St. Louis Missouri Broker Banned From Securities Sales
Securities industry regulators say a St. Peters stockbroker ran an eight-year
ponzi scheme in which he swindled brokerage customers, fellow church members
and a cousin in order to support a "lavish personal lifestyle" and
$4,000-per-month entertainment bills.
The Financial Industry Regulatory Authority announced Monday that broker
Kenneth George Neely took $600,000 from at least 25 victims, claiming he would
invest it in a fictitious investment club and a nonexistent real estate
investment trust.
Without admitting guilt, Neely last week consented to an order banning him from
the brokerage business. He could not be reached for comment. FINRA officials
said he does not have a lawyer.
FINRA, the self-regulatory arm of the brokerage industry, gave this account of
Neely's activities:
Neely has been a broker since 1987. In 2001, he was working for UBS PaineWebber
Inc. when he fell on hard times amid the collapse of the technology investment
bubble. His income dropped from $150,000 in 2000 to $30,000 in 2002. He was
having trouble paying bills. He ran up some of those debts buying dinners and
drinks for clients and friends at his country club.
"It was during this period of personal financial stress that (Neely) conceived
and effected his ponzi scheme," FINRA said in its order. He invented the "St.
Louis Investment Club" and the equally phony "St. Charles REIT," promising 20
percent returns. He made up investment "certificates" for the club and REIT to
give to clients. His first investor was a cousin who invested $30,000,
expecting returns of up to 10 percent.
Neely portrayed membership in the investment club as exclusive. He told a
retiree, a longtime friend and fellow church member (Neely is a Jehovah's
Witness) that he would tell her when "openings" occurred in the club. "Seven or
eight" other church members invested in the scam, said James Shorris, executive
vice president at FINRA. "In no sense were these sophisticated investors," he
added.
Neely also signed up his brokerage clients, while trying to hide that fact from
his employers, regulators said. FINRA records show that Neely moved from UBS to
Stifel Nicolaus and finally to AXA in Clayton. In all, at least 25 people
eventually invested in the scheme, FINRA said.
A ponzi scheme operates by paying current investors with money from new
investors. Neely returned about $300,000 to clients over time, FINRA said.
Neely spent the other $300,000 on his personal expenses including "his lavish
personal lifestyle, including entertainment expenses at his country club,
sometimes totaling over $4,000 per month," the FINRA order said.
Such schemes depend on a constant flow of new money. By 2007, Neely
"desperately" needed funds to repay investors who were demanding their money,
FINRA said. He convinced a longtime friend to invest $154,000 in the St.
Charles REIT. The friend's daughter invested $10,000.
According to FINRA, the scheme continued until this month, when FINRA
investigators confronted Neely. A spokeswoman for the U.S. Attorney's office in
St. Louis said there are no criminal charges against Neely. The St. Charles
County prosecuting attorney could not be reached.
Neely's disciplinary record shows that UBS paid out more than $240,000 to
settle four cases brought by investors claiming they were placed in unsuitable
investments.
AXA said it discharged Neely the day it learned of the scheme early this month
and said it is investigating the matter.
ponzi scheme in which he swindled brokerage customers, fellow church members
and a cousin in order to support a "lavish personal lifestyle" and
$4,000-per-month entertainment bills.
The Financial Industry Regulatory Authority announced Monday that broker
Kenneth George Neely took $600,000 from at least 25 victims, claiming he would
invest it in a fictitious investment club and a nonexistent real estate
investment trust.
Without admitting guilt, Neely last week consented to an order banning him from
the brokerage business. He could not be reached for comment. FINRA officials
said he does not have a lawyer.
FINRA, the self-regulatory arm of the brokerage industry, gave this account of
Neely's activities:
Neely has been a broker since 1987. In 2001, he was working for UBS PaineWebber
Inc. when he fell on hard times amid the collapse of the technology investment
bubble. His income dropped from $150,000 in 2000 to $30,000 in 2002. He was
having trouble paying bills. He ran up some of those debts buying dinners and
drinks for clients and friends at his country club.
"It was during this period of personal financial stress that (Neely) conceived
and effected his ponzi scheme," FINRA said in its order. He invented the "St.
Louis Investment Club" and the equally phony "St. Charles REIT," promising 20
percent returns. He made up investment "certificates" for the club and REIT to
give to clients. His first investor was a cousin who invested $30,000,
expecting returns of up to 10 percent.
Neely portrayed membership in the investment club as exclusive. He told a
retiree, a longtime friend and fellow church member (Neely is a Jehovah's
Witness) that he would tell her when "openings" occurred in the club. "Seven or
eight" other church members invested in the scam, said James Shorris, executive
vice president at FINRA. "In no sense were these sophisticated investors," he
added.
Neely also signed up his brokerage clients, while trying to hide that fact from
his employers, regulators said. FINRA records show that Neely moved from UBS to
Stifel Nicolaus and finally to AXA in Clayton. In all, at least 25 people
eventually invested in the scheme, FINRA said.
A ponzi scheme operates by paying current investors with money from new
investors. Neely returned about $300,000 to clients over time, FINRA said.
Neely spent the other $300,000 on his personal expenses including "his lavish
personal lifestyle, including entertainment expenses at his country club,
sometimes totaling over $4,000 per month," the FINRA order said.
Such schemes depend on a constant flow of new money. By 2007, Neely
"desperately" needed funds to repay investors who were demanding their money,
FINRA said. He convinced a longtime friend to invest $154,000 in the St.
Charles REIT. The friend's daughter invested $10,000.
According to FINRA, the scheme continued until this month, when FINRA
investigators confronted Neely. A spokeswoman for the U.S. Attorney's office in
St. Louis said there are no criminal charges against Neely. The St. Charles
County prosecuting attorney could not be reached.
Neely's disciplinary record shows that UBS paid out more than $240,000 to
settle four cases brought by investors claiming they were placed in unsuitable
investments.
AXA said it discharged Neely the day it learned of the scheme early this month
and said it is investigating the matter.
