Pastor, Partner Must Pay $9M To Settle Fraud Allegations
By: Dean Seal of Law360.com
A Florida federal judge on Monday ordered a fund run entirely by a North Carolina man and a convicted pastor-turned-fraudster to pay $9 million to settle claims it duped Florida churchgoers and their associates out of $2 million.
The settlement with the U.S. Commodity Futures Trading Commission resolves claims against the corporate entity Maverick International Inc., its sole officer Edward Rubin and Wesley A. Brown, the two men accused of soliciting investors into a pooled fund that they then entirely embezzled. U.S. District Judge Brian J. Davis ordered $2,151,318.73 in restitution along with $6.8 million in civil monetary penalties.
“Upon consideration of Brown’s trusted position as a pastor, the defrauding of elderly church and that the penalty is within statutory limits, the court finds the amount to be appropriate,” Judge Davis said.
The CFTC’s April 2015 suit alleged Brown, the former associate pastor for a Flagler Beach, Florida, church who is serving time for a related criminal case, used his position to find investors, and that Brown and Rubin brought 31 people into the fund between 2008 and 2013, with Brown claiming to be an “experienced trader and financial adviser.”
“By convincing them over time to trust him, Brown gained access to their friends and family and pulled them into the fraudulent scheme,” the complaint said.
The pair sent falsified receipts and profit statements to the victims of the scheme and claimed to only be taking a small percentage of profits, when in reality the two used the roughly $2 million in invested funds to trade precious metals on personal accounts and pay for rent, meals, travel and other expenses, the complaint said.
The six-count complaint accused the pair of failing to register Maverick as a commodity pool operator, failing to register themselves as associated persons for an operator, fraud, and commingling of pool funds, and sought disgorgement and permanent injunctions against the two being involved in trading ever again.
In January 2017, a state court jury convicted Brown on 19 of 31 criminal charges over the scheme, and he was sentenced to 7½ years in prison and ordered to pay $283,000 in restitution for his victims.
Monday’s order stipulates that Maverick is liable for $2,065,178 of the total restitution amount while Rubin is liable for up to $500,000. It further stipulates that Maverick is liable for the $6,806,534 civil monetary penalty, of which Rubin can pay up to $140,000.
An attorney for the CFTC and counsel for Rubin did not respond to a request for comment.
The CFTC is represented by Daniel J. Grimm and Timothy J. Mulreany.
Brown is representing himself.
Rubin is represented by Robert D. Wilcox and Elizabeth R. P. Bowen of the Wilcox Law Firm and Charles J. Brown III of Gellert Scali Busenkell & Brown LLC.
The case is U.S. Commodity Futures Trading Commission v. Brown et al., case number 3:15-cv-00354, in the U.S. District Court for the Middle District of Florida.
Comment by Scott Starr: Cases such as this are unfortunately rather common. Unscrupulous brokers frequently use religion to sell shady investments. Starr Austen & Miller have worked on over a dozen such cases. These cases run the gambit from brokers quoting the Bible, concentrating their solicitations on fellow church attenders, to advertising that profits earned are for “the Lord’s work.” Beware of such tactics. If you or a loved one has been a victim of these tactics, contact Scott Starr for a free, no commitment consultation.
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.