Complaints Against Woodbury Financial Services
Our law firm is investigating complaints against Woodbury Financial Services. If you or someone you know lost money investing with the firm, please call us at 212-203-9300 to speak with an attorney for free. We have experience handing complaints involving non-traded REITs, private investments, promissory notes and investment scams.
Woodbury Financial Services’ Supervisory Failures Cost Investors Millions
When an unauthorized individual impersonated Woodbury Financial Services client Joseph Muff and withdrew a “large sum” from his retirement account, the investor’s estate alleged in a 2018 arbitration claim, Woodbury Financial Services took no action to contact him. The firm attempted to have the claim dismissed by the Financial Industry Regulatory Authority, but was unsuccessful. In August 2021 it was found liable for negligence and supervisory failures, and was ordered to pay an award of $100,000 to Muff’s estate.
In 2018, Woodbury was slapped with a considerably heftier award in a complaint by two customers alleging the firm failed to supervise a broker who engaged in unsuitable short-term trading of real estate and coal investments, and unsuitable A-share mutual fund switches. The broker, Robert Hoffman, was barred by FINRA in 2018 over findings he refused to testify in an investigation into allegations of unsuitable, excessive, and unauthorized trading. A FINRA panel found that Woodbury failed to supervise Hoffman and permitted his execution of unsuitable transactions. The firm was ordered to pay more than $1 million to the claimants.
These are two recent instances of misconduct by Woodbury Financial Services and its representatives. As an examination of the Minnesota-based firm’s history reveals, they are hardly outliers.
Complaint: Woodbury Rep Steals Millions in Ponzi Scheme
St. Louis broker Joshua Gould embezzled millions of dollars from senior citizens and retirees while employed by Woodbury Financial Services, according to federal prosecutors. His victims reportedly included widows, religious groups, and even his own mother, from whom he stole about $500,000. In some cases, he paid investors with funds provided by other investors; in other cases, he spent the funds on credit card bills, home improvements, business ventures, and what prosecutors described as “adult entertainment.” During a sentencing hearing, the St. Louis Post-Dispatch reported, a widow told the court she was consumed by anguish “when she thinks of losing the money that her husband worked his whole life to save, including the money he earned in the last few weeks he worked while battling cancer.”
According to prosecutors, Gould conducted his scheme between May 2007 and December 2010, in conjunction with David Rubin, who operated two local offices of the lender Coral Mortgage Bankers Corporation. One of their victims was a retiree who invested about $1.2 million in funds under the pretense that they would be held in a trust account and used as collateral for Coral’s business operations, with regular interest payments provided to the investor. The funds came from the investor and his wife’s life savings, prosecutors alleged, and only about $250,000 were directed to operating expenses. Rubin allegedly transferred the rest to Gould, who used them for personal expenses and to finance other businesses. Gould and Rubin allegedly concealed their scheme by providing the investor with false account statements.
In other instances, Gould allegedly stole about $3.5 million from other brokerage clients, in part using his role as head of Spetner Associates’ Financial Services Division to encourage clients at Spetner’s insurance agency “to move their investment portfolios and retirement accounts from other brokerages to his management,” then conducted unauthorized transactions in those accounts and transferred the proceeds into his own accounts. “As part of the scheme,” prosecutors alleged, he “falsely represented to his clients that Pacific Mutual Alliance, LLC and Apex Alliance LLC were legitimate investment securities, when they were actually shell companies that he had established and controlled.”
Gould eventually pleaded guilty to wire fraud and mail fraud, receiving a sentence of 97 months in prison and an order to pay $4.3 million in restitution. Woodbury Financial Services was sanctioned by the Missouri Securities Division for its alleged failure to detect Gould’s scheme; it settled with affected customers and paid $150,000 into the state’s Investor Education and Protection Fund.
Second Woodbury Rep Steals Millions in Unrelated Ponzi Scheme
Joshua Gould was not the only ex-Woodbury Financial Services representative to plead guilty to orchestrating a Ponzi scheme. In 2015, the North Dakota Securities Department began investigating a Ponzi scheme operated by broker Kevin D. Wanner over a period of 15 years, while he was affiliated with Questar Capital Corporation and later Woodbury Financial Services. Wanner was eventually charged with mail fraud and money laundering in connection with allegations that he stole more than $3 million from 66 customers. According to the North Dakota Securities Department, his scheme “involved the sale of fictitious brokered time certificates of deposit, and unregistered interests in pooled investment vehicles.”
Wanner pleaded guilty to the charges in 2018, receiving an 11-year sentence. Woodbury agreed to pay more than $596,000 to victims of the scheme, on top of $2.4 million already contributed by Questar. “None of these victims were high rollers,” US Attorney Nicholas Chase said at a sentencing hearing. “They had all lived the American dream as it was preached to all of us.”
FINRA Fines Woodbury Financial Over Annuity Violations
More than 3,800 variable annuity transactions were affected by sweeping supervisory failures at Woodbury Financial Services, according to a 2019 order by the Financial Industry Regulatory Authority. The regulator specifically charged that Woodbury lacked supervisory procedures designed to ensure compliance with securities rules and laws governing the addition of funds to existing annuity investments. As a result, the firm was unable to monitor whether those 3,800 transactions were suitable for the investors, especially with respect to the particular suitability considerations of variable annuity products—which, FINRA observed, are typically long-term, illiquid investments whose premature sales may incur significant costs. Woodbury was censured and ordered to pay a fine of $225,000 for these supervisory failures.
SEC Fines Woodbury Over Mutual Fund Violations
That same year, the Securities and Exchange Commission included Woodbury Financial Services in an action targeting 79 broker-dealer firms over mutual fund fee violations. According to the SEC, Woodbury and other firms sold investors “higher-cost mutual fund share classes when a lower-cost share class was available,” but failed to disclose that they received 12b-1 fees — “recurring fees deducted from the fund’s assets” — from the more expensive investments.
Woodbury Financial Services agreed to pay more than $1 million in disgorgement to customers affected by the undisclosed conflicts of interest. In a statement, SEC enforcement head Stephanie Avakian said: “The federal securities laws impose a fiduciary duty on investment advisers, which means they must act in their clients’ best interest. An adviser’s failure to disclose these types of financial conflicts of interest harms retail investors by unfairly exposing them to fees that chip away at the value of their investments.”