Newspaper article International Herald Tribune

Madoff's Locked Away, but Schemers Abound

Newspaper article International Herald Tribune

Madoff's Locked Away, but Schemers Abound

Article excerpt

Problems remain with policing the financial industry, even after the wave of rules enacted since the collapse of Bernard L. Madoff's giant fraud scheme in 2008.

To Philip Horn, the Braemar Country Club was not just a golf course, it was an extension of his office. Most weeks, Mr. Horn, a financial adviser at Wells Fargo, chatted up potential clients between holes at the upscale club set against the backdrop of the Santa Monica Mountains in Los Angeles.

"I always thought, 'This is a great guy and a straight shooter,"' said Barry Zelner, one of several country club members who invested with Mr. Horn.

Now, those same clients are wondering what went wrong.

After Wells Fargo alerted him to discrepancies in his account, said Mr. Zelner, a corporate lawyer, he stormed onto the club's rolling greens in April, accusing the broker of theft. "Tell them what you did, Phil," the lawyer bellowed among a crowd of members.

A few months later, Mr. Horn pleaded guilty to having defrauding more than a dozen clients and Wells Fargo.

While Mr. Horn is a relatively minor player in the pantheon of financial fraud, his actions highlight the persistent problems with policing the industry, even after the wave of rules enacted since the collapse of Bernard L. Madoff's giant fraud in 2008.

And the challenge of oversight is not becoming any easier, with the ranks of financial advisers swelling. As new regulations crimp profits, big banks like Wells Fargo are expanding their brokerage businesses in an effort to make up for lost revenue.

Amid the renewed focus, banks have spent millions of dollars to strengthen their compliance systems and improve their oversight. Regulators, too, have bolstered their efforts, increasing enforcement and adopting new measures.

Every month, the Financial Industry Regulatory Authority, a Wall Street regulator, penalizes more than 100 brokers for various actions, including unauthorized trading and fraudulent activities, as well as smaller violations.

Thefts and "other financial scams continue to happen at an alarming rate," said Thomas Ajamie, a plaintiff's lawyer who represents two of Mr. Horn's clients.

For more than two years, Mr. Horn systematically executed and canceled trades in clients' portfolios, pocketing the profits. To avoid detection, he limited his paper trail and made it appear that the trades had originated in his own account, according to court documents.

"It's simply unbelievable to me that this kind of fraud could happen for so long without Wells Fargo doing anything about it," Mr. Zelner said. After meeting Mr. Horn on the golf course, Derek Brown invested more than $10 million with him in 2006, assured by the Wells Fargo name on his business card. "This wasn't just Schlepper & Schlepper," said Mr. Brown, a retired pharmaceutical executive. …

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