Ex-Wells Fargo advisor hit with 128-count felony indictment after SEC case
Fourteen years of fraud and forgery in an alleged Ponzi scheme led to 128 felony counts for a former Wells Fargo Advisors Financial Network branch manager.
Sheriff’s deputies arrested John Gregory Schmidt on Dec. 28 after a grand jury in Dayton, Ohio, handed down the indictment, per Montgomery County court records. In a civil filing this past September, the SEC had accused Schmidt, 67, of defrauding his mostly older clients out of more than $1.1 million.
Schmidt preyed on “particularly vulnerable” clients, five of whom died during the scam and several of whom were suffering from Alzheimer’s disease or dementia, SEC investigators say. He transferred annuity assets from one group of client accounts to another to hide shortfalls, according to the SEC.
“He had to keep stealing from more investors in order to cover for the thefts from other investors,” Montgomery County Prosecuting Attorney Mat Heck said in a press release.
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Steven Pierson, the attorney representing Schmidt, didn’t respond to requests for comment on the allegations. Wells Fargo Advisors spokeswoman Shea Leordeanu sent an emailed statement when asked about the case.
“At Wells Fargo we hold all advisors to the highest ethical standards,” Leordeanu said in a statement. “We fully cooperated with all regulatory and law enforcement investigations regarding this formerly affiliated advisor.”
SEC staff attorneys received an offer of settlement from Schmidt, but the grand jury charged him with 124 counts of forgery, two counts of theft of more than $150,000 from an elderly or disabled adult, telecommunications fraud and fraud or deceit by an investment advisor.
Wells Fargo fired Schmidt in October 2017 following allegations of “unauthorized money movement” and inaccurate client account statements, according to FINRA BrokerCheck. FINRA barred him the following March after he failed to respond to a request for information.
Former clients accusing Schmidt of absconding with their money and making misrepresentations have received two settlements for a combined $1.7 million, BrokerCheck shows. Another client received $80,000 in a different claim filed in 2007. At least two others have pending arbitration cases.
Schmidt — a former CFP and 35-year industry veteran who ran a Dayton-based practice named Schmidt Investment Strategies and lives in nearby Bellbrook — led an independent FiNet office, the SEC says. The scam fell apart after state insurance regulators launched an investigation in the summer of 2017.
In a Dec. 21 filing in the U.S. District Court in Dayton, the SEC notified Judge Walter Rice that staff attorneys and Schmidt had arrived at a potential settlement they find “acceptable in principle.” The SEC’s enforcement unit and the Commission itself must approve any settlement, however.
The process usually lasts four to six weeks, according to the civil case filing. A spokesman for the regulator declined additional comment when asked for further details on the potential settlement.
Schmidt’s lawyer has filed a request for discovery in Montgomery County Court seeking witnesses, records and other evidence in the case. Deputies arrested and booked him at the county jail, and prosecutors scheduled his arraignment for Jan. 10.