Indiana settles with securities firm over agent who ran Ponzi scheme
By: Indianapolis Business Journal Staff and Associated Press
The state has reached a $275,000 settlement with NYLife Securities LLC over the activities of an Indiana wealth manager who killed himself in 2013 while being investigated for operating a Ponzi scheme that took millions of dollars from dozens of investors.
Indiana Secretary of State Connie Lawson announced the settlement Thursday.
Former NYLife agent Richard Schwartz operated a Kokomo-based company called RAS & Associates that sold investments totaling $16.3 million to 53 Indiana investors.
The state says most of that money was never invested but went to support Schwartz’s “extravagant lifestyle” and an apparent gambling problem.
Attorney Scott Starr, who represented 33 of Schwartz’s victims, told the Kokomo Perspective in 2015 that 71 parties filed claims against the Schwartz estate, seeking more than $36 million.
Those claims weren’t just for the investment losses, but debts to casinos, the IRS, banks and other creditors.
Schwartz shot himself to death in August 2013, one month after Lawson’s office began investigating numerous investor complaints against him. According to police reports, he also tried to kill his wife before the suicide but his gun misfired, allowing her to escape.
RAS, founded in 2001, sold insurance products, annuities and general wealth management advice. Investigators say Schwartz persuaded many of his clients to liquidate their insurance holdings to invest in fake securities that he said would receive higher interest rates than their previous investments.
Instead of investing his clients’ money, Schwartz used the funds to sustain his lifestyle and pay for business expenses. As he acquired new investors, he used some of their money to pay interest payments to existing clients, which is typical in a Ponzi scheme.
Among the reported victims were former Seattle Seahawks quarterback David Krieg.
Investigators say Schwartz owned several luxury vehicles, a private jet, a $2 million residence in Scottsdale, Arizona, a $2.5 million vacation home on Lake Maxinkuckee in northern Indiana, and a horse farm in Kentucky. Associates also said he was fond of Rolex watches and gambling. His debts included a quarter-million dollars to the Tropicana Evansville casino and $80,000 to the Belterra casino in Florence.
Investigators say NYLife, a division of New York Life Insurance Co., conducted required audits of Schwartz’s paperwork, but failed to look into what he was selling through RAS. Neither RAS nor the investments were ever properly registered with the Indiana Secretary of State’s office.
Through numerous civil settlements, all investors involved in the scheme have been repaid, the state said.
In addition to $250,000 in penalties and costs, NYLife agreed to send $25,000 to the Investor Protection Trust on Indiana’s behalf. The office uses funds from the trust to further its dual mission of promoting financial literacy and fraud prevention in Indiana.
The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.