In November 2004, long before Bernie Madoff was a household name, financial planner Bonnie Kirchner was stunned to learn that her husband, financial advisor Brad Bleidt, had been running a $32.6 million Ponzi scheme. He's now serving an 11-year sentence in federal prison for stealing from more than 100 Boston-area clients. In this excerpt from her new book, Who Can You Trust With Your Money? Get the Help You Need Now and Avoid Dishonest Advisors, Kirchner explains how Bleidt's clients were duped.
Brad ran a financial advisory firm, through which I had my own practice, and one morning, the receptionist handed me a package with Brad’s handwriting. I found a small recording device inside, hit play, and heard Brad’s voice.
“Hello, Bonnie, it’s me. Tragic, tragic news: I am guilty of some very hideous crimes. I’ve been stealing clients’ monies for roughly 20 years. And we’re talking about tens and tens of millions of dollars. Obviously, the monthly statements I was generating are fraudulent. It’s a great big Ponzi scheme.”
Brad had a cult-like leader effect, especially among the local Masonic groups. His victims included college professors, artists, attorneys, business people, and even his mother.
Although I wasn’t technically one of Brad’s scam victims, his antics cost me a small fortune. Since I had been saving in a joint brokerage account, the government felt half of the money belonged to Brad and took it.In addition, there were enormous legal bills and some of my assets were seized.
- Red Flag 1: Brad prepared monthly performance statements for his clients that made him appear to be delivering consistent, reasonable returns — even when the market was not performing well.
- Red Flag 2: As far as I know, Brad’s clients did not receive trading confirmations, showing how many shares were bought or sold, their prices, and commissions or fees.
- Red Flag 3: According to Brad’s confessional tapes, he had customers make checks payable to his own firm, “Allocation Plus Asset Management Corp.” But brokers aren’t typically allowed to accept client checks payable to them or their firms. Rather, client checks are usually made payable to the custodial firm that provides the SIPC (Securities Investor Protection Corp.) insurance, which works to return customers’ money if their brokerage firms go under.
- Ask how the advisor earned consistent returns during market volatility.
- Inquire why you haven’t received itemized trading confirmations.
- Don’t make your checks out to your planner’s firm; instead, make sure the custodian of your investments is a separate entity and ask for information about the firm’s auditor. Verify with SIPC that the firm receiving your checks is a SIPC member.
How could I not have known what Brad was doing? After all, I was a financial advisor and a financial reporter for a Boston TV station.
One reason is that I had my clients, and Brad had his. Brad kept his demons locked up in special filing cabinets in his office, undiscovered by anyone, including the SEC. Perhaps I should have probed more, but our marriage was falling apart over more important things than money.
Three Red Flags
In hindsight, there were three red flags that clients missed:
How to Avoid Getting Taken
If you spot any of those red flags with your advisor, investigate:
Should you suspect your advisor is scamming you, file a complaint with the Financial Industry Regulatory Authority at finra.org or by calling (301) 590-6500.
From Who Can You Trust With Your Money? Get the Help You Need Now and Avoid Dishonest Advisors by Bonnie Kirchner. Copyright © 2010 by Pearson Education, Inc. Reprinted by permission of FT Press, an imprint of Pearson Education.
More on MoneyWatch: