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Home / Articles / News / Cover Story /  White Collar Greed Page 1
Cover Story

White Collar Greed Page 1

Some Utah businessmen say the Utah Division of Securities treats them like common thugs. What’s the problem?

By Eric S. Peterson
Posted // July 30,2008 - “I been reading in the news lately there’s some scandalous behavior out there with these major corporations like Enron,” says Dave Chappelle from a 2004 episode of his Comedy Central show. “They rip everybody off and they don’t be getting no time in jail. It’s like there’s two legal systems, damned near.” Chappelle then plays out a Law & Order parody showing what it would be like for a white-collar criminal to switch places with “Tron” the crack dealer.

A SWAT team bursts into the home of the “Fonecom” CEO. The cops shoot his dog and throw the corporate exec into shackles. Tron, by contrast, gets a polite call from a police detective asking what they can do about a pesky drug-trafficking charge. “We don’t want to make a big deal out of this,” the detective assures Tron. “You’re a cocaine dealer, but you’ve done a lot of good for the community.” At sentencing, the CEO gets life in jail while Tron appears before a committee, pleads the “fif” and gets two months at “Club Fed.”

Utah’s own version of Law & Order—from increasingly tough sex-offender laws to sweeping anti-meth initiatives—has always been about the good guys locking up the bad guys. But when it comes to the Utah Division of Securities (UDS)—the watchdog agency over investment programs and fraud that might grow out of them—some legislators allege the equivalent of police brutality. To hear these lawmakers tell it, the division is running roughshod over the rights of decent and trustworthy entrepreneurs—several of them businessmen who happen to be the lawmakers’ friends and close business associates.

Representatives Jim Bird, R-West Jordan, and Carl Wimmer, R-Herriman, called for a legislative audit of the division, the results of which were released in early July. The audit criticized former UDS Director Wayne Klein (left) for being too involved in cases and alleged that investigators “intimidated” suspected offenders, conducted “secret investigations” and emphasized punishment over compliance.

The uproar raised by targeted securities agents months before the audit’s release forced Klein out of office in March 2008. The division now faces an extreme makeover in the next legislative session. Bird wants to change the way the division brings charges and Wimmer hopes to completely dissolve the agency. From the sidelines, former lead watchdog Klein wonders why the audit blasted the division simply for doing its job.

Auditors specifically mentioned three anonymous cases that Wimmer and Bird brought to their attention. The two lawmakers are deeply familiar with each case. One investigation subject was a former supervisor over Bird, who also happens to be a securities salesman. Another case subject has been confirmed by both Wimmer and the subject himself: Utah County radio talk-show host “Free Capitalist” Rick Koerber claims Wimmer as a former student of his investment school. Koerber is currently under investigation for allegedly defrauding investors through his numerous businesses.

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REPLY TO THIS COMMENT
Posted // September 25,2008 at 12:11 Great article. I predict Bird will eventually be investigated for fraud.

 

