Advisor to clients with special needs charged with hate crimes

A financial advisor who was barred by FINRA two years ago and fired by his firm in 2018 now faces hate crimes charges alleging he stole from victims because of their ages.

Louis Cook selected two victims in 2019 and 2020 based in “whole or substantial part because of a belief or perception regarding [their] age,” according to a March 3 indictment in the Supreme Court of Staten Island, New York, against him and his business, Nevsadi. FINRA barred him in March 2020 after alleging that Cook made misrepresentations to 11 clients — many of them “elderly investors” or parents of developmentally disabled children — that enabled him to withdraw $150,000 from their variable annuities for his own use between 2016 and 2018.

The indictment charges Cook, 61, with six counts of grand larceny with three of them as hate crimes. It represents the latest disturbing turn in the story of a planner who once ran a company focusing on wealth management for individuals with mental or physical disabilities and their loved ones. In recent years, some financial advisors have centered their practices around clients with special needs or disabilities, and one university has launched a research center devoted to the topic. This case demonstrates how such vulnerable populations can potentially fall victim to fraudulent members of the profession.

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The Staten Island Advance first reported the case March 16, noting that investigators believe Cook defrauded two women over 60 years old for $190,000 by promising to help protect their assets to pay for long-term care services. Representatives for the Staten Island District Attorney’s Office provided the indictment but didn’t respond to requests for further details.

In accepting the bar from FINRA in 2020, Cook didn’t admit or deny the regulator’s findings in the earlier case. An attorney for Cook didn’t respond to Financial Planning’s request for comment, but he did speak to the local news outlet.

“This is not a hate crime,” attorney Scott Cerbin told the publication. “This is an over-the-top allegation.”

Securities Service Network fired Cook in 2018 based on the variable annuity allegations, according to the FINRA settlement.

“Consistent with our expectation that financial advisors adhere to the highest possible ethical and professional standards, SSN terminated this individual’s affiliation with the firm in 2018,” spokesman Joseph Kuo said in a statement.

The firm folded into Securities America in 2020 after Advisor Group purchased Ladenburg Thalmann and combined three brokerages into the largest firm of the network. LPL Financial purchased the assets of National Planning, another one of Cook’s prior firms, in 2017. In an amended Form U5 disclosure the year after Cook voluntarily resigned from the firm, National Planning cited the variable annuity allegations as well, according to the FINRA settlement.

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Business on the side
In October 2014, Cook had listed a non-investment-related business named “Special Needs Team LLC” where he was the co-owner, according to his detailed BrokerCheck file. Although FINRA investigators didn’t mention the company by name, they alleged Cook had met his victims through a company advising parents, caregivers or individuals about “special needs matters” such as Medicaid eligibility and long-term care, the 2020 settlement order shows.

“Many of these customers were financially unsophisticated, elderly or parents of children with developmental disabilities,” the document states.

In 2016, Cook convinced at least 11 clients to sign a third-party authorization form that gave him the right to make changes or withdraw funds from their variable annuities in order to pay advisory fees, according to FINRA. He told them falsely that he needed those forms to continue servicing the annuities without limiting their options and because they were required under the Department of Labor Fiduciary Rule issued in 2015, according to investigators.

“The customers did not intend to authorize Cook to withdraw funds from their variable annuities for his own personal use,” the settlement order states. “Cook improperly used those funds.”

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Hate crimes
Most states make financial exploitation of the elderly a discrete charge, and there are few, if any, cases in which authorities have filed hate crimes against advisors in connection with fraud, according to Christine Lazaro, director of the Securities Arbitration Clinic at the St. John’s University School of Law. Lazaro noted that New York is the only state that doesn’t include a private right of action for individual investors in its securities laws.

“It may be that this was an attempt to ensure that there were heightened penalties because it was an elderly victim,” Lazaro said. “There are heightened penalties in other states when the victim is elderly.”

Recent studies of exploitation of elders have calculated the annual losses at billions of dollars nationwide, according to a December 2020 report by the U.S. Government Accountability Office. At least 33 states have enacted a model rule from the North American Securities Administrators Association designed to protect vulnerable adults from financial exploitation.

Without any contribution from Cook, National Planning settled a 2018 client complaint for $47,498 after the investor alleged that “fees were debited from variable annuity without proper disclosure,” BrokerCheck shows. It’s not immediately clear whether the victims in the latest case against Cook may have also been swindled in the earlier scheme alleged by FINRA.

The New York Police Department arrested Cook on March 4, and a judge released him on bail after he pleaded not guilty to the charges, according to the available court records online. In the indictment, Staten Island District Attorney Michael McMahon’s office alleges that the thefts occurred in March and June 2019 and October 2020. Cook faces two counts of grand larceny in the second degree and four in the third degree, according to the indictment.