An LPL Financial advisor scammed a widow in her 90s out of more than a million dollars over eight years before the firm detected any problems, according to the Securities and Exchange Commission.
In a Sept. 29
Goodbred, 54, operated his Roselle, Illinois-based practice under brokerage affiliation with LPL for the entire time he was allegedly steering the client's money toward his personal use between 2012 and 2020. The scheme outlined in the SEC's case bears similarities with
Goodbred convinced the client to invest in a real estate investment trust by selling part of her holdings, then using the proceeds to write a check to his business, investigators say. Rather than investing the sums in a REIT, he spent the money on personal expenses, according to the SEC. Goodbred's previously unmarked disciplinary record and the frequency of clients cashing out part of their portfolios for the purposes of, say, buying a home, would make it difficult for wealth managers like LPL to detect anything amiss, according to fraud expert Douglas Schulz of Invest Securities Consulting.
Schulz also faults regulators for the billion-dollar fraud losses for going after "low-hanging fruit" rather than imposing enforcement actions that would make cases like Goodbred's more costly to LPL and other large brokerages, he said.
"The reason that the industry doesn't clean itself up is because it's just a cost of doing business," Schulz said. FINRA and SEC rules "absolutely require the broker-dealers to monitor their licensed agents like a hawk."
It's not immediately clear whether the regulators are investigating LPL for any potential supervisory cases or whether Goodbred will face criminal charges because authorities have policies against disclosing pending cases.
Goodbred, who had known the client for more than 20 years, gave her back more than $300,000 between 2013 and 2014 and another $147,000 in March after the discovery of the scam, according to the SEC. In August, LPL paid the client's successor trustee a settlement of more than $1.2 million, FINRA BrokerCheck
An attorney who represented Goodbred before FINRA in its case barring him from the industry in February 2021 declined to discuss the case. Representatives for LPL — which
The client's late husband introduced her to Goodbred prior to his 2006 death, after which she lived alone. Their children had died earlier as well. Goodbred "positioned himself as a friend and confidant" to her, according to the SEC. A year after he first sold her on the phony REIT investments, she appointed him the investment advisor of her trust account and later endowed him with her power of attorney for property and health purposes, according to investigators.
When LPL eventually fired Goodbred in January 2021, the firm cited allegations that he used "unapproved power of attorney to facilitate distribution of customer funds to a real estate company," according to BrokerCheck. A successor trustee who was the first to recognize any concerns with their relationship later filed an arbitration case that expressly linked Goodbred's power of attorney to the fraud, BrokerCheck shows.
It's not clear what kind of a REIT or returns Goodbred was pitching to the woman. She transferred the proceeds of her stock sales from her trust into her bank account and wrote 10 checks between 2012 and 2020 to his real estate company, according to the SEC. The company, Northern Lights Properties, owns four single-family rental homes, Goodbred's
The estate's successor trustee finally broke the case open in September 2020, when the client's cognitive condition necessitated the hiring of a professional care manager. Goodbred terminated the caretaker and refused the trustee's request for a medical examination, according to the SEC. In addition, he didn't comply with the trustee's multiple demands to provide copies of the client's bank statements, investigators say. Meanwhile, the client received the dementia diagnosis in December 2020 and moved into the memory care unit of an assisted living facility.
LPL received a complaint in November 2020 about the possibility that Goodbred "might be exercising inappropriate discretion" over the client's trust account, the complaint states. The firm subsequently began its investigation and fired him in February 2021. The SEC's case charges Goodbred with five violations of antifraud laws and seeks disgorgement of "ill-gotten gains."
