Aubrey Lee Price had an interesting life. He went from being a minister to a trusted financial advisor and banker and later a fugitive. Along the way, he faked his own death but was later captured and sentenced to 30 years in prison. Aubrey Price was the mastermind of $40 million Ponzi scheme.
While his story is certainly interesting, investors who lost money to Price might better enjoy the story of FSC Securities and how third parties such as stockbrokers can be held responsible for losses caused by others. We will share both stories.
Aubrey Lee Price and the Ponzi Scheme
By all accounts, prior to turning to a life of crime, Price was a devout minister. At some point in his career he decided to help establish offshore missions. Price went to fellow Christians to raise money and later began offering seminars on Christian investing.
The FBI says that at some point, Price began to gamble. As losses mounted, he turned to risky investments in the hopes of making up his losses and when that failed, he simply began fudging the books to hide his losses.
Even though Price was losing money, he had charisma and was able to get on the board of directors of a small Georgia bank and access some of their money. Everyone believed in him and no one suspected what was really happening.
Like all frauds and Ponzi schemes, eventually Price’s scheme collapsed. Unfortunately, many investors lost their life savings. The bank lost $70 million and failed.
When the bottom dropped out of his scheme, Price faked his death in a boating accident. The FBI claims Price wrote a suicide note in which he admitted the fraud. He then claimed he was taking his life by jumping off a high speed ferry. The Coast Guard mounted a huge search effort but no body was found.
No body was found because he wasn’t dead. Price had fled to Mexico. After a brief stay there, he apparently returned to Florida and became a drug dealer. The FBI also claims he may have served as a bodyguard for prostitutes.
Price was caught during a routine traffic stop and was later convicted of bank fraud and embezzlement. In December he was sentenced to 30 years in prison.
While Price’s arrest and long prison sentence may bring some closure to his victims, it doesn’t help them get back their life savings. Like many frauds, the losses far exceed the little bit of money and property that was recovered. That is where the second part of the story begins.
“Selling Away” and the Liability of Stockbrokers
Some of Price’s victim’s purchased their investments from a stockbroker. Fortunately, brokerage firms are often responsible for the conduct of their employees and agents. Eight investors purchased from a broker employed by FSC Securities, a company within the AIG Advisor Group umbrella.
Last month a three person arbitration panel decided in favor of the investors and against FSC. The brokerage firm was ordered to pay damages of $1.28 million.
Price once worked at FSC Securities but later left to pursue his own investment fund. He still had friends at FSC, however, and two of those friends helped convince investors to invest in Price’s fund.
FSC claimed the brokers did not have authority to offer or recommend investments with Price but it doesn’t matter. Recommending investments without your employer’s permission is called “selling away.” Industry rules say that brokerage firms can be liable for selling away claims if the customer thought the investment was sanctioned by the firm.
In simple terms, if a stockbroker sells a used boat to a customer, its hard to imagine how the customer could think the boat was offered by the brokerage firm. If the selling away involves an investment fund (Price offered a fund called PFG), however, its easy to see how a customer could think his or her broker was doing so with approval of the firm.
Stockbrokers have a legal obligation to only recommend investments which are suitable for clients. Brokerage firms have a duty to supervise their employees and be aware of what they selling and what claims they are making. In the case of Price’s PFG fund, Price was making claims of outrageous rates of return. Excessive market returns should have been a red flag for both the brokers and FSC.
The $1.28 million award wasn’t unanimous. No reasons were given for the award or the dissent.
Most or all of the investors who purchased Price’s investment products while clients of FSC Securities have already come forward. We constantly see new selling away cases involving other investments, however. Dishonest brokers use the trappings and reputation of their employer to lure customers into making questionable investments on the side.
Frequently brokers engage in selling away because they receive much higher commissions and kickbacks.
Unfortunately, some investors are hesitant to sue when they believe their broker is insolvent or when they learn that the offending product was actually not offered by the firm. As this case points out, however, selling away cases can be won.
Common indicators of selling away activity includes brokers asking clients to make checks payable to third parties instead of the brokerage firm or receiving statements / confirmations from third parties.
If you are the victim of any type of investment fraud or Ponzi scheme, give us a call. We can often hold third parties responsible for these losses even if the wrongdoer is broker or in prison. Most cases can be handled on a contingent fee basis.
MahanyLaw – America’s Fraud Recovery Lawyers