An advisor was allegedly paid by an ex-convict to coax clients into investing in a worthless company, according to federal authorities.
Larry Werbel, who headed Evolution Partners Wealth Management, a dually registered firm near Cleveland, is due to appear in federal court Wednesday to enter a not guilty plea and fight a bevy of charges for his role in the alleged scheme, his lawyer said.
Werbel is accused by authorities to have received payoffs from Edward Durante, an ex-con charged with orchestrating the fraud, for promoting a shell company to his clients and failing to disclose the conflict or conduct any due diligence on the investment he was recommending.
Richard Blake, Werbel's attorney, says that his client plans to fight the charges and plead not guilty on all counts, but declined to discuss details of the case. Werbel is set to appear before Judge Andrew L. Carter Jr. in New York, where he faces charges of securities fraud, wire fraud and investment advisor fraud, among other counts.
Attorneys for Durante and other alleged co-conspirators did not immediately respond to requests for comment.
PLANNED BEHIND BARS
Durante, known also by several aliases, is alleged to have hatched the scheme to gin up investor interest in VGTel, the shell company that he controlled, while he was serving a 10-year prison sentence for a prior case of securities fraud.
Federal officials have now brought civil and criminal charges against Durante and a network of associates and financial advisors for allegedly steering millions of dollars from at least 100 investors into VGTel, withholding key information about the nature of the investment and the criminal past of the scheme's architect.
In parallel cases brought by the SEC and the Justice Department, authorities outline a scheme in which Durante worked with a handful of financial professionals around the country to promote the shell company VGTel by lying to investors about how their funds would be used and concealing Durante's criminal past.
While clients were led to believe that their investments would fuel the growth of the company, Durante is alleged to have pocketed much of the money, to the tune of more than $9 million that he kept for himself or funneled to his family and co-conspirators.
Durante is facing a litany of charges including securities fraud, wire fraud and money laundering. A maximum sentence for all charges would carry a prison term of 110 years. The brokers and advisors named as co-conspirators face similar charges, each with the possibility of lengthy prison sentences.
DOZENS OF VICTIMS
The DOJ's indictment cites at least 100 investors who were bilked out of more than $14 million. The scope of the alleged fraud is narrower in the SEC's civil action, which claims that at least 50 "relatively inexperienced" investors lost at least $11 million through investments in VGTel.
Authorities detail how advisors allegedly aided Durante in his scheme by misleading clients about the nature of their investment in VGTel, and one broker who engaged in a coordinated trading campaign to pump up the value of the company's shares.
Kenneth Wise, a Durante employee accused of orchestrating the payments to Werbel and setting up trading and bank accounts to facilitate fraudulent conduct, has pled guilty to six charges, including securities fraud, wire fraud and money laundering.
Durante appeared in court last month after he was extradited from Germany, and entered a plea of not guilty.
- Ex-Edward Jones Advisor Stole $1.2M to Remodel Home, SEC Claims
- NFL Player Can Pursue $20M Fraud Claims Against Merrill, Judge Rules
- Advisor Fined $1M in Breakaway Fraud Cases