Meyer Wilson is investigating potential unauthorized trading claims against former broker Jeffrey T. Kluge (CRD# 2187964).
Kluge’s broker career consists of a single 25-year registration with Merrill Lynch. He was suspended as a broker in April 2017 by the Financial Industry Regulatory Authority, or FINRA, for allegedly failing to respond to a FINRA request for information.
Kluge recently pleaded guilty to two counts of felony bank fraud in a federal criminal proceeding. He was accused of running a scheme that resulted in $8.7 million in losses for two Minnesota commercial banks.
The scheme began in 2001, when Kluge fraudulently obtained a line of credit from Alliance Bank. As collateral, he pledged certain shares in municipal bond funds that were already pledged for loans Kluge had obtained from Merrill Lynch. Kluge used falsified account statements to substantiate these bond holdings to Alliance Bank.
Kluge ran a similar scheme in 2007 against Platinum Bank. This time, Kluge submitted falsified account statements to the bank using a phony email address and a fabricated Merrill Lynch employee identity.
The federal plea agreement requires Kluge to pay nearly $8.7 million in restitution, $250,000 in fines, and to serve up to six and a half years in prison.
In November 2016, Kluge was the subject of two civil actions in a Minnesota state court brought by plaintiffs raising claims of fraud, breach of contract, and claim and delivery. He was also subject to two preliminary attachment orders linked to allegations of intentional fraud and improper disposition of property.
According to Kluge’s FINRA BrokerCheck Report, Kluge faced his first reported customer dispute in April 2009. The customer took issue with Kluge’s sale of an auction rate security made just before the market for such securities suffered unprecedented illiquidity. This dispute was resolved when Kluge’s firm repurchased the securities at issue at a cost of over $2.1 million.
More recently, Kluge was implicated in five customer disputes filed in November 2016 that accused him of unauthorized trading conducted in October 2016. All five of these unauthorized trading disputes were resolved in December 2016 for over $40,000 each.
Unauthorized trading can leave investors bearing financial risks they never intended to accept. Those risks can result in losses for the investor. For non-discretionary accounts, brokers are required to first get the investor’s authorization before making any trades on their portfolio.
Unfortunately, not all brokers follow that rule. The opportunity to make a commission on the trade may be too much temptation for some less scrupulous brokers.
Investors who’ve lost money to unauthorized trading are in a position to hold the broker responsible for that loss. Claims of unauthorized trading are typically handled through FINRA arbitration.
If you suspect you may be the victim of unauthorized trading, contact Meyer Wilson for a free consultation. Our attorneys have helped hundreds of clients recover millions of dollars lost to investment fraud. Call us at our toll-free number, or fill out our online request form.