Trade Practices Alert: Feds Accuse Former Wachovia Securities Advisors of Defrauding Older Clents
Below is an announcement from the U.S. Securities and Exchange Commission concerning an enforcement action it filed in Charlotte yesterday against two investment advisors from the Mt. Airy area. According to the Associated Press, the scheme they allegedly ran caused dozens of their older clients to lose roughly $8 million.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21781 / December 16, 2010
Securities and Exchange Commission v. William K. Harrison, et al., Case No. 3:10-cv-00634-FDW-DLH.
SEC Charges two former employees of Wachovia with Securities Fraud
The United States Securities and Exchange Commission (“Commission”) announced the filing of a civil injunctive action in Charlotte, North Carolina on December 15, 2010, alleging that William K. Harrison (“Harrison”) and Eddie W. Sawyers (“Sawyers”) violated the antifraud provisions of the federal securities laws.
The Commission’s complaint alleges that between approximately December 2007 and October 2008, Harrison and Sawyers used misrepresentations and omissions of material fact to defraud at least forty-two Wachovia brokerage customers of at least $8 million in customer funds. The complaint further alleges that on or around December 2007, Harrison and Sawyers, acting under the d/b/a “Harrison/Sawyers Financial Services,” began offering their Wachovia customers an investment opportunity that they misrepresented was guaranteed to make a 35% return, with no risk of loss of principal. In those instances when customers were informed that their monies would be used for trading options, Harrison and Sawyers misrepresented the riskiness of their trading strategy by telling customers that they had a foolproof approach to trading options and that their principal investment was secure and would make handsome returns regardless of market volatility. Harrison and Sawyers either opened accounts with optionsXpress in the client’s name or commingled the client’s funds in accounts opened in Harrison’s wife’s name or a joint account in the name of Harrison and his wife. So as to not draw attention to their conduct, Harrison and Sawyers placed “limited trading authorizations” and other related documentation associated with their scheme in the name of Harrison’s wife. Although the trading strategy that Harrison and Sawyers employed was initially successful, it soon resulted in substantial investor losses. By October 2008, they had depleted the vast majority of the money they had raised from investors. On October 13, 2008, Harrison submitted to Wachovia a resignation letter in which he confessed to “misdirecting” $6.6 million from seventeen of his Wachovia customers in order to trade online. He also admitted that he had conducted this online trading without first securing the authorization of these 17 individuals.
In its Complaint, the Commission alleges that Harrison and Sawyers violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 promulgated thereunder.
******End of Alert******
Date: December 16, 2010
David N. Kirkman
Assistant Attorney General
Task Force Alerts Chair
Consumer Protection Division
Office of Attorney General Roy Cooper
9001 Mail Processing Center
Raleigh, NC 27699-9001
NC Senior Consumer
Fraud Task Force
Fraud / Alerts
Trade Commission Alerts
(Protecting America's Consumers)
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