Editors' Pick: Originally published Feb. 9.
It was five years ago this week when the brokerage firm LPL Financial fired Larry S. Werbel.
The Cleveland-based stockbroker caught the attention of his firm's compliance cops on Jan. 11, 2011, when he tried to wire money from an LPL account to a local penny stock promoter.
The firm did some digging and figured out that its man in the Buckeye State was violating company policy by selling unlisted penny stocks and unapproved private investments to clients, according to an LPL spokesman. LPL fired him on Feb. 11, 2011.
It would have served the investing public well if it had all ended there.
Werbel, 67, was arrested at his home in Solon, Ohio, on Jan. 6, charged by the U.S. Attorney for the Southern District of New York with conspiracy, securities fraud, wire fraud, investment adviser fraud and making false statements.
The charges were related to his role in a years-long scam selling one of the world's most easily manipulated investments. That would be penny stocks.
In an email statement, his Cleveland lawyer, Scott Matasar, said "Mr. Werbel disputes the allegations that have been made against him and looks forward to the opportunity to present his defense."
In the five years leading up to his arrest in January, he was fired by LPL, suspended briefly by Finra, and "permitted to resign" by Summit Brokerage Services Inc. after a customer filed an arbitration complaint claiming $1 million in losses, according to regulatory records.
His most recent employer, Concorde Investment Services LLC, hired him in 2015 despite the termination, the suspension, and the $1 million claim, all of which were noted in his public Finra records and should have been easily accessible to Concorde. A day after Werbel was arrested, Concorde filed a note in his regulatory record saying he was discharged after an internal review was launched "upon learning Rep was indicted for defrauding investors prior to association with the firm."
Talk about closing the barn door after the horse has bolted.