In December 2018, FINRA censured and fined Merrill Lynch $300,0000 for failure to supervise Eva Weinberg (CRD# 1767814), who engaged in a scheme to defraud a Merrill Lynch customer.
According to the Acceptance, Waiver and Consent, between February 2010 and June 2010, Merrill Lynch failed to reasonably supervise Weinberg, who, together with Michael Stern, engaged in a scheme to defraud former Colts and Chargers defensive end and seven-time Pro Bowler Dwight Freeney. Weinberg is currently serving prison time after pleading guilty to defrauding Freeney. Stern is also serving a prison term related to defrauding Freeney. Freeney sued Bank of America and Merrill Lynch for $20 million, and ultimately settled for $13 million, according to Investment News.
Weinburg devoted a significant portion of her time providing Freeney with a variety of financial-related services, including advising him on investments he held away from the Firm and paying his bills online from his Merrill Lynch brokerage account. Weinburg also introduced Stern to Freeney using a fictitious name, falsely representing that Stern was a wealthy and successful businessman who could help Freeney with his various, existing business and other financial needs. In fact, MS was a con man who together with Weinburg gained Freeney’s confidence and then access to his financial accounts, ultimately misappropriating millions of dollars after Weinburg left the Firm in July 2010.
In February 2010, Weinburg forwarded an email from Freeney to Stern regarding a private securities transaction away from Merrill Lynch, which violated the firm’s policies. In March 2010, Weinburg sent an email to a client associate on her team using a personal email address. The email contained a non-disclosure agreement regarding an investment, which raised the question as to if Weinburg was involved in private securities transactions. In March 2010, Weinburg received an email from a real estate attorney regarding Freeney, and in the email thread Weinburg attempted to terminate the attorney’s engagement with Freeney and assume control over advising Freeney on a real estate investment. All three of these instances were not elevated by Merrill Lynch for further supervisory review, which would have revealed Weinburg’s association with Stern, scope of services provided to Freeney, and involvement in private securities transactions.
According to FINRA, Merrill Lynch failed to respond to red flags that Weinberg was engaged in conduct that appeared to violate the firm’s policies and procedures. In particular, Merrill Lynch failed to reasonably investigate certain of the Weinberg’s email communications that it had flagged for review, and the firm failed to reasonably follow-up on a $1.7 million default judgment entered against Weinberg. The judgment was regarding a civil complaint that alleged that Weinberg had cheated a couple who had lent the third party money, alleging that Weinberg had written two post-dated checks, only to later close the account on which the checks were written.
According to FINRA, “The scheme began when the broker was associated with Merrill Lynch, but the actual theft of funds occurred after the broker left the firm and ended when the broker and the third party were arrested by the criminal authorities.”
In March 2012, the FBI arrested Weinberg and Stern, who both pled guilty to wire fraud. Stern is serving a 13-year prison term, and Weinberg is on supervised relief following a six month prison sentence.
She was last registered with Merrill Lynch, Pierce, Fenner & Smith Incorporated in Miami, Florida from July 2009 to July 2010. Weinberg was a Merrill Lynch advisor at the time Freeney was brought on as a client. After gaining access to Freeney’s financials, Weinburg left Merrill Lynch and with Stern, launched a scheme in which she opened a firm called Global Wealth Management. Weinberg worked in Stern’s Miami office on a team that focused on working with professional athletes, including Freeney.
Stern had a criminal history, according to the Acceptance, Waiver and Consent, and his business went bankrupt in March 2009.
In January 2015, Merrill Lynch, Pierce, Fenner & Smith Inc. signed an Acceptance, Waiver and Consent with FINRA. It is alleged that the firm failed to timely amend a representative’s Form U5 to report two written complaints alleging misappropriation of customer funds. FINRA censured and fined Merrill Lynch $175,000.
In September 2012, FINRA found that the Merrill Lynch failed to make or timely make approximately 1,200 required filings or acknowledgments of customer complaints, arbitrations and civil litigations and related Forms U-4 and U-5. The firm was censured and fined $500,000.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Merrill Lynch may be liable for investment or other losses suffered by its customers.
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