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Curbing broker fraud
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May 22, 1997: 1:58 p.m. ET
Justice Dept. has recently charged 17 brokers in ongoing crackdown
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WASHINGTON (CNNfn) - In an effort to highlight the government's ongoing campaign against stock broker fraud, the Justice Department announced Thursday that in recent months charges have been filed against 17 "rogue" brokers in 10 states.
The charges are described as "the second wave" of prosecutions to come from a joint initiative by the Justice Department and Securities and Exchange Commission launched in 1995.
Attorney General Janet Reno said the defendants had "cheated the elderly, the retired, the disabled, and the unwary."
Reno said the investment advisers stand accused of forging investor checks, making unauthorized transfers of client funds, or using false or fictitious account statements.
Officials said separate actions will occur later Thursday against four of the 17 rogue brokers. In Tampa, one man will be arraigned and two others will plead guilty, while in Miami one broker will be sentenced.
"Brokers may have gotten away with these crimes with little punishment before. Those days are over. If you prey on unsuspecting Americans, you're going to answer for your crimes," Reno said.
Officials say one in three U.S. households now owns securities, compared with one in 17 households in 1980.
"It's not surprising that with the tremendous success of the markets in the last few years and the influx of capital that this has presented new opportunities for abuse," said William McLucas, the SEC's director of enforcement.
"Criminals as you know, always tend to follow the money and we tend to not be too far behind the criminals," he said, adding that these prosecutions are "good news for the markets and good news for investors."
He warned investors to beware of brokers who "churn" accounts or make excessive trades in order to produce commission income.
The SEC official told investors, "Know your broker, know who you are dealing with, never buy something as a result of a cold call, a high pressure sale. And when the pitch sounds too good to be true that's an indication it likely is."
McLucas also expressed concern about the growing threat to investors from the Internet. He said investors who would have the common sense to say "no" to people who approach them on the street can fall victim to the same pitches from strangers on the Internet.
"Sitting at home in the den, looking at the Internet and observing what purports to be a tremendous investment opportunity that's dressed up with some legalese, people will take out their checkbook, write a check and put it in the mail," McLucas said. 
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