Victims want Morgan Stanley to answer for ex-financial advisor's Ponzi scheme

A erstwhile Morgan Stanley fiscal advisor has been sentenced to much than 7 years successful situation aft admitting helium ran a $7 cardinal Ponzi strategy astatine the steadfast for much than a decade.

But adjacent though the scam targeted Morgan Stanley clients and the advisor admitted utilizing a Morgan Stanley merchandise to transportation it out, the steadfast has fought efforts to clasp it responsible.

Victims accidental not lone has Morgan Stanley resisted their efforts to retrieve wealth from the firm, it is besides continuing to clasp them liable for lines of recognition that the advisor fraudulently convinced them to open. Morgan Stanley is America's sixth-largest brokerage firm, with much than $1.3 trillion nether management. The steadfast made $11 cardinal successful profits past year.

"I tin liken the full process to being assaulted successful a backmost alley portion you're connected mind-altering drugs similar roofies," said Caitlin Andrews, 43, of Carolina Beach, North Carolina, a azygous parent of 2 boys who mislaid $1.7 million, oregon virtually her full nett worth. "And past 1 time you aftermath up successful the constabulary presumption and you person to ticker the video again and again and spell implicit slope statements of erstwhile things happened and perceive to telephone calls again and again. It's traumatizing."

The advisor, Shawn Edward Good, was a vice president successful Morgan Stanley's Wilmington, North Carolina, bureau from 2012 until aboriginal past year, erstwhile helium was abruptly fired aft the scam came to light. Last September, helium pleaded blameworthy successful national tribunal to 1 number of wealth laundering and 1 number of ligament fraud.

Prosecutors said that Good, 56, conned astatine slightest a twelve clients into paying him much than $7.24 cardinal that they thought was going toward "low risk" investments. Good instructed them to get against their portfolios utilizing a Morgan Stanley merchandise known arsenic a Liquidity Access Line of Credit, transportation the wealth to him and helium would instrumentality attraction of the rest.

"Access the currency you request to money your goals, with the spot of Morgan Stanley down you," says a firm video touting the Liquidity Access Line of Credit.

But alternatively of investing the funds arsenic promised, Good spent the wealth connected homes, luxury cars, European vacations and payments to aggregate women. Investigators recovered physics wealth transfers with memo lines specified arsenic "Hotel for Destiny," "because youre [sic] sexy" and "Nailz." By the clip the scam came to airy successful 2022, helium had racked up $800,000 successful recognition paper bills, according to tribunal filings.

"Shawn Good spent that wealth to prop up a lavish lifestyle," Michael F. Easley Jr., U.S. lawyer for the Eastern District of North Carolina, said successful an interview. "It was a hallmark of idiosyncratic who each azygous time of their beingness chose greed implicit good."

The usage of the Morgan Stanley lines of recognition gave the transfers an aerial of legitimacy.

"So, effectively, Morgan Stanley is lending wealth to the victims of this strategy and that wealth past gets diverted into Shawn Good's pocket," Easley said.

But it besides meant that portion they were unwittingly backing Good's scam, the victims besides were connected the hook for involvement to Morgan Stanley for arsenic overmuch arsenic $2,000 per month.

"Shawn Good convinced them helium would get capable instrumentality that helium could marque wealth and wage backmost his liquidity entree indebtedness main and involvement and inactive travel retired ahead," Easley said. "That didn't happen."

Prosecutors said that successful summation to the wealth helium spent connected himself, Good utilized immoderate of it to wage different investors, successful a classical Ponzi scheme.

On May 24, a national justice successful Raleigh sentenced Good to 87 months successful situation and ordered him to wage much than $3.6 cardinal successful restitution. It's not astir capable to marque the victims whole, prosecutors and victims said. And due to the fact that of the quality of the scam, overmuch of the wealth Good pilfered is agelong gone.

That is wherever Morgan Stanley comes in. Some of Good's clients filed arbitration claims against the steadfast — modular relationship agreements barroom brokerage customers from suing successful court. The victims alleged that the steadfast failed to reasonably supervise its employee.

"I deliberation immoderate different brokerage steadfast would person detected this activity," said lawyer Marc Fitapelli of New York, who represents Andrews and her mother. Andrews' parent besides mislaid everything she had, astir $1 million.

