Stock Fraud: Has This Happened To You?

Jane Auerbach lost almost all her savings and her husband's life insurance. Because she trusted a stock broker.

Auerbach, age 56, moved to the Tampa Bay area around Florida 10 years ago after her husband Neil died at the age of 46 from colon cancer. With two young children to support, she needed to be close to her parents. And she also needed them for financial support.

The Auerbach's were living in New Jersey and they were happy with their broker, but he retired after 30 years with Prudential Securities. "After my broker retired, the individual who took his place changed my former conservative portfolio into one of mainly high tech and high risk securities," Jane Auerbach says. The family was financially secure with their previous broker and he had made a substantial amount of money for them. Unfortunately, even though he had integrity, their previous broker didn't judge the new broker "Chuck" too well. It was upon the old broker's recommendation that they turned their account over to Chuck.

"I would call myself an ignorant consumer who depended upon an expert, "says Auerbach.

By this time Jane Auerbach was widowed and had moved to Florida with her two small kids, ages 5 and 7. "The thing that makes it bad for me is that my kids and I relied on that money to get us through," says Auerbach. She got a job as a social worker but it is contract work and the pay isn't great. It is ironic that the motto of her profession is "Stand Up For Others".

"My husband had left us his life insurance. And some of the stocks that cost $20,000 sold at $2. All his life insurance is gone," says Auerbach.

"I talked to Chuck and he encouraged me -- I knew nothing about the stock market," says Auerbach. "This was in 1999 when people went online and I did the same; I looked at the stocks and saw them going up -- I was happy. Although some were going down Chuck said they would all go up. "I phoned him and said I was worried but he said don't be and that I didn't have a good understanding of what was happening." She felt victimized and exploited. "He condescended to me, made me feel that I asked stupid questions."

Chuck was making a lot of transactions on her account and charging her for each one. In fact he was making more money in transactions while Auerbach was losing money.

Auerbach started paying attention to her monthly statements and she was alarmed at the amount of money she was losing. So she talked to a neighbor and found a local broker. Cynthia Parris, branch manager of Brookstreet Securities Corporation in Seminole, Florida, put Auerbach into guaranteed annuities - a safe portfolio for a widow with two kids.

"Chuck took her money and played it as if he went to Vegas and played the tables to get the tax losses," says Parris.

Parris believes that "fraud happened to this woman." Neil Auerbach had invested conservatively, such as bonds and utilities stocks, AT&T and Treasury Bills. When Neil passed away, "Chuck told me that he would invest for me like he would invest for his own mother," says Auerbach. "Chuck just kept defending his positions and said they were very safe. Almost every one of [the stocks] has gone bankrupt."

All Auerbach's prior positions were being liquidated and reinvested in mainly technology stocks. "He started doing this in 1998 and continued until I met her in 2001," says Parris.

How can he continue to work at Prudential? "I have no clue," says Parris. "I am saddened; the only thing I can say is that nobody is managing [Chuck] because he is not applying client risk tolerance with investments... Our basic rule that we as brokers live by, is 'know your client'. The National Association of Security Dealers (NASD) takes this very seriously."

Auerbach's account shrank from $110,000 to $20,000. "I think the poor woman deserves financial settlement," says Parris. "Chuck had inappropriate positioning and lack of concern for the client's well-being. You don't put a middle-aged woman with two kids to raise and someone with zero knowledge into tech stocks. This woman would not be in any of these investments by a normal broker."

She further adds: "I think this guy should have charges filed against him and his branch manager; try to get it resolved before it goes to arbitration, but if the firm feels that their broker did no wrong, then go to arbitration."

Jane Auerbach hasn't called Prudential. "There are only so many battles you can fight - I haven't phoned because right now I am just trying to keep my head above water. You get afraid, don't want to make complaints. There is a pervasive feeling of shame. Plus it took a long time to get over the death of my husband," she says.

In a telephone interview Chuck says, "I have no idea who she is and I have no comment." He then hung the phone up, without a goodbye. Perhaps Chuck should get a call from an attorney sometime soon, before he uses someone else's money like he did Jane Auerbach's savings.