Tuesday, October 21, 2008

SEC Charges Five Brokers with Fraud

The Securities and Exchange Commission charged five Los Angeles-area brokers, Guillermo Haro, Kederio Ainsworth, Jesus Gutierrez, Gabriel Paredes and Angel Romo, with securities fraud, alleging that they put their customers at risk by refinancing their homes with subprime mortgages that they could not afford in order to fraudulently sell them unsuitable securities. The SEC alleges that the five registered representatives, who worked for World Group Securities Inc., paid themselves high commissions on both the subprime mortgages and the securities purchases. The customers generally were of modest means, had little prior investment experience, and had little or no formal education beyond high school. Some of the investors did not speak English fluently or at all.

The SEC alleges that Guillermo Haro, Kederio Ainsworth, Jesus Gutierrez, Gabriel Paredes and Angel Romo sold unsuitable securities to customers, primarily variable universal life policies (VUL). Most investors who bought these securities lacked the cash or income to do so, but were urged by their brokers to raise the money to pay for the purchases and the monthly payments required for these products by refinancing their fixed-rate mortgages into subprime adjustable-rate negative amortization mortgages.

“This case demonstrates the SEC’s commitment to halting fraudulent sales practices by brokers and others in the securities industry,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “At a time when investors were already losing their homes in record numbers, the SEC alleges that these brokers pushed their customers into risky and unsustainable subprime mortgages as a means of financing a fraud. Not only was the whole scheme fraudulent, but the brokers profited by charging commissions at each stage. The SEC will relentlessly pursue unscrupulous brokers and other securities industry professionals who seek to line their own pockets at their customers’ expense.”

Ken Israel, Director of the SEC’s Salt Lake Regional Office, said, “The defendants’ willingness to take advantage of their customers’ lack of sophistication to fraudulently sell them unsuitable securities products and expose them to possible loss of their homes is egregious misconduct that will not be tolerated by the Commission.”

According to the SEC’s complaint, filed in federal district court in Los Angeles, each defendant was a mortgage broker as well as a registered representative and collected compensation from the mortgage refinancings as well as the sales of securities. In making the sales, the brokers allegedly misrepresented the expected returns from the securities, the liquidity of VULs, the nature of the VULs, and the terms of the new mortgages while failing to disclose material facts about the products. The defendants also allegedly falsified client account forms and order tickets relating to the securities sales.

The SEC’s complaint charges Haro, Ainsworth, Gutierrez, Paredes and Romo with violating the antifraud provisions of the Securities Act of 1933, and the Securities Exchange Act of 1934, and aiding and abetting violations of the broker-dealer books and records provisions of the Securities Exchange Act. The SEC seeks injunctions, disgorgement, and financial penalties.

mortgage fraud

1. This is the TRUE cause of the financial crisis.

   Posted by  on  10/21  at  08:25 AM

2. These sound like a bunch of Mexicans, anybody know if these scammers where legally present in the US? I’m curious to know if we have holes in our process that allow illegals to sell securities. God forbid if illegals are not blocked from selling securities.

   Posted by  on  10/21  at  06:12 PM

3. All of the people mentioned above are US citizensor Naturalized citizens. Not defending them, but i’m of Mexican decent and I find your, “these sound like a bunch of Mexicans” comment offensive.

   All races have there flaws, not one can be excluded.  It is the people them self that have given the race or races a bad name.

   Also before we buy anything or invest we should take it upon ourself to research the person or the company itself. We should even try to ask someone within friends and family a second opinion. We have the power to research.

   But what the persons mention above in the blog did is unforgiving.

   Posted by  on  04/13  at  10:37 AM

4. deLA,

   I agree with you that hearing a Mexican immigrant’s behavior described is disturbing. The crimes these Mexicans commit against those of us legally present here is very offensive, that’s why the prosecutors here refer to their crimes as “offenses”.

   You claim to know these fraudster’s legal status. You claim that none of these fraudster’s are legal resident aliens with green cards but instead they all are citizens. Which of these fraudsters were naturalized and on what date? And which of these fraudsters were born here in the U.S. and on what date and in what specific state and county were the American born fraudsters born?

   If you can’t answer the above, then you are not in any position to attest to these fraudster’s legal status. On the other hand though, if you do know these fraudster’s legal status, you would have to be fairly close to these crooks. If this is the case, then you hang with such a slimy group of people. Are you yourself guilty of any felonies? Do you have a history of steeling from American financial institutions?

   Posted by  on  04/13  at  11:12 AM