Barred broker charged with embezzling $287K of client funds

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This article was originally published by Financial-Planning.com

A barred advisor defrauded a client out of $287,000 in a high-risk international casino investment scheme, according to federal prosecutors.

James Unger, 51, was charged in federal court with two counts of wire fraud and five counts of filing false tax returns, according to the U.S. Attorney’s Office for Northern District of Ohio. Unger used the stolen funds to pay for his daughter’s college expenses and to reimburse other clients, prosecutors said.

After gaining control over his client’s financial affairs through a durable power of attorney in 2007, Unger convinced her to invest in an international casino project by promising that the investment was not only lucrative but extremely safe, according to prosecutors.

Unger, who resides in Shaker Heights, Ohio, even gave the client, known as “E.C.” in court filings, a number of promissory notes guaranteeing a 15% yearly rate of return, according to court documents.

In reality, Unger used funds E.C. provided for other purposes; for example, in 2012 he wired money from her account to pay another client of his, prosecutors said.

By the time E.C. decided to pull her money out in 2014, she falsely believed her investment, including earnings, totaled $1.9 million. However, all of her funds were lost, according to authorities.

An attorney for Unger, Carolyn Kucharski, declined to comment on the case.

In addition to wire fraud, Unger is also facing charges for filings false tax returns, since he allegedly failed to report the illegal income he gained from client funds, according to the court documents.

Most recently, Unger was registered with Financial America Securities in Cleveland as of June 2014, according to FINRA BrokerCheck records.

Unger was barred by FINRA in 2014, per BrokerCheck. Unger borrowed at least $219,000 from a customer without his member firm’s approval, according to a disclosure filed with FINRA. Additionally, Unger made false statements on annual compliance questionnaires and even used blank, pre-signed forms to make ongoing distributions from the client accounts without generating new paperwork, FINRA says.

Unger neither admitted nor denied the FINRA findings, per BrokerCheck.