A barred former financial advisor faces prison time and the forfeiture of assets, including real estate proceeds and his Ford Mustang convertible, after pleading guilty to mail fraud and money laundering.
Onetime Questar Capital and Woodbury Financial Services broker Kevin D. Wanner carried out a 15-year Ponzi scheme involving bogus CDs and investment funds, according to the North Dakota Securities Department.
Questar and Woodbury have agreed to pay more than $3 million in restitution. Wanner pleaded guilty last week after striking a December agreement with federal prosecutors.
Other recent examples of Ponzi scams include: a barrage of arbitration claims by clients in connection with an incarcerated former LPL Financial advisor’s $1.4 million scheme; a onetime Oppenheimer and Morgan Stanley advisor who received a seven-year prison sentence last March after pleading guilty to a $21 million fraud; and notorious fraudster R. Allen Stanford, who is serving a 110-year sentence after being convicted in 2012 of a $7 billion scheme also involving phony CDs.
While Wanner’s crimes were on a smaller scale, the Bismarck-based broker preyed on 66 victims, including several family members, state investigators say. The case represents one of the state’s largest ever securities fraud cases, according to examinations and investigations supervisor Kelly Mathias.
“Financial crime can have devastating consequences for investors,” North Dakota Securities Commissioner Karen Tyler said in a statement.
Jeff Weikum, a lawyer representing Wanner, declined to discuss the case. “We are unable to comment on the matter as the sentencing phase of the litigation has yet to occur,” he wrote in an email.
Minneapolis-based Questar, which is the 48th largest independent broker-dealer, fired Wanner in December 2015 after state regulators issued a cease-and-desist order, according to FINRA BrokerCheck. Regulators and Questar agreed to a $2.4 million settlement in August.
“Mr. Wanner was terminated by Questar Capital upon discovery of his wrongdoing,” Brett Weinberg, a spokesman for Questar parent Allianz Life Insurance of North America, said in a statement. “Questar cooperated with the State of North Dakota Securities Department and offered our affected clients full restitution. We are pleased to have resolved this matter.”
Wanner had spent two years with Woodbury between two three-year stints with Questar. The Twin Cities-area firm, which is a subsidiary of Advisor Group and the No. 25 IBD, assented in December to a voluntary $596,000 payment to victims, Mathias says.
A spokeswoman for Woodbury declined to comment, noting a company policy against discussing the specific circumstances surrounding legal matters.
State regulators revoked Wanner’s license in December 2015 after accusing him of not properly disclosing the CDs to Questar and depositing the money clients intended for the CDs into accounts controlled by him. FINRA barred him from the industry the following month.
Wanner paid out $1.8 million in fake investment returns to victims out of some $5 million he obtained through the fraud scheme, according to Mathias’ affidavit filed in federal court. In addition to the CDs, he started a false investment scheme called the Bulls and Bears Investment Club, investigators say.
In both cases, he simply co-mingled his clients’ money in his personal and business accounts and spent it on purchases like the 2011 Mustang and home renovations, according to investigators. Wanner and his wife bought the car in 2015 for $16,450, according to Mathias’ filing.
Mathias declines to say exactly how regulators cracked the case, although he notes that, by late 2015, Wanner began to struggle to make the Ponzi payments and clients started asking for larger withdrawals.
“It just crashed,” Mathias says. “We had information that came to our office from other sources.”
Federal prosecutors in August sought forfeiture of the Mustang convertible and money Mathias earned from later selling the home. An evidentiary hearing prior to the June sentencing will determine whether his wife has innocent ownership of the sale proceeds and the car, according to filings in the case.
Mail fraud and money laundering charges carry a maximum combined prison sentence of 30 years and a fine of $500,000, the December plea agreement shows. Prosecutors pledged to recommend a reduced sentence if Wanner “has demonstrated a genuine acceptance of responsibility,” the agreement says.