Middle District of Pennsylvania announced criminal charges against Wright.
Notwithstanding the foregoing, it appears that several customer initiated securities arbitration claims against AXA and Wright appear to be outstanding and unresolved.
Wright Prayed on Family & Friends
According to the SEC, Wright targeted his childhood friends and/or members of his community, unsophisticated and inexperienced investors who trusted Wright to honestly represent their financial interests but instead engaged in a scheme to defraud his customers by inducing them to withdraw funds from their existing AXA variable annuity accounts with the false promise to invest those funds in an AXA “managed account” that purportedly invested in mutual funds and yielded higher returns than their AXA variable annuities.
In fact, the alleged AXA managed account was a fiction, created by Wright to lure customers into transferring funds in a manner that would allow Wright to steal their savings. Wright never invested his customers’ money as promised. Instead, he deposited their funds in a bank account that he controlled, under the name Wright Associates, and he used those funds to pay his personal expenses as well as to pay other customers he owed money.
Wright concealed his fraud and induced some customers to invest additional funds by using a variety of misrepresentations and deceptive practices. For instance, Wright assured his customers that their funds were secure and invested as promised by providing falsified AXA account statements reflecting non-existent AXA managed accounts with appreciated account values that purportedly held mutual fund shares, and by using his Wright Associates bank account to pay customers who demanded withdrawals.
Wright’s scheme included sending many customers forged account statements that falsely represented ownership of non-existent managed accounts with purportedly appreciating account values.
Examples of Wright’s Fraud
Wright’s Misappropriation of Funds from Customer A.
Between January 2006 and June 2012, Wright misappropriated approximately $92,734.62 from Customer A, a retired United Parcel Service employee residing in Pennsylvania.
Customer A told Wright that he wanted a safe investment with the ability to withdraw a monthly income. Customer A initially invested $270,000 through Wright in an AXA variable annuity. On January 23, 2006, Wright instructed Customer A to write a check to Wright Associates for $33,134.62, for investment in the previously purchased AXA annuity. However, Wright never invested the funds in the AXA annuity as expected by Customer A. Instead, Wright deposited the check in the Wright Associates bank account and misappropriated the funds.
In August 2007, Wright recommended that Customer A shift his money from the AXA annuity into a purported AXA managed account. Acting upon Wright’s advice, in August 2007 and September 2010, Customer A withdrew a total of$50,000 from his AXA annuity, and signed over the AXA checks to Wright Associates for investment in the purported AXA managed account. Wright never invested the funds in the AXA managed account but rather deposited the money in the Wright Associates bank account and stole the funds.
After these two alleged investments, Wright provided Customer A with an altered AXA document containing the AXA logo, entitled Contract Information Report (“report”). This document falsely showed that Customer A established an AXA managed account in July 2001, and that the account held shares of a mutual fund with an appreciated account value of $71,069. Wright had whited out, among other things, the existing market value, quantity of shares and the total account value and substituted fabricated values.
In May 2011, Customer A received a Social Security disability payment and Wright again advised Customer A to invest this payment in the fictitious AXA managed account and claimed it was an “exclusive” opportunity. Customer A wrote a check for $25,000 from his personal checking account to Wright for investment in the fictitious AXA managed account. Wright never invested the funds in an account for the benefit of Customer A and instead misappropriated the money.
On or about March 3, 2012, Wright sent Customer A a hand-written letter in which he further reassured Customer A by stating “even with your Payments And the dip we had in The market we are almost back to where we started [sic].” Wright supported this misrepresentation by providing Customer A with an altered report falsely representing that Customer A owned an AXA managed account that held shares of a mutual fund valued at $113,672 as of March 1, 2012. In fact, Wright had stolen $92,734.62 of principal that Customer A was led to believe had been invested in the purported AXA managed account. Because there was no appreciation on those funds, the remaining balance of Customer A’s investment in the fictitious AXA managed account was zero.
Wright’s Misappropriation of Funds from Customer B
Between 2006 and June 2012, Wright misappropriated approximately $20,875 from Customer B, an inexperienced investor and retired security service employee residing in South Carolina.
Wright recommended conservative investments and Customer B opened two AXA variable annuity accounts in 2006. Shortly after Customer B opened the AXA annuity accounts, Wright recommended that Customer B invest in fictitious AXA managed accounts. Based on that recommendation, Customer B liquidated certain matured bonds and gave Wright two cashier’s checks in the amounts of$10,363 and $11,820 to invest in the fictitious AXA managed accounts. Wright deposited both cashier’s checks directly into his Wright Associates bank account and misappropriated the funds.
Wright created and provided Customer B with a false and misleading report for the fictitious AXA managed accounts, which falsely showed that Customer B’s money was invested in a mutual fund valued at $11,875 as of July 26, 2006. At year-end, Wright created and sent Customer B another false and misleading report for the fictitious AXA managed accounts falsely representing an appreciated balance of $23,461.
In November 2007, Wright offered Customer B the opportunity to invest in another purported AXA managed account. Wright told Customer B that this managed account was a more aggressive investment opportunity and would be actively managed by AXA. Trusting Wright, on November 13, 2007, Customer B withdrew $25,000 from one of his AXA variable annuity accounts opened in 2006, and signed over the AXA check to Wright Associates for investment in the purported AXA managed account. Wright never invested the funds in the AXA managed account but rather deposited the money in the Wright Associates bank account and stole the funds.
On or about December 14, 2007, Wright sent Customer B a handwritten note stating, “Here is an update on the 25,000 we just moved into a managed acct[. ][sic]” and provided a false and misleading report reflecting holdings in mutual fund shares with a balance of$27,912 as of December 13, 2007.
Wright concealed his fraud, in part, by creating and sending Customer B at least three more false reports showing appreciating account values of Customer B’ s purported investment in the fictitious AXA managed accounts. Wright stole $20,875 of principal that Customer B was led to believe had been invested in the purported AXA managed accounts. Because there was no appreciation on those funds, the remaining balance of Customer B’ s investment in the fictitious AXA managed accounts was zero.
Wright’s Misappropriation of Funds from Customer C
Between 2010 and June 2012, Wright misappropriated approximately $62,000 from Customer C, an inexperienced investor residing in Pennsylvania, who had previously invested her retirement funds in an AXA variable annuity account.
In January 2010, Wright proposed that Customer C invest a portion of her money into a managed account that purportedly was held at AXA, yielded a higher rate of return, and invested in mutual funds. Wright also told Customer C that there were no limitations regarding withdrawals. Based on Wright’s recommendation, Customer C made two withdrawals totaling $10,000 from her savings account and made the checks payable to Wright Associates for investment in the purported AXA managed account. Wright did not invest the funds as promised, but instead deposited the money in the Wright Associates bank account and stole the money.
Between November 2011 and December 2011, Customer C withdrew a total of $52,000 from her AXA annuity and her savings account for Wright to invest in the fictitious AXA managed account. As before, Wright deposited the funds in the Wright Associates bank account and misappropriated the money.
On or about April 6, 2012, Wright created and provided Customer C with an altered report falsely representing that Customer C’s AXA managed account held shares of a mutual fund valued at $73,096.32. Wright stole the $62,000 of principal that Customer C was led to believe had been invested in the purported AXA managed account. Because there was no appreciation on those funds, the remaining balance of Customer C’ s investment in the fictitious AXA managed account was zero.
Wright’s Misappropriation of Funds from Customer D
Between March 2009 and June 2012, Wright misappropriated approximately $100,000 from Customer D, an inexperienced investor residing in Pennsylvania.
In March of2009, Wright recommended that Customer D open a money managed” account with AXA that would invest in mutual funds, yield 8% to 12% per year, and allow easy withdrawals. n March and July 2009, Customer D gave Wright Associates two personal checks in the amounts of $43,000 and $65,000 to invest in the fictitious money managed account. Wright never invested the funds in an AXA money managed account but rather deposited the money in the Wright Associates bank account and stole the funds.
As with other customers, Wright continued to perpetuate the fraud by sending Customer D false and misleading reports. For example, on or about July 24, 2009, Wright created and provided Customer D with a fabricated report and a handwritten note falsely stating that the fictitious AXA money managed account held shares of a mutual fund with a balance of approximately $112,365. From July 2009 through at least December 2011, Wright created and provided Customer D with at least twelve fictitious reports for the fraudulent AXA money managed account that showed appreciating account values. In fact, Wright stole $100,000 of principal that Customer D was led to believe had been invested in the purported AXA money account. Because there was no appreciation on those funds, the remaining balance of Customer D’s investment in the fictitious AXA money managed account was zero.
Guiliano Law Group
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