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If You Think Something Sounds Fishy, Trust Your Gut

When someone you trust steals from you, the consequences are immense. You might suffer a sense of betrayal, embarrassment or humiliation, and of course the cost of the loss itself.

See Also: Spot Fraud Before It Spots You
A handful of Wyoming residents know that first-hand. They were victims of theft and fraud at the hands of two people they trusted to invest their money.

Wyoming Secretary of State Max Maxfield wants Wyoming residents to know that if they suspect they are being cheated or defrauded that his office can help.

“I know how hard people work for their money,” Wyoming Secretary of State Max Maxfield says. “I want to make sure that people have the tools and information they need to protect themselves. While we know that the vast majority of investment professionals are honest and ethical people, we also know of instances when that’s not the case.

“My office is available if people have questions about their brokers or investments they are considering. I would much rather prevent a fraud from occurring than investigate one that’s already taken place. But if any Wyoming resident feels an investment fraud has taken place, he or she should call the Compliance Division immediately.”

Two cases are particularly well documented in Wyoming, thanks to the media attention to guilty pleas to a variety of federal charges by both men, one a Casper securities agent, and the other a Rock Springs securities adviser. In both cases, the Wyoming Secretary of State’s office became involved early on. The results of the investigations that resulted were far-reaching, attracting the attention of the U.S. Securities and Exchange Commission in one of the cases.

In the first case, a widow in southwest Wyoming discovered in September 2004 that her 2002 federal taxes had not been paid. Gregg Novotny, then employed at Piper Jaffray & Co., in Casper, had invested the woman’s inheritance from her husband’s retirement accounts. Novotny had told the woman his company offered free tax services to its clients, and she took him up on his offer, selling securities and providing Novotny with blank signed checks to make tax payments. When she contacted Novotny, he told her the error was a glitch and he would take care of it. When she tried reaching him again, she was told he no longer worked at Piper Jaffray.

A subsequent investigation showed Piper Jaffray does not offer tax services to clients; Novotny made a payment on her federal taxes with one check, but deposited money from eight more checks, totaling $87,300, in two personal bank accounts for his own use.

Several years later, Leo T. Buggy, working at his AXA Equitable office in Rock Springs, convinced a number of clients to cash out of investments – incurring early withdrawal penalties and other fees – to put that money in investments that he told them were safer and produced higher yields. He produced statements that purported to be from AXA detailing the fake accounts.
In reality, he had transferred up to $1.2 million in client funds to his personal bank accounts.

In one case, Buggy emptied a client’s account – insurance money the victim received after her husband’s death in a motorcycle accident; she’d relied on that to supplement her Social Security income.

In August 2007, Novotny was sentenced to 38 months in federal prison after pleading guilty to mail fraud and money laundering charges. He was also ordered to pay his victim $330,500.

In October 2009, Buggy was sentenced to 46 months in federal prison after pleading guilty to mail fraud, wire fraud and money laundering charges. He also was ordered to reimburse $1.2 million to AXA; the company had reimbursed his clients.

The Wyoming Secretary of State, among other duties, serves as Wyoming’s securities commissioner. The Compliance Division oversees the state’s securities industry and is responsible for registering investments offered or sold in Wyoming as well as registering and overseeing the firms and brokers working for those firms.

An estimated 83,000 securities agents are registered in Wyoming, giving the Secretary of State’s Office access to background information on all of them, including criminal history, customer complaints, regulatory actions taken as well as any other disclosures.

The Secretary of State has the authority to investigate violations of the state Securities Act and has jurisdiction over fraudulent activities in these areas. The division can file administrative actions – to revoke licenses, for example – and to refer criminal matters to local, state or federal authorities.

Fraud investigators often find that victims are embarrassed or feel stupid and as a result they don’t report crimes. Karen Wheeler, director of the Secretary of State’s Compliance Division said people should never feel that way. While recovering lost money isn’t always possible, that will never happen if fraud isn’t reported.

If you suspect something is fishy about a broker’s promise or an investment opportunity, all it takes is a quick phone call to verify that the product is registered to be sold in Wyoming and that the broker is in good standing. Contact the Wyoming Secretary of State’s Compliance Division at 307-777-7370.

Find more information, including tips to avoid risky investments.

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