Stupid Broker – Weapons Grade

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Stupid Broker – Weapons Grade

On a long plane ride from New York to Dallas, a gentleman sat next to me and began a conversation.  He eventually disclosed that he was a 30-year financial broker with a major firm.  He explained how he helped his elderly (70 to 90 year-old) clients invest money and when they want to “reward him” he had them “contribute” funds to his young children’s college fund – which he had opened in not his or his wife’s name, but in the name of a close family member.  He kept stressing that what he was doing was “technically” legal as his family member could decide not to fund his children’s education.

“Really?”, I replied. “But the relative won’t do that because the relative is, after all, family, right?”

“Yeah, yeah – I can trust them to do what is right.”

For the next two hours he bragged about how he’s not reporting his rental income to the IRS, how he hides funds, and helps his clients do the same, etc., etc.  I got the sense that although it was not specifically discussed that it was a wide spread practice in his office.  I asked if his manager had any issues with his behavior and he emphatically said, “Oh, no – as long as what we are doing is not ‘technically’ illegal, the manager is fine.”  I pointed out that I had been following the Governor of Virginia who had nearly the exact same response to similar “gifts to his children” and the Governor was about to be indicted (and who subsequently, together with his wife, was indicted).  The broker replied, “Oh, my family member could ‘technically’ (there’s that word again) keep all the money deposited for my children, so there’s no issue.”  There was no indication that this gentlemen was intoxicated or under the influence of any medication.  He was clear, lucid, and proudly showed pictures of his favorite elderly clients, with whom he vacationed at their luxury vacation properties, and aboard cruise ships, etc.  He was very pleased with his crafty “technically legal,” at least in his mind, actions.

For those members not from the legal profession, this gentleman’s conversation is one of the hearsay exceptions as he was making several statements against interest, and/or statements of personal or family history.  No one would brag loudly on a flight that they are taking funds from elderly clients, not reporting income and evading taxes unless it were true, because it is so contrary to his proprietary and pecuniary interest that a reasonable person would not have made those statements if they weren’t true.   Some of his statements were so outrageous that I asked him to repeat himself, thinking I had to have misheard him.  I hadn’t.

Federal Rules of Evidence – Rule 804

(3) Statement Against Interest. A statement that:

(A) a reasonable person in the declarant’s position would have made only if the person believed it to be true because, when made, it was so contrary to the declarant’s proprietary or pecuniary interest or had so great a tendency to invalidate the declarant’s claim against someone else or to expose the declarant to civil or criminal liability; and

(B) is supported by corroborating circumstances that clearly indicate its trustworthiness, if it is offered in a criminal case as one that tends to expose the declarant to criminal liability.

(4) Statement of Personal or Family History. A statement about:

(A) the declarant’s own birth, adoption, legitimacy, ancestry, marriage, divorce, relationship by blood, adoption, or marriage, or similar facts of personal or family history, even though the declarant had no way of acquiring personal knowledge about that fact; or

(B) another person concerning any of these facts, as well as death, if the declarant was related to the person by blood, adoption, or marriage or was so intimately associated with the person’s family that the declarant’s information is likely to be accurate.

We exchanged cards, he gave me his card and I gave him a business card of someone I had not just met at a conference.  I could not get enough privacy to use the voice memo function on my cell phone and with the jet background noise – it may not have worked well regardless, but upon landing, I was able to stop and write down the conversation and all the direct quotes that I found so remarkable.

Upon returning home I reported him to the regulators and to the tax authorities.  I have been a witness for the DoJ and the United States Attorney but I have never had to do an affidavit for a braggart on a plane.  He was so brazen about his illegal gifts, and his laundering of the proceeds of the gifts to avoid disclosure and taxation that he “technically” needed to be investigated.  Preying on the elderly and the act of the laundering the money of the gifts itself was stupid, but to discuss it with someone who you do not, who happens to be an attorney specializing in white collar crime – is an 11 on the scale of 1-10 of the moron index.  I had witnessed weapons grade stupidity as most corporate fraud is, but this experienced financial advisor was in possession of a large stockpile of weapons grade stupidity and he was not afraid to use it – and boldly brag about it.

When someone rationalizes their behavior with the phrase “technically legal” it has been my 30+ plus years’ experience that it is anything but.  I had to speak up on behalf of the elderly clients he was proudly milking to pay for his children’s education.

The only thing necessary for the triumph of evil is for good men to do nothing.  –Edmund Burke

By, Name Withheld, Esq.

(Dear Name Withheld, Esq. – after telling me this story – I have to thank you for sending us this article for publication – I am still stunned – but Weapons Grade Stupidity – is a marvelous phrase. Ed.)

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