Investment Advisor Facing $6.3M Fine Challenging Order

Dec. 05--Investment adviser facing $6.3 million fine challenging order

By MICHAEL COUSINEAU

New Hampshire Union Leader

December 04. 2017 11:43PM

CONCORD -- A former investment adviser ordered to pay $6.3 million in penalties and restitution for allegedly defrauding up to 208 clients believes a jury and not a hearings officer should decide his fate, according to his attorney.

"The New Hampshire Constitution requires a jury trial when the state seeks more than $1,500 in fines and penalties and we believe the administrative hearings process unconstitutionally denies Mr. (Curtis) Ridlon his right to a jury of his peers," said attorney Brian Quirk, a director at the Preti Flaherty law firm in Concord.

Quirk and the state Attorney General's Office squared off in Merrimack County Superior Court on Monday to argue the issues, but no rulings were issued.

The state Bureau of Securities Regulation in April ordered Hooksett resident Ridlon, a securities-broker dealer and a registered investment adviser serving clients nationwide, to pay nearly $6.3 million, saying he defrauded up to 208 clients of millions of dollars over a period of at least eight years.

Ridlon allegedly was "deceiving those clients into believing that they were required to pay an annual fee for management of their accounts when in reality Ridlon was having them sign up for unnecessary optional financing planning," according to bureau records.

The securities bureau also reached a consent order with Ridlon's employer, Waddell & Reed, which agreed to pay about $2.9 million in restitutions and penalties.

The securities bureau ordered Ridlon to pay restitution of about $1.34 million, an administrative fine of more than $3.2 million and to turn over $1.5 million of ill-gotten gains. Ridlon also was ordered to pay $200,000 to cover the bureau's investigation costs.

Many of Ridlon's clients were in their 60s, 70s and 80s, with one as old as 98, according to the securities bureau, which received a written complaint in June 2015 against Ridlon and Waddell from former clients regarding questionable payments.

Defendants can request an administrative hearing before the securities bureau to contest the order. Ridlon requested an administrative hearing.

"Right now, we're scheduled to go forward with the final hearing in May," said Eric Forcier, a staff attorney with the securities bureau.

Quirk said the process isn't fair to those accused.

"A hearing officer who is a paid employee of the bureau has an obvious conflict of interest in hearing a case being prