Former stockbroker Ralph Edward Thomas Jr., who pleaded guilty to mail fraud in September, has been barred for life by the Financial Industry Regulatory Authority (FINRA) for conversion of more than $800,000 in customer funds to his own use.
According to FINRA, Thomas misappropriated the money from three vulnerable customers between December 2001, and July 2010. The first customer was a child suffering from cerebral palsy who had received a large medical malpractice settlement. The money was place in a trust fund for her care.
Through his role as financial advisor for the disabled child’s mother, Thomas stole more than $750,000 from the trust fund. He also misappropriated $12,500 from the mother’s account.
In a separate case, Thomas stole more than $42,000 from an elderly customer by making fraudulent withdrawals from her annuity account.
Ralph Edward Thomas Jr. Pleads Guilty
Per a Letter of Acceptance, Waiver and Consent (AWC) submitted by Thomas to settle the matter, FINRA’s factual findings will be entered in the record, but Thomas was not required to admit or deny anything. FINRA accepted the AWC on Jan. 18.
Thomas’ guilty plea and his brazen theft prompted at least one industry observer to question the pathetic state of Wall Street regulation. In a blog for Forbes, Bill Singer called out the fact that FINRA followed business as usual and accepted a settlement that did not require Thomas to admit the charges.
The stance seems ridiculous in light of Thomas pleading guilty to mail fraud in federal court in Baltimore in September. He could be sentenced to as much as 20 years in prison and be fined $250,000. Prosecutors in the case are also seeking the forfeiture of $838,350, which roughly matches the proceeds of his crimes. This amount includes Thomas’ investment accounts, a house he bought with the disabled child’s stolen money, and luxury cars.
In the BrokerCheck report on Thomas, FINRA stated that restitution is being required in a separate criminal proceeding against Thomas. Ostensibly, this is the reason for the absence of a penalty, although he was found to have violated numerous FINRA rules.
Thomas entered the securities industry in 1991, eventually joining Invest Financial Corporation August 2000, where he worked until February 2004. At the same time, Thomas was the vice president of Harbor Financial Services, a subsidiary of The Harbor Bank of Maryland.
In February 2004, Thomas joined Wells Fargo Advisors LLC where he remained until Wells Fargo fired him July 20, 2010, after he admitted to misappropriating customers funds, according to the BrokerCheck Report. Thomas did not return to the industry.
Identified only as JW, Thomas’ fist victim was a child suffering from cerebral palsy, according to the AWC. In November 1994, a trust account was established for JW with the proceeds of a $3 million medical malpractice settlement. Her mother was appointed guardian and trustee and the funds were used to purchase an annuity that was supposed to pay JW a minimum of $4,000 per month until her death or the year 2029, whichever came first.
In late 2001, Thomas became the mother’s financial advisor and he convinced her to move the trust fund to Harbor Bank, where he worked. Thereafter, he obtained complete control over the brokerage and banking accounts associated with JW’s trust fund, the AWC said.
Through June 30, 2010, Thomas made sure that all the annuity payments were deposited directly into the bank trust account. The annuity had performed well and the monthly payments averaged about $6,300 per month. However, Thomas disbursed only $1,000 to $1,500 per month from the trust account to the mother for JW’s care, the AWC said. Thomas stole the rest of the money for his own use.
Thomas persuaded JW’s mother to sign blank withdrawal slips, which he used to withdraw money from the bank trust account every month. He then purchased cashier’s checks made payable to other financial institutions where he held personal accounts, according to the AWC.
Thomas Withdrew $769,463.98 Total From 2 Accounts
All in all, Thomas went to the bank 111 times and withdrew a total of $756,963.98 from the bank trust account. Thomas also stole $12,500 from the mother’s personal bank account.
As reported in the Forbes blog, that wasn’t all. Court documents also reveal that between June 2006 and May 2009, Thomas obtained three mortgages on the mother’s home through the use of forgery. He then deposited the proceeds into the Harbor Bank account before diverting them to his personal use. These mortgage cost JW’s mother almost $30,000 between losses and expenses. Then, in the summer 2009, Thomas stole $100,000 from the trust account to buy himself a house.
JM Was Not the Only Victim of Thomas
JW was not the only victim of Thomas’ one-man crime spree. Between February 2004 and July 2010, he stole $42,000 from the annuity of retired woman who shared the funds with her 85-year-old sister suffering from dementia.
While acting as the retired woman’s financial advisor, Thomas withdrew $42,000 from her annuity without her knowledge, the AWC said. He then used the withdrawn funds to purchase cashier’s checks made payable either to cash, or to credit card companies where Thomas held accounts.
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