Securities Industry Commentator by Bill Singer Esq

April 28, 2020

FINRA Imposes Fine and Suspension for Forged Endorsement in Parents and Wife's Accounts. In the Matter of Steven Todd Gary, Respondent (FINRA AWC)

Distilleries Are Turning Stale Beer Into Coronavirus Whiskey / And hand sanitizer, too. (Bloomberg by Brad Japhe)

Okay, sure, I admire a good scam as much as the next guy. On the other hand, I also admire a talented scammer who shows some creativity and approaches his fraud with intelligence and detetrmination. That being said, yesterday I got the crapola below from some jackass who really needs to get his act together:


How are you doing today? Please confirm to us if you sent this man to receive your Fund.

I am Christopher A. Wray, (Current) Director of FBI (Federal Bureau Investigation) There is presently a counter claims on your funds by one  Mr John Wheeler whom is presently trying to make us believe that you are dead of Corona Virus also he explained that you entered into an agreement with him, to help you in receiving your fund. So here comes the big question.

Did you sign any Deed of Assignment in favor of JOHN WHEELER? thereby making him the current beneficiary with this following account details:( MR JOHN WHEELER),AC/NUMBER: 6503809428. ROUTING/122006743,B/NAME:CITI BANK, ADDRESS:NEW YORK,USA, we shall proceed to issue all payments details to the said (JOHN WHEELER) if we do not hear from you within the next two working days from today. However, you are advice to email the bank and confirm to them immediately and let them know if (JOHN WHEELER) is from you or not.

Here is the Banking In formations:


Please note that you have less than 48hrs to get in contact with the Bank or the Bank will proceed to issue all payments to that (JOHN WHEELER.)

Christopher A. Wray
Director FBI DEPT.
Today's blog considers several ingredients that would get shaken into a volatile cocktail: a boyfriend, a girlfriend, her grandson, a night of drinking, an argument, his banging on a door, and some marijuana in his bag. Shake. Stir. And we then pour out a nasty concoction whereby the boyfriend gets charged with three crimes and winds up getting fired by Allstate Insurance. Which prompts the boyfriend to sue.
As alleged in part in the DOJ Release:

[T]he Eighth Circuit Court of Appeals issued a precedential opinion on Friday, April 24, 2020, affirming a district court decision that a transaction designed to generate massive foreign tax credits (referred to as the STARS tax shelter) lacked economic substance and business purpose and was subject to the accuracy-related penalty for negligence, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman and Deputy Assistant Attorney General Joshua Wu of the Justice Department's Tax Division.

In Wells Fargo v. United States, No. 17-3578, the Eighth Circuit Court of Appeals affirmed the decision of the U.S. District Court for the District of Minnesota and the position of the United States. Wells Fargo, like several other U.S. banks, had entered into the STARS shelter, a transaction promoted to them by Barclays PLC and KPMG as a method of generating foreign tax credits on U.S. income. The Eighth Circuit rejected the transaction as an economic sham subject to penalties, consistent with the decisions of three other courts of appeals. In rejecting Wells Fargo's appeal, the court agreed with the government that "STARS was an elaborate and unlawful tax avoidance scheme, designed to exploit the differences between the tax laws of the U.S. and the U.K. and generate U.S. tax credits for a foreign tax that Wells Fargo did not, in substance, pay." 

READ: The Full-Text Opinion: Wells Fargo & Company, Plaintiff/Appellant v. United States of America, Defendant/Appellee (Opinion, United States Court of Appeals for the Eighth Circuit ("8Cir"), 17-3578 / April 24, 2020)
In a Complaint filed in the United States District Court for the Northern District of California, the SEC charges William Alfred Batchelor and John Zukoski with violating the antifraud provision of Section 17(a)(3) of the Securities Act. 
Without admitting or denying the allegations in the complaint, Batchelor and Zukoski agreed to be enjoined from future violations of the charged provision and from participating in future municipal debt offerings. Batchelor agreed to pay a $20,000 penalty and Zukoski agreed to pay a $15,000 penalty. In describing the underlying events attendant to investors' purchase of $25.54 million in bonds issued on behalf of Tri-Valley Learning Corporation, which operated two public charter schools, the SEC Release alleges that:

[I]n May 2015, Batchelor, Tri-Valley's then Chief Executive Officer, and Zukoski, Tri-Valley's then Director of Finance, helped prepare and signed a bond offering document to fund the purchase and renovation of a building to house the schools. The complaint states that Batchelor and Zukoski were aware that Tri-Valley was experiencing serious cash flow problems that negatively affected its ability to make debt service payments on the bonds, was delinquent on payments owed to vendors, had incurred additional debt in the form of a private term loan that was overdue by nearly one year, and had drawn a bank line of credit to its limit just prior to the bond sale. However, the offering document allegedly failed to disclose that Tri-Valley was in serious financial distress at the time the bonds were sold and contained misleading financial projections. Additionally, the complaint alleges that, despite knowing the true state of Tri-Valley's financial condition, Batchelor and Zukoski signed separate certifications that the information in the offering document contained no material misrepresentations or omissions.

