A Tustin, Calif. woman is facing a long list of civil and criminal penalties after allegedly orchestrating a multimillion-dollar investment fraud scheme.

In a civil complaint filed Feb. 14, the Securities and Exchange Commission charged Brenda A. Eschbach with securities fraud, investment advisory fraud and acting as an unregistered broker-dealer.

The Commission alleges that from 2003 to 2009, Eschbach, 55, misappropriated over $3 million of her clients’ funds.

Eschbach is one of several financial advisors who have attracted SEC investigators’ attention so far in 2012. (Also see: 5 Financial Advisors Who Couldn’t Outrun the SEC)

In a related criminal court case, Eschbach pled guilty last September to money laundering and mail fraud for sending out false account statements to clients. On Feb. 17, the US District Court for the Central District of California sentenced her to 41 months in prison and billed her for $2.5 million in restitution. Eschbach’s attorney did not respond to several requests for comment.

In March of 2003, according to the SEC complaint, Eschbach opened Eschbach, Mondragon and Associates to do business as a franchise of a national investment advisory firm. She retained control over all office affairs, including a business checking account through which she channeled her client’s money.

Eschbach took money from four clients including three individuals and one affiliated business, all of whom believed their money was being invested in non-publicly traded real estate investment trusts, the complaint alleges.

Eschbach’s bank statements, however, reveal that the funds were put toward personal expenditures including mortgage payments, Mercedes lease payments, private school tuition, and trips to Las Vegas and Atlanta, according to the SEC complaint.

Meanwhile, Eschbach sent false account statements by mail from EMA to each client. The reports detailed shares or units owned, quarterly or monthly distributions, and the increasing total value of the investments, which were never made, according to the complaint.

The plan began to unravel in 2009 after one client asked to withdraw his money in order to purchase a new home. When the redemption date passed and the money had not been returned, Eschbach tried to put his mind at rest, saying that his “funds have never been … commingled and all your investments have been in your best interest.”

Without denying the Commission’s allegations, Eschbach has consented to entry of a proposed final judgment, according to an SEC statement. Under the terms of the judgment, which has yet to be approved by the U.S. District Court for the Central District of California, she is prohibited from further association with any broker, dealer, investment advisor, or transfer agent. Moreover, Eschbach must disgorge all profits resulting from the scheme, and must pay restitution to the court.

Mason Braswell writes for Financial Planning.



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