The National Association of Securities Dealers, now known as the Financial Industry Regulatory Authority (FINRA), revoked William "Jay" Zubick's license in 2000, just four years after he had filed for Chapter 7 bankruptcy and within months of beginning a multiyear scheme to defraud a close circle of California investors.
Most of the California investment counselor's victims didn't know about the revocation. And the few who did accepted without investigating further Zubick's explanation that any trouble with his license was "a technicality," says Anne Michaels, head of the Monterey County district attorney's civil prosecution unit.
According to a sentencing brief filed by Michaels, Zubick used an elaborate method of "cut and paste" to carry out the fraud. Zubick "went to concerted efforts to create inflated numbers on the computer, print the numbers, cut them out, and paste them over and on top of the actual numbers from the actual investment account statements generated by the online brokerage firms," the brief says.
Zubick kept the scheme going for years by honoring the victims' sporadic requests for disbursements; fabricating investment statements to reflect grossly inflated values; altering actual stationery from brokerages to create the illusion of accounts that didn't exist; fabricating and disseminating K-1 statements to reflect phantom income on which the victims paid taxes; signing and submitting false statements to mortgage lenders in support of certain victims' applications for home loans; working on his own and declining victims' offers to pay for clerical support; and selecting online brokerages, rather than full-service firms, to reduce scrutiny of the accounts.
Here are tips from Michaels to help others from falling victim to the kind of fraud that bilked Zubick's 29 victims of a total of $15.8 million:
Check your broker's history using FINRA's "BrokerCheck." The database can be accessed on FINRA's website and provides information about current and former FINRA-registered firms. It also provides information about individuals who are FINRA-registered or have been registered with FINRA within the past two years. If you can't find any information, the website also offers a toll-free number for consultations during normal business hours.
Check your statements carefully. In Zubick's case, some of the fraudulent statements he issued were clever forgeries, but many did not appear uniform and lacked the mandatory disclosure statements required by law.
Look for relevant information in any statements issued on brokerage accounts. For example, they should identify the name of the issuing broker and the firm's phone number. Some of forgeries Zubick sent to clients showed a brokerage house's logo and trademark but lacked other relevant information.