Working The SEC System From Prison
May 1, 2015
You had your day in court. You lost. You didn't plead guilty to the criminal charges but chose to throw the dice at trial. Unfortunately, a jury convicted you. Now imagine that you were in the brokerage or investment advisory business and the underlying crimes involved frauds involving your advisory role and financial institutions. How difficult do you think it would be for the Securities and Exchange Commission to bar you from the biz? How long a process do you think would be involved? Today's BrokeAndBroker.com Blog might surprise you.
From 1999 through August 2013, David R. Wulf was registered with Moloney Securities Company, Inc., which was both a broker-dealer and an SEC-only registered investment adviser. Starting in 1986 and running through August 2013, Wulf was also the Chief Executive Officer and an advisory representative for Wulf Bates & Murphy, Inc. In addition to the above affiliations, Wulf was registered in additional broker-dealer and/or investment adviser capacities with four other firms from 1978 through 1986.
B. RESPONDENT'S CRIMINAL CONVICTION
1. On August 22, 2013, a federal jury found Wulf guilty of eighteen counts of mail fraud, wire fraud, conspiracy to commit mail fraud affecting a financial institution, and conspiracy to commit wire fraud affecting a financial institution in violation of 18 U.S.C. §§ 1343, 1344, and 1349 before the United States District Court for the Eastern District of Missouri in U.S. v. Sutton et al., Case No. 4:09-cr-00509-JCH-6.
2. Wulf's conviction arose from his role as an investment adviser for National Prearranged Services, Inc. ("National Prearranged") through Wulf Bates. National Prearranged was in the business of selling contracts for prearranged funeral services. As National Prearranged's designated investment adviser, Wulf established trusts for these prearranged funeral services and maintained certain authority over the assets maintained in these trusts. The trustees were financial institutions and/or insurance companies.
3. The indictment against Wulf alleged, inter alia, that from approximately some time before 1992 and continuing until on or about May 14, 2008, Wulf conspired with his codefendants and others regarding a scheme to defraud purchasers and trustees of National Prearranged's contracts and trusts. Moreover, Wulf was Chief Executive Officer of a registered investment adviser and associated with a dually registered broker-dealer and investment adviser during the period of his misconduct. The underlying conduct that gave rise to Wulf's conviction includes, but is not limited to: (i) Wulf's failure to serve as an independent investment adviser for National Prearranged as mandated under state law and a binding consent decree; and (ii) Wulf enabling National Prearranged, and related entities and individuals, to assume the full power to administer, manage, control, remove, and/or use the assets in the preneed funeral trusts established by National Prearranged for their own benefit. Consequently, Wulf knowingly allowed nearly $600,000,000 of the money invested by purchasers to be misdirected for the use by National Prearranged, and related entities and individuals, for their own benefit. The indictment further alleged that Wulf and his co-defendants committed various federal offenses incidental to the misconduct described above including, but not limited to, conspiracy, mail fraud and wire fraud.
4. On November 18, 2013, the Court entered the judgment against Wulf based on the jury verdict. The Court sentenced Wulf to a prison term of 120 months followed by five years of supervised release. The Court further ordered Wulf to make restitution in the amount of $435,515,234.
[A]lthough a guilty plea constitutes an admission of the facts alleged in an indictment, see United States v. Broce, 488 U.S. 563, 569-70 (1989), United States v. Vong, 171 F.3d 648, 654 (8th Cir. 1999), a general jury verdict of guilt establishes only those "issues which were essential to the verdict," Emich Motors Corp. v. Gen. Motors Corp., 340 U.S. 558, 569 (1951). Consistent with the foregoing, the Commission has held that a jury verdict does not establish the facts alleged in an indictment. Gary L. McDuff, Exchange Act Release No. 74803, 2015 WL 1873119, at *3 (Apr. 23, 2015).Given the degree to which to Division relies on Mr. Wulf's second superseding indictment, the Division's motion for summary disposition is DENIED without prejudice to renewal by May 11, 2015. If the Division renews its motion, it may supplement its motion with additional evidence, including the transcript of Mr. Wulf's sentencing hearing and the district court's explanation for the sentence it imposed. The deadline for Mr. Wulf to file an opposition to the Division's motion is extended to May 26, 2015. If Mr. Wulf files an opposition, the Division may file a reply by June 8, 2015.In the event the Division foregoes the opportunity to renew its motion, a hearing will be held in this matter on June 8, 2015, in Washington, D.C. . . .
- In the Matter of David R. Wulf (Order Instituting Administrative Proceedings and Notice of Hearing, '34 Act Rel. No. 74207; Investment Adv. Act Release No. 4020; Admin. Proc. File No. File No. 3-16374 / February 4, 2015
- In the Matter of David R. Wulf (Order Scheduling Hearing, Admin Proc. Ruling Rel. No. 2289; Admin. Proc. File No. File No. 3-16374 / February 6, 2015)
- In the Matter of David R. Wulf (Order Postponing Hearing and Scheduling Prehearing Conference, Admin Proc. Ruling Rel. No. 2325; Admin. Proc. File No. File No. 3-16374 / February 18, 2015)
- In the Matter of David R. Wulf (Order Following Prehearing Conference, Admin Proc. Ruling Rel. No. 2396; Admin. Proc. File No. File No. 3-16374 / March 10, 2015).
- In the Matter of David R. Wulf (Order Denying Without Prejudice The Division's Motion For Summary Disposition, Admin Proc. Ruling Rel. No. 2590; Admin. Proc. File No. File No. 3-16374 / April 27, 2015)