Monthly Archives: March 2013

Investigation of NYLIFE Securities, LLC in Connection With Failure to Supervise Ponzi Schemer Richard Schwartz

Blau & Malmfeldt is investigating NYLIFE Securities, LLC (NYLIFE) in connection with its supervision of registered representative Richard Schwartz.

The Kokomo, Indiana-based Schwartz, who was found dead on August 21, 2013 of an apparent suicide, appears to have run a Ponzi scheme in which he convinced his clients to invest the proceeds of liquidated variable annuity policies in real estate.  According to the Indiana Secretary of State’s office, there is no evidence that Schwartz used the proceeds to invest in real estate; instead, Schwartz used the money to maintain a luxurious lifestyle. Schwartz also used some of the money from new investors to pay off interest payments to older clients.

Some of Schwartz’s clients may have included former National Football League players, including Seattle Seahawks quarterback Dave Krieg, who sued Schwartz in an Arizona district court in April. Krieg alleged that Schwartz encouraged him to purchase a $14 million life insurance policy with NYLife in 2011, claiming that the firm would stop selling that particular policy later that year. Schwartz advised Krieg to liquidate two other policies he already held in order to pay for the NYLife policy.

Schwartz was associated with NYLife until April 2012. According to a FINRA report, the firm discharged Schwartz in March after becoming concerned about his business activities. NYLife alleged that Schwartz provided them with incomplete or inaccurate information and that he failed to disclose outside business activities to the firm. According to the local paper in Kokomo, NYLife sued Schwartz in 2012 in an attempt to recover $75,000 in unspecified damages

A lawsuit filed by the Indiana Secretary of State in Howard County Superior Court asks the court to freeze all of Schwartz’s financial accounts, including two life insurance policies held by New York Life totaling $13 million.

“I believe any money left in his estate should go to his victims first,” Indiana Secretary of State Connie Lawson said in a press release.

Schwartz’s business practices garnered attention earlier this year, when a customer dispute was filed against Schwartz claiming that he had mishandled a minor’s guardianship funds and made unauthorized withdrawals from an account established to benefit the minor, resulting in the loss of more than $460,000.

NYLIFE had an obligation to supervise all Schwartz’s outside business activities.  As a result of Schwartz’s previous regulatory and employment problems – Schwartz was fined by the NASD (FINRA’s predecessor) in 2000 and fired by METLIFE Securities in 1998 for violations of firm policies relating to outside business activities – NYLIFE’s supervisory duties were heightened.

It may be possible for Schwartz’s victims to recover their losses by pursuing claims in arbitration against NYLIFE.  Please contact Blau & Malmfeldt at 312-443-160, or email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com for a no-obligation consultation regarding possible recovery options.  Blau & Malmfeldt is a law firm that represents investors throughout the United States in securities, commodity futures, partnership and shareholder rights disputes.