The arbitration process, nether the auspices of the Financial Industry Regulatory Authority, is confidential. While the steadfast settled with astatine slightest 1 lawsuit nether undisclosed terms, Fitapelli said Morgan Stanley has pushed backmost against claims that it was someway liable for Good's actions. And respective of Good's victims said the steadfast is inactive holding them to their lines of credit, and it is inactive charging them interest.

One victim, Charles Hayward of Wilmington, said that means helium has nary prime but to support his relationship astatine Morgan Stanley to this day.

"It's atrocious hard to wage that indebtedness disconnected to determination my wealth away, oregon I conscionable springiness them each my wealth and past determination whatever's near away," helium said.

According to a tribunal filing, Hayward mislaid $150,000 successful the scam.

Morgan Stanley, which topped net expectations Tuesday acknowledgment successful ample portion to its wealthiness absorption business, declined an interrogation request. In a statement, a spokesperson for the steadfast said: "After discovering Mr. Good's fraud, helium was promptly terminated from Morgan Stanley. We person and volition proceed to cooperate afloat with instrumentality enforcement and different authorities and to enactment with counsel for Morgan Stanley clients to code their claims."

It wasn't Morgan Stanley that discovered Good's fraud, according to aggregate instrumentality enforcement sources. These sources said that national and authorities investigators successful North Carolina, who were looking into Good's finances, began contacting his clients aboriginal past year. One of those customers was the archetypal to alert the firm. Only aft Good refused to beryllium interviewed by investigators did Morgan Stanley occurrence him.

Caitlin Andrews said she began investing with Good successful 2014, opening her Morgan Stanley relationship with astir $1.7 cardinal from a divorcement settlement. She said that she saw nary crushed not to spot him. Good was already handling her mother's investments, and earlier that helium had worked with her grandmother.

"He conscionable seemed truly invested successful our family," she said. "He conscionable seemed precise trustworthy and friendly."

But much important than each of that, she said, was that helium worked for Morgan Stanley.

"Morgan Stanley does the homework astir who they hire," she said. "And helium isn't conscionable immoderate feline connected a thoroughfare country with a sign."

Andrews said that she stressed to Good from the outset that the wealth was everything that she had. As a azygous mother, her earning powerfulness was limited.

"It's what I lived disconnected of, it's what I paid groceries disconnected of, it's what I paid my owe disconnected of," she said, explaining what she told Good. "It was my sons' assemblage education, it was wellness insurance, it was everything."

Eventually, she said, Good pitched her connected a program that would let her to leverage her holdings to put successful an Airbnb successful her beach-side community, earning her other income with minimal risk.

"I've got a precocious yield, debased hazard enslaved that pays retired each 3 months. So, successful 3 months, you're going to get $15,000 and that would beryllium large for this bathroom," she said helium told her. "And past successful the adjacent 3 months, $15,000 volition beryllium large for, you know, that room upgrade."

Good would put for the purchases done her Liquidity Access Line of Credit. What she said she had not understood, arsenic a novice investor, was that the funds for the bonds were going from her enactment of recognition into Good's idiosyncratic account.

It wasn't until aboriginal past twelvemonth that she had immoderate thought thing was wrong. That's erstwhile investigators from the IRS and the North Carolina State Bureau of Investigators contacted her astir the wealth transfers from her brokerage relationship to Good.

"I retrieve 1 of the women was truly nice, and she said, 'Do you cognize that you are missing X magnitude of money?'" Andrews recalled. "And I said, 'No, I'm not.'"

She said she past pulled up her relationship connected her phone, and it showed her holdings were inactive there. But past the cause instructed her to scroll down to the conception astir her enactment of credit.

"If you spell down to however overmuch I owed, no, I didn't person immoderate money," Andrews said. At that point, the cause started crying, she said. "And I knew that erstwhile the instrumentality enforcement cause starts crying connected your behalf, that things are truly bad."

Filled with adrenaline and confusion, Andrews said she decided to face Good and grounds the full thing. The telephone conversations would yet go portion of the tribunal record.

"How bash we cognize it's not a Ponzi scheme?" she is heard asking Good connected Feb. 2, 2022.

"It's not! I mean, I mean, the money's there. It's coming back. It's not," helium said.

"OK, and I'm going to spot you due to the fact that you enactment astatine Morgan Stanley. And you should cognize these things," Andrews replied.

But by this point, Good was nary longer touting his Morgan Stanley credentials. That became adjacent clearer successful Andrews' 2nd telephone telephone to Good a week later.

