FBI Arrests Ex-Ameriprise Advisor for Fraud, Arbitrators Order Morgan Stanley Felon to Pay Firm $6 Mln
(Updated with comment from Ameriprise in the sixth paragraph.)
It’s been a bad week for former advisors accused of major client fraud.
The FBI arrested a former Ameriprise broker in Los Angeles on charges of federal fraud and money laundering in a scheme that cost clients at least $2 million and Morgan Stanley filed a claim for at least $6 million from a former New Jersey broker it fired 15 months ago for stealing client money.
The U.S. Attorney’s office in the Central District of California said on Wednesday that authorities arrested Li Lin Hsu on charges of stealing from 11 of her former Ameriprise clients while employed at the firm and after she was fired in 2015. She allegedly took money from the clients, whom she found through ads in Chinese language newspapers, and used it to pay credit card bills and personal loans and to buy real estate and luxury items.
Hsu, accused of applying $1 million from one victim to buy a condominium in Diamond Bar, California, faces three counts of mail fraud, three counts of wire fraud, one count of money laundering and one count of obstruction of justice, according to the release.
She pleaded not guilty and was released on $50,000 bond, federal authorities said. She will stand trial on June 12 and faces a maximum sentence of 20 years on each fraud count, 10 years on money laundering and five years for obstruction of justice if convicted.
Hsu, who in September was ordered by a Finra arbitration panel to pay Ameriprise $675,000 to cover the cost of a settlement it made with one of her clients, could not immediately be reached for comment. A spokeswoman for Ameriprise said the firm was not aware of the U.S. Attorney’s Office action and is not facing any regulatory questions related to its supervision of Hsu.
Another Finra arbitration panel on Thursday ruled that Barry F. Connell is liable to pay Morgan Stanley $6 million in compensatory damages related to his February 2017 arrest for stealing $5 million from clients. Last November, another arbitration panel ordered the broker to pay the firm the $300,000 balance on promissory notes he owed plus interest on signing bonuses.
Connell, who represented himself in both Finra hearings, was suspended from the securities industry definitely by Finra for failing to pay the arbitration award.
In the most recent proceeding, arbitrators in Newark denied Morgan Stanley’s request for punitive damages and attorneys’ fees, but assessed him $2,500 to reimburse the firm’s arbitration filing fee.
Hsu, who allegedly carried out a Ponzi scheme to use new victims’ money to repay other clients and sent clients fabricated account statements and investment purchase confirmations, was barred from the securities industry in February 20126. She had spent her nine-year career as a broker with Ameriprise.
The firm fired her in March 2015.