This article was originally published by Financial-Planning.com
A former broker swindled multiple elderly clients of millions to indulge his taste in luxury cars, authorities charged this week.
Jay Costa Kelter, 48, was arrested in Nashville, Tennessee, on Monday, Nov. 13, following the release of a grand jury indictment and an arrest warrant the previous week. Both the SEC and federal prosecutors charged Kelter with multiple counts of fraud.
Among the accusations, Kelter allegedly defrauded an elderly woman of $1.4 million and deposited the funds in accounts associated with Kelter’s company, BEK Consulting, according to the U.S. District Attorney’s Office for the Middle District of Tennessee. His company was dissolved in early 2017.
Court documents describe an alleged scheme that lasted from 2013 to 2016 and involved the Marietta, Georgia-based broker making trades and transfers without his client’s knowledge. He allegedly used some of the money to purchase a Bentley for $101,400. More than half a million dollars was sent to a relative and former client of Kelter’s, according to the indictment. Other transactions include $40,000 spent at Mercedes and Lamborghini dealerships, and $21,060 on custom jewelry.
Prior to 2013, Kelter was registered with Berthel Fisher, a broker-dealer based in Cedar Rapids, Iowa, according to FINRA BrokerCheck records. He was not registered as an investment advisor with a brokerage firm during the period of alleged wrongdoing. In 2001, when Kelter was registered with Securities Service Network, a NASD arbitration panel awarded $346,800 to one of Kelter’s clients for alleged deception, misrepresentation and unsuitable investment recommendations, according to BrokerCheck.
In total, federal prosecutors charged Kelter with five counts of wire fraud, 16 counts of mail fraud and one count of securities fraud. The FBI is investigating the case, and Assistant U.S. Attorney Stephanie Toussaint is prosecuting on behalf of the Middle District of Tennessee.
Kelter’s lawyer, Jim Todd of law firm May, Hagan & Todd, was not available for immediate comment.
The charges carry the possibility of up to 20 years in prison for each count and a $5 million fine.
WIDOW AMONG ALLEGED VICTIMS
A second series of allegations was also levied last week against Kelter in a complaint by the SEC. Both the time period and methods echo the Department of Justice indictment. The SEC claimed that Kelter posed as a representative of TD Ameritrade and convinced three senior clients to open accounts with the discount brokerage, which he then operated without their knowledge.
TD Ameritrade did not return a request for comment.
The SEC said that “Kelter used the misappropriated client funds as his own personal piggy bank.” Alleged activities involved futures and options trading that resulted in the loss of $189,022 for one client. According to the complaint, Kelter promised multiple clients that he would restore lost or stolen funds, in one instance taking money from one client to pay back another. Kelter obtained user names and passwords from each of the clients in order to make trades and transfers without their consent, the SEC charged.
One of Kelter’s clients, a 75-year-old widowed retiree who requested a conservative investment strategy, allegedly lost nearly half of her $3 million investment.
It is not clear from the two sets of charges if the client described in the Justice Department indictment is also represented in the SEC complaint. The SEC statement did, however, extend thanks to the FBI and the U.S. Attorney’s Office for the Middle District of Tennessee for their assistance.