'Cherry picking' costs a Miami woman, man and their Brickell business $5.7 million
Miami Herald (FL)
The directors of a Brickell-based Miami financial services business and the on-the-record beneficiaries of their shenanigans are in the process of paying $5.7 million in fines and penalties to settle Securities and Exchange Commission charges of "cherry picking."
In addition, UCB Financial Advisors president Lina Maria Garcia, 50, is suspended from the financial services industry for a year while director Ramiro Jose Sugranes, 59, is banned from the industry.
State records say UCB Financial Advisors (number disconnected) remains an active corporation and, legally, Sugranes and Garcia admit nothing. But common sense draws other conclusions when people who paid their bills for 20 years by working in the financial advisory business pay millions of dollars and agrees to financial industry exile.
READ MORE: SEC asset freeze, fraud charges for UCB Financial and directors
Fruits of "cherry picking" according to the SEC
Sugranes registered UCB Financial Advisors with the state of Florida in 2005, a year after, the SEC complaint noted, he resigned from a broker job after not following company policy in documenting activity in a relative's account. Garcia joined UCB, which includes UCB Advisors and UCB Services ("UCB Entities" in the complaint), as president and chief compliance officer in 2006. It's her job to make sure schemes such as the SEC alleged don't occur.
"[Sugranes] carries out the cherry-picking scheme by first using an average price trading account used by the UCB Entities to purchase stocks and options on behalf of numerous client accounts," the SEC complaint said. "Sugranes then allocates those trades to specific accounts, typically later that same day.
"If the position increases in value during that day, the position is usually closed out, thereby locking in the same-day profit, and the opening and closing trades and the corresponding profits are allocated to one of the Preferred Accounts," the complaint continues. "If the value of the trades decrease during that day, the position (which is worth less at the time of allocation than it was at the time of purchase and, thereby, has a first day loss) is usually allocated to [the account(s) of] one or more of the UCB Entities' other clients."
The complaint says doing this with stocks and options allowed the preferred accounts to pile up $$4,629,814 in first day gains while the non-preferred accounts got smacked with $5,575,130 in losses.
The names on the Preferred Accounts: Ramiro Sugranes Hernandez and Thelma Lanzas De Sugranes, Sugranes parents.
Sugranes and Garcia's punishments and payments
Miami federal court documents say these are the punitive actions against Sugranes, Garcia and his parents.
Sugranes and his parents are responsible for $2,255,672 disgorgement plus interest of $382,562. This was taken care by the transfer of $2,377,099 out of a Insigneo Securities broker account and $261,135 from an Apollo Bank account that were in the names of Sugranes' parents.
Sugranes and Garcia are responsible for $225,718 disgorgement plus interest of $38,282 and a $100,000 civil penalty. They also have to sell their interest in companies Tigressa, LLC and Toscana Divino before February (and can't sell them to a relative).
Sugranes alone will pay $2,118,610 disgorgement plus interest of $359,316 and a civil penalty of $500,000.
Each UCB Entity will pay a $500,000 civil penalty.
Garcia is suspended until next October from "association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization; and suspended from participating in any offering of a penny stock..."
Sugranes is "barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, o rnationally recognized statistical rating organization."