REPLY TO THIS COMMENT
Posted // August 8,2008 at 08:47 While I had originally felt it was unnecessary to respond to the comments of Wayne Klein in the City Weekly of July 31st, 2008, I want to be sure that in all of the rhetoric that both sides of the story be fully considered so that we can move forward with Legislative proposals that reflect industry concerns. Hence my comments sent to the editor yesterday....nn nnTo the Editor:nn nnI want to hopefully correct some conclusions your readers may have drawn based on the quotes by Mr. Wayne Klein in your July 31st, 2008 article entitled “White Collar Greed”. Some of his quotes and my rebuttal are as follows:nn nn1-“Teran talks about how wrong it was to be investigated”. What I actually have said is that it was wrong for us to be investigated without our knowledge or for UDS to draw conclusions and file a case without speaking to us. We welcome being “investigated”. We have been audited on share class recommendations (and other issues) by the NASD (now FINRA) in 1999, 2001, 2003, 2005, and 2007 for up to two weeks at a time. The UDS did not contact us at any time prior to their filing.....ever. Had they bothered to ask us first, we would have told them that my client had added diversification, commission discounts for stocks, free mutual fund exchanges and performance that beat the S & P 500 during the period these mutual funds were held. UDS didn’t bother to check how our recommendations actually performed prior to filing a case. Perhaps their filing may have been different had they checked first.nn nn2-“Yet they all consented to orders that they change their practices and offer refunds”. Our clients were dragged into this without having complained to regulators (they didn’t know about the investigation either). We preferred to offer them a refund (some did not accept) after the State agreed to publish an apology for which we were appreciative. The refunds were hundredths of a per cent of the transactions we processed for them. That being said, we welcome regulatory suggestions and want to do better. If there is a problem, we want to fix it.nn nn3-Speaking of the subjects of his investigations he states, “Ok, you got me here’ the money back, do you not arrest him”? Yet later in the article he confesses that when he realized that holding a check violated a statute, he immediately turned it over to the state fund. Why wasn’t he immediately arrested? Is there a double standard for state employees who violate statutes?nn nn4-Speaking of UDS, he says, “You’re not going to be able to anticipate all of the policies you might need”. That’ ironic given that was exactly his position with First Western Advisors since we were being held accountable for actions going as far back as 1994.nn nn5-Klein notes that defendants could always request a hearing officer outside the Department of Commerce. What Klein didn’t note was that the defendant had to pay for an outside judge. So, in addition to paying the extraordinary cost of defense, they gave us the kind offer (sarcasm intended) of paying for the outside judge. I had never in my life heard of such a thing until our experience with the UDS.nn nn6-“Our credibility in the government is that we don’t make allegations that we’re not sure we’re right on”. Perhaps Mr. Klein should make a quick call to Dr. Steven Hatfill, the scientist wrongfully charged with the 2001 anthrax murders, now that Bruce Ivins has committed suicide in anticipation of an indictment. Dr. Hatfill might have some insight into the government’ ability to self assess its cases. Remember, Mr. Klein was to be the Judge of the First Western Advisors...he is basically saying he has rendered a verdict before hearing the case. His assertion that the “government” doesn’t make improper allegations should have been sufficient grounds for his dismissal had he not chosen to resign. It’ Orwellian.nn nnFortunately, Mr. Klein will never hear any other cases because he did resign. If the City Weekly has evidence otherwise (forced out), I am interested to see it. It is also fortunate because rarely have I encountered an individual so unwilling to recognize that we licensed representative are not the enemy of the state. It’ amazing how many times words like “investigation”, “thief”, “jail”, “punish”, “O.J.” , and “cop” (among others) find their way into his lexicon. Perhaps Mr. Klein should add another word to his vocabulary “prejudice”, a word that should never be appropriate in government oversight. We want to do the right thing but we want the same Constitutional protections afforded every citizen, due process, speedy justice, presumption of innocence, interviewing our accusers, et al. We were denied all of these protections in our case.nn nnFinally, I believe that with the help of the Legislature, positive changes will be made at the Division and at First Western Advisors and we look forward to working with the new UDS Director (Keith Woodwell) in making Utah one of the best places in the country for investors and advisors alike.nn nn nn nnGary W. TerannnPresident & CEOnn nnFirst Western Advisorsnn6440 S. Millrock Drive, Suite 150nnHolladay, UT 84121nnPhone: (801) 930-6500nnFax: (801) 930-6501nn nn nnInformation contained herein is gathered from sources deemed reliable but is not guaranteed nor is it intended as a solicitation or an offer to purchases or sell securities mentioned herein. Past performance does not guarantee future results.nn nnNOTICE REGARDING ENTRY OF ORDERS AND INSTRUCTIONS: Please do not transmit orders regarding your First Western Advisors (FWA) account(s) via e-mail. First Western Advisors will not accept orders transmitted by e-mail, and FWA will not be responsible for carrying out such orders and/or instructions. nn nnNOTICE REGARDING PRIVACY AND CONFIDENTIALITY: First Western Advisors has the regulatory responsibility to review incoming and outgoing correspondence of its customers. FWA therefore reserves the right to monitor and review the content of all e-mail communications sent and/or received.nn nnTo opt out of this email at any time, please submit an email request to compliance@fwainvest.com.

 

REPLY TO THIS COMMENT
Posted // August 8,2008 at 06:59 Top ten things hated by left wing liberal journalists:nn1. Godn2. Weak Coffeen3. Ironyn4. the White Collar classn5. the Sunn6. Popular Musicn7. Local Governmentn8. SUV’sn9. Holidaysn10. George Bushnnprevious to this article i thought local government would be closer to the top. but i’m always learning thanks to unbiased, and unprejudiced reporting. (oops i forgot to add sarcasm to the list.)

 

REPLY TO THIS COMMENT
Posted // August 4,2008 at 16:51 A completely objective third party legislative body of the Utah Government.nnSure. And if you believe that, then Rick Koerber has some land to sell you in the west desert - the development boom out there is right around the corner!

 

REPLY TO THIS COMMENT
Posted // August 4,2008 at 14:49 Yes, anonymous, but who wrote the audit? Paid staffers of Curtis, Bird, and Wimmer (and by proxy, paid staffers of the crooks who have those three, plus Shurtleff, in their back pocket)!nnActually it was Tim Osterstock, Susan Verhoef, and David Pulsipher, from the Office of the Legislative Auditor General. A completely objective third party legislative body of the Utah Government. Of course you would have known that had you read the Audit in the first place. nnSure it’s more fun to conjure up notions of conspiracies and corrupt legislators, but maybe in this case, Wimmer, Curtis, and Bird, (despite any political shortcomings) we’re actually dead on right about this one.

 

 
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