Ex-Wachovia brokers accused of defrauding clients

Two former Wachovia Securities brokers tricked dozens of mostly elderly clients into investing in what were supposed to be can’t-miss opportunities, only to lose roughly $8 million, according to a lawsuit filed by the Securities and Exchange Commission.

The SEC complaint charges William Harrison and Eddie Sawyers of misrepresenting the investment strategies they were selling to at least 42 clients in 2007 and 2008, guaranteeing 35 percent returns while using the money to trade securities in risky online deals.

“Instead of safeguarding their customers’ investments through suitable investments and prudent recommendations, these two brokers crossed the line with a scheme that victimized unsuspecting investors,” said William Hicks, the SEC’s associate regional director for enforcement in its Atlanta office, in a statement.

Harrison, 33, lives in Pilot Mountain, and Sawyers, 45, lives in Mount Airy. A phone message left at Sawyers’ home was not immediately returned Thursday. A message left with Harrison’s lawyer also was not immediately returned. Both men resigned from Wachovia in October, 2008.

The SEC accuses the two of recruiting Wachovia investors to a new business venture they called Harrison/Sawyers Financial Services, which they billed as offering an essentially foolproof investment plan guaranteed to make money regardless of market conditions.

The lawsuit, filed Wednesday in federal court in Charlotte, contends the brokers misrepresented the riskiness of their plans as well as what they were actually doing with clients’ money.

In one case, according to the SEC, Harrison and Sawyers told a husband and wife who had invested $100,000 that their money had “maxed out” by achieving a 35 percent return, when in fact it ultimately lost about $84,000.

“All of the brokerage customers Harrison and Sawyers solicited were unsophisticated investors,” the lawsuit says. Most customers were over 50, and an unspecified number were retired and living on fixed incomes.

The lawsuit contends that the two brokers set up online brokerage accounts in some clients’ names, while pooling the investment money from other clients into accounts set up in the name of Harrison’s wife and in a joint account held by the Harrisons.

The brokers then obtained permission to trade securities using their clients’ personal accounts, designating Harrison’s wife as each client’s agent, the lawsuit says. The SEC argues they did this to conceal their conduct, and that they didn’t notify Wachovia of what they were doing.

The brokers’ investment plans initially made money, according to the SEC, but when the economy began to collapse in 2008, things quickly went sour. In Harrison’s letter of resignation from Wachovia, he “confessed his wrongdoing, stating that he had ‘misdirected’ $6.6 million of his clients’ money,” the lawsuit says.
–Associated Press

Related Topics: Securities and Exchange Commission, Wells Fargo & Co.