The Securities and Exchange Commission charged a former LPL Financial rep and his full-time personal assistant for defrauding 23 investors.
The SEC’s complaint, filed in federal court in the District of Utah earlier this month, alleges that from 2010 through the Fall of 2015, Thomas Edward Andrews persuaded 23 investors, most of whom were residents of a small rural Utah community and unsophisticated in securities, to invest their savings and retirement funds into two investments he recommended, called “the Jackson Trust” and “the Lincoln.”
Andrews was a registered rep and was employed as an independent contractor by Gary A. York & Associates of Salt Lake City, which is an office of supervisory jurisdiction of LPL Financial.
Almost all of Andrews’ victims were people he had known while growing up in Nephi, Utah, and many had originally been clients of a tax, accounting and bookkeeping business founded by Andrews’ father.
Andrews allegedly told investors that the “Jackson Trust” was guaranteed and had an annual return of 6 percent to 8.5 percent. He also allegedly claimed that the “Lincoln” investments would generate a return equal to 5 percent or the quarterly S&P index return, whichever was greater.
Andrews set up bank accounts for the fictitious entities at a local credit union, with himself as trustee and sole signatory. Without the knowledge of his investors, he deposited their checks into the accounts and over time transferred the funds to his own account at the same credit union. He never transmitted his investors’ funds to any legitimate investment. This activity was concealed from his supervisor at York & Associates and from LPL.
The SEC complaint alleges that the investments were fictitious and Andrews used the investors’ funds to pay his personal expenses. Scott Walter Christensen allegedly assisted Andrews in the scheme by helping him create and mail false account statements and by pretending to be a “Jackson Trust” supervisor in calls to investors. Andrews allegedly misappropriated nearly $8.4 million from investors and paid Christiansen $1 million.
The SEC’s complaint charges Andrews and Christiansen with 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. The complaint also charges Andrews with violating Section 15(a)(1) of the Exchange Act for operating as an unregistered securities broker. The complaint seeks injunctive relief, disgorgement and civil penalties.
In December 2016, Andrews pleaded guilty to securities and mail fraud and was sentenced to 97 months in prison and ordered to pay nearly $8.4 million in restitution. In July 2016, Christensen pleaded guilty to securities fraud and making a false statement to a federal agent and was later sentenced to 12 months and 1 day in prison and ordered to pay $1 million in restitution.