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Home Financial Planning

Judge sentences advisor who sold to WEG in fraud case

by TheAdviserMagazine
5 months ago
in Financial Planning
Reading Time: 4 mins read
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Judge sentences advisor who sold to WEG in fraud case
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A disgraced investment advisor who sold her practice to Wealth Enhancement Group before becoming the subject of an extensive fraud investigation now has 10 years in prison to look forward to.

Julie Anne Darrah had helped operate the advisory firm Vivid Financial Management in rural Santa Barbara County, California, for about six years before selling it to WEG in 2021. Both WEG, a Plymouth, Minnesota-based acquirer of independent RIAs with nearly $100 billion under management, and the Securities and Exchange Commission filed lawsuits roughly two years later after uncovering evidence that Darrah had stolen $2.25 million from her elderly former clients.

In March this year, Darrah separately pleaded guilty to one count of wire fraud in a criminal case brought by the U.S. Attorney’s Office in the Central District of California. On Monday, federal judge Otis Wright II sentenced her to 121 months in prison; a hearing to set restitution for victims will be scheduled for a later date.

READ MORE:’Daughter they never had’ accused of defrauding elderly clientsHow to plan ahead for diminished capacity and prevent elder abuseAs elder fraud explodes, banks beat back duty to call copsJPMorgan fights FINRA arbitration for elder fraud case, countersuesThe disturbing size of elder financial abuse in America

Like the SEC and WEG civil suits, the federal criminal case against Darrah accused her of using her position as a financial advisor to siphon off the assets of many elderly residents in and around the unincorporated community of Orcutt, California. The U.S. district attorney said she gained the trust of her victims by “often convincing them she would take care of them in their older years like a daughter.”

Gaining positions of trust

Her theft of $2.25 million from clients took place from November 2016 to July 2023, according to the criminal complaint. She carried it out by persuading her victims to sign documents making her their trustee or a signatory on their bank accounts or giving her power of attorney over their brokerage accounts. The money she moved out would sometimes go straight to her own bank, according to the complaint.

She used her ill-gotten gains to buy things like luxury vehicles and support her other business ventures. A 2023 article from the local news site Noozhawk identifies Darrah as the part owner of a coffee shop and bakery and two delis. 

After the fraud was discovered, “Some victims were left in desperate circumstances, without the money to pay for end-of-life care,” according to the district attorney’s office.

Edward Robinson, Darrah’s lawyer, said he and client “accept the judge’s sentence.”

“We are hoping that Ms. Darrah can do her best to make restitution to the victims,” he said.

Settlements with the SEC, WEG

Darrah has already been saddled with some heavy repayment obligations in her other cases stemming from the fraud. In December, she agreed to a judgement in the SEC’s civil case requiring her to pay $2.4 million in disgorgement, as well as a $2.25 million civil penalty. 

That same month, she agreed to settle WEG’s claims against her for $7 million. WEG, which fired Darrah in 2023 after learning of regulators’ investigation into her conduct, is not named by the U.S. District Attorney in its press release 

But the release notes that a Minnesota-based investment advisor firm, which it refers to as “Business Victim 1,” incurred roughly $5.4 million in losses after buying Darrah’s former practice. A spokesperson for WEG declined to comment on the outcome in the criminal case.

“We have fully cooperated with law enforcement agencies in their review of this matter,” the spokesperson said. “Wealth Enhancement holds our entire team to the highest professional and ethical standards and we do not tolerate anything less.” 

The size and scope of elder fraud

Fraud targeting elderly savers and investors has long been a plague in the wealth management industry. The AARP, an interest group representing older Americans, has estimated that $28.3 billion is stolen every year from U.S. adults who are 60 and older.

So-called “affinity fraud” — in which scammers perpetuate their schemes by establishing a personal connection with their victims — remains common. But even more prevalent is fraud carried out by scraping personal financial information off the internet.

In an analysis of FBI data released Wednesday, the digital privacy firm Icogni reported that of the 113,906 internet-related crimes reported in 2024, 72% involved personal information that was mined online. The misuses of personal data led to losses of $2.4 billion for elderly victims, Incogni found. Incogni also found that investment scams were responsible for the highest losses — $1.83 billion in total or $194,000 for each separate complaint.

It’s not always the ‘dark web’

Ron Zayas, the CEO of Incogni’s Ironwall data protection service, said the personal data used in these scams isn’t always the type of confidential information like Social Security numbers and credit card numbers that often have to be pulled from illicit sites on what is known as the “dark web.” More often than not, it’s phone numbers and addresses that can be retrieved for a small fee from legitimate people-search services and other online resources.

“Who are the most vulnerable people?” Zayas said. “Well, they’re going to be people who are wealthy. They tend to be elderly. They tend to be people who may live alone, who may not have somebody else in their life. Maybe they’re in nursing care, or in other situations like that. All of that information is information you can buy on the internet.”

State lawmakers could help, Zayas said, by passing laws stipulating that residents have to opt in to having their data appear on people-search sites rather than opt out. And more important, he said, people need to become more guarded about giving out phone numbers, addresses and other bits of information often deemed innocuous — much as they already are with their Social Security and credit card numbers.

“People need to understand that that phone number tells me where you live, tells me who your family is, tells me all these pieces about you,” he said.



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