Securities News Releases
Wednesday, June 25, 2014
Contact: Kevin Flannery, (573) 526-0949
Kander Recovers $2 Million for Defrauded Investors
Action Holds Investment Firm Accountable for Negligent Supervision
Jefferson City, Mo. — Secretary of State Jason Kander today fined and censured Woodbury Financial Services, Inc., holding the Minnesota-based investment firm accountable for negligent supervision of a rogue employee who mishandled over $2 million of client funds.
"The vast majority of professionals in the financial services industry are good people looking out for their clients’ interests," Kander said. "But, like any industry, there are bad apples, and that’s why safeguards are in place to protect investors. When firms put Missourians at risk by ignoring these safeguards, I will hold them accountable."
The fines and censure stem from Woodbury’s role overseeing the actions of Joshua Gould, a former St. Louis-based employee now serving a federal prison sentence for defrauding investors. Working at Woodbury from late 2008 to November 2010, Gould made dozens of unauthorized transfers from client accounts, often using illicit copies of account withdrawal authorizations.
Gould used misappropriated funds to renovate his home, purchase jewelry and pay credit card bills.
Without Woodbury’s knowledge, Gould also operated side businesses rife with conflicts. He solicited Woodbury clients to invest in companies he controlled. Gould then used the funds to pay expenses of another business he operated.
In multiple internal audits, Gould failed to supply sufficient records for his clients’ accounts. But neither Gould’s supervisor nor the firm’s compliance department followed up.
Additionally, Gould used his official Woodbury email account to discuss outside business activity with a client—another red flag that supervisors failed to investigate.
The firm’s disregard for industry safeguards played a significant role in Gould’s ability to continue defrauding clients.
Kander’s action officially faults Woodbury for not properly overseeing Gould. The censure is paired with $170,000 in fines, and comes after Woodbury paid over $1.9 million in restitution to affected investors.
Before making any investment decisions, Missourians are encouraged to call Kander’s office at 1-800-721-7996 or visit www.MissouriSafeSavings.com.
Visit www.sos.mo.gov to learn more about the Office of the Missouri Secretary of State.