"I privation my money. And I privation it successful my hands," Andrews told Good connected Feb. 9, 2002. "I person 2 boys. I americium their lone parent. This is each of my money. And you took it!"

"And you person it all, Caitlin. You person it all, we volition get it each transferred back," Good replied.

But, helium said, "If they spell to Morgan Stanley, they volition occurrence me. I mean, I volition suffer my job."

On the recordings, Good tin beryllium heard telling Andrews that going to the firm, oregon adjacent contacting an attorney, would "hamstring" his efforts to get her wealth back. And successful the recordings helium is heard instructing her to correspond with him utilizing a backstage email code and not his Morgan Stanley account.

Good's efforts to fell his scam from Morgan Stanley bash not absolve the firm, said Louis Straney, a 43-year seasoned of the securities manufacture who consults successful arbitration cases but isn't progressive with this one.

"They should person detected it and prevented it astatine the outset," said Straney, the laminitis and managing spouse astatine Arbitration Insight successful Santa Fe, New Mexico. "They should person been much proactive. Because the reddish flags, the alerts were there."

According to tribunal filings, Good's cars included a 2010 Lexus RX350, a 1997 Porsche Boxster, a 2019 Tesla Model 3 and a 2018 Alfa Romeo Stelvio. His question destinations included France, Italy, Spain, and the Netherlands. Straney said Good's manner unsocial should person been a dormant giveaway.

"As a supervisor, you're looking astatine the advisors that enactment for you and determining whether oregon not their manner matches their income," helium said. "I managed immoderate of the champion and largest producers astatine my firm, and nary of them had a manner that matched this, not one."

The information that virtually each of Good's clients had opened lines of recognition and they were actively utilizing them was a 2nd reddish flag.

"You truly person to warrant wherefore they're borrowing," Straney said.

It was besides not the archetypal clip that employees went down Morgan Stanley's backmost utilizing unofficial channels, and the steadfast failed to notice. 

Last year, the steadfast paid a $125 cardinal good to the Securities and Exchange Commission aft admitting to the "widespread and longstanding nonaccomplishment of Morgan Stanley employees passim the firm" to travel rules prohibiting "off-channel communications" connected idiosyncratic devices and messaging apps arsenic acold backmost arsenic 2018, pursuing an probe that began successful 2021.

Morgan Stanley was among 16 firms charged, each admitting they violated national securities laws. Specifically, the SEC said that communicating extracurricular of authoritative channels violates recordkeeping provisions of the law, thwarting the agency's quality to defender against fraud.

Fitapelli said that meant the steadfast was already connected announcement astir the aforesaid benignant of behaviour Good was engaging in.

"The enactment that they're being fined for is precisely what happened," helium said. "And, so, the harm is foreseeable."

Caitlin Andrews was Good's biggest victim, according to tribunal filings.

She said the fraud upended her life. She was forced to determination with her boys into the cottage, inactive nether construction, that she had been readying to crook into an Airbnb. With nary wealth to wage her contractors, she is trying to bash the operation by herself, spot by bit. The household has nary wellness security and with nary wealth for kid care, she can't enactment a full-time job.

"The accent connected maine is understandable. But what I hatred is the magnitude of accent connected my kids," she said. "I effort to beryllium strong. I deliberation I americium strong, and I effort to speech astir it, not screen it up, but astatine slightest not fto it bleed into everything. But the children cognize precisely what's happening and however their beingness has changed."

Andrews said that astatine 1 point, she adjacent considered suicide, and was saved lone by her emotion for her children, arsenic good arsenic a therapist who insisted connected treating her for free.

"You're conscionable successful this acheronian void of bare abandonment, due to the fact that you're abandoned by your fiscal advisor who took everything. You're abandoned by the steadfast whose committedness is to assistance you," she said.

At his sentencing proceeding successful May, a disheveled-looking Good said "there's nary excuse" for what helium did, and that "the guilt and remorse is overwhelming."

Several of his victims spoke astatine the sentencing, arsenic well, each describing however Good stole not lone their wealth but besides their trust.

"He took my boys retired for crystal pick portion helium was stealing their assemblage funds," Andrews told the judge.

Not successful court, nor anyplace adjacent it, was anyone from Morgan Stanley.

If you oregon idiosyncratic you cognize is successful crisis, telephone 988 to scope the Suicide and Crisis Lifeline.