Bernard Parker stole investor money to remodel his house, but now it looks like he will be living in a federal penitentiary. According to the Securities and Exchange Commission (SEC), he stole over $1 million from 22 investors through a Ponzi scheme while working at Edward Jones.
In retrospect, there are some obvious red flags that investors should have stayed away from Mr. Parker. Way back in 1992, Mr. Parker was forced to resign from his brokerage firm, North American Management, for the improper, unauthorized sale of unregistered securities. Tax liens were also filed against him in 2007 and again in 2012.
Tax liens indicate that a financial advisor is unable to manage their own finances, so they are the exact opposite of a ringing endorsement for an advisor’s financial and investment acumen. They also indicate that a financial advisor is in a challenging spot financially, which suggests they may be unusually eager to recommend investments that line their own pockets with commissions, even if such investments are unsuitable for clients. Obviously, a Ponzi scheme fits into this category.
So, how did the Ponzi scheme work?
Mr. Parker operated a separate entity called Parker Financial Services (Parker Financial). Supposedly, Parker Financial invested in tax lien certificates in Florida, Arizona, and Colorado. Tax lien certificates are real and a legitimate investment option. Municipalities issue tax lien certificates and auction them off to generate revenue from properties that are delinquent on their property taxes. If the property owner then pays, the purchaser of the tax lien certificate can make good money. If the property owner does not pay, the purchaser of the tax lien certificate can foreclose on the property and then sell it on the open market, often for a significant profit.
Unfortunately for investors in Parker Financial, Mr. Parker only invested a sliver of incoming funds in tax lien certificates. While he told investors that he had taken a class in tax lien investing, had hired a portfolio manager, and that the certificates generated tax-free income, this was all untrue. Instead, Mr. Parker pocketed the vast majority of investor funds, pulling out over $650,000 in cash, paying all kinds of personal expenses, and even using investor money to remodel his own home.
Now, both the SEC and U.S. Attorney’s Office are filing parallel civil and criminal charges against Mr. Parker. While the SEC could win a civil judgment, Mr. Parker should be more concerned with the criminal charges which, according to the Federal Bureau of Investigation (FBI) carry a maximum sentence of 30 years in prison and a $1.25 million fine.
Unfortunately, while the government’s lawsuits against Mr. Parker might be cathartic, it is unlikely that they will do much to actually recover investors’ losses. The reason is simple: it appears that Mr. Parker has spent most of investors’ money. While it is possible that his home could be seized and resold for the benefit of investors, hundreds of thousands of dollars were simply squandered.
One potential avenue for investors to recover is by bringing claims against Edward Jones. When he was operating this Ponzi scheme, Mr. Parker was an Edward Jones financial advisor. You have to wonder: how did Edward Jones fail to catch a Ponzi scheme mastermind in their ranks, operating under their nose?
Brokerage firms have an obligation to take reasonable steps to supervise their employees. While Edward Jones would no doubt vehemently argue that they did so here, most of Mr. Parker’s victims were also his longtime clients at Edward Jones. Potential claims investors could bring against Edward Jones include negligent supervision and even—based on his checkered past in the securities industry—negligent hiring.
While details about Edward Jones’ supervision are unknown at this time, at least one investor has received a settlement from Edward Jones for the oddly exact figure of $231,655.93. Perhaps there is some hope for proactive investors after all.
If you have questions about investment losses, the securities litigation attorneys at Investor Defense Law LLP may be able to help, and offer free initial consultations.
Investor Defense Law LLP is a law firm dedicated to helping investors in California, Georgia and Washington State recover investment losses. Working with local counsel, we also occasionally accept matters in other states.
We understand investment fraud and financial advisor malpractice. Our lawyers know how to sue investment advisors, brokerage firms, and financial advisors. To learn more, contact an investment fraud attorney at 800.487.4660.