Wall Street Quants Are Turning Their Skills to the Virus Fight (Bloomberg by Justina Lee)
In an intriguing article that follows the efforts of Quants to mine the emerging datapoints of COVID-19, Bloomberg reporter Lee notes in part that: 

At hedge fund Atlas Ridge Capital, founder Christos Koutsoyannis is helping to launch the non-profit Covid Network, which uses advanced statistical techniques to match hospital demand with suppliers of personal protective equipment, or PPE.

He's calling on the financial industry to share data such as cell-phone usage or satellite imagery that might help estimate the effectiveness of social distancing. "Quants might not have epidemiological experience, but the mathematical challenges are similar," he said.

For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Steven Todd Gary submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that Steven Todd Gary entered the industry in 1997 and starting in 1998, he was registered with FINRA member firm Sate Farm VP management Corp. (and also was employed with the firm's affiliated insurance company). The AWC alleges that Gary "does not have any disciplinary history with the Securities and Exchange Commission, any state securities regulators, FINRA, or any other self-regulatory organization." In accordance with the terms of the AWC, FINRA found that Gary had violated FINRA Rule 2010; and the self regulator imposed upon him a $12,500 fine and a one-year suspension from association with any FINRA member firm in any capacity. As set forth in the "Overview" portion of the AWC;

From April 2010 through January 2018 (the "Relevant Period"), Gary violated FINRA Rule 2010 by forging the signature endorsements of his parents on approximately 60 checks totaling $332,650, which represented loans on their life insurance policies. 

In April 2018, Gary also violated FINRA Rule 2010 by providing three falsified and backdated power of attorney forms for his parents and wife to his insurance company employer during an investigation into Gary's forgery. In April and May 2018, Gary violated FINRA Rule 2010 by impersonating his father during three calls with the bank affiliated with his insurance company employer. 

Bill Singer's Comment: That's as horrific a set of allegations packed into an Overview as I could imagine. On the other hand, consider that the AWC concedes that starting in "April 2010, with his parents' consent, Gary processed requests to borrow funds from his parents' life insurance policies. . . ." Ummm . . . what the hell? Was this all done with the parents' consent or what? I am in NO way condoning any of Gary's idiocy or apparent clumsy cover-up. Perish that thought immediately. What I'm trying to figure out is whether the parents or the wife ever complained, which, oddly, is nowhere alleged in the AWC. At worst, the AWC fails to say what it means and mean what it say, and, at best, Gary had his folks and wife's permission to do what he did but he didn't comply with his firm's policies and lied when his short-cuts were discovered. Like I said, I'm not defending him but I would have preferred if FINRA made it clear as to what the "victims" knew and approved. And in case you're wondering, I checked Gary's BrokerCheck record and there are no customer complaints noted.
As veteran reporter Bertha Coombs notes in part:

For primary-care doctors, telemedicine has provided a way to help maintain part of their practice. Still, nearly 90% of primary-care physicians say they've experienced significant losses in patient volumes, according to the most recent weekly Covid-19 impact survey from researchers at the Larry Green Center and the Primary Care Collaborative.

Distilleries Are Turning Stale Beer Into Coronavirus Whiskey / And hand sanitizer, too. (Bloomberg by Brad Japhe) readers know that our publisher Bill Singer was the third generation of his family in the wine and liquor business before pursuing his legal career. Bill was fascinated by this article in Bloomberg, which proves that human ingenuity and resourcefulness is still alive and well -- and fighting back against the onslaught of COVID-19. In part, reporter Japhe notes that: 

This hail mary isn't without precedents. For generations, farmers have turned to distillation as a way to repurpose crops that would otherwise spoil with the seasons. Much the way fresh fruit is shelved into preserves and jams, grapes became brandy and grain became whiskey. Now the Covid-19 pandemic crisis is becoming camaraderie, as WhistlePig intends to eventually sell some of these spirits as limited-edition single barrels, in conjunction with the breweries that unintentionally birthed them.

"A few years down the road, it'll be a way to commemorate this moment in time, when we came together to help each other out," says Kozak. "As the liquid develops in the cask, we'll work with each brewer on an aging strategy that best benefits their specific beer." That could mean unique cooperage options and barrel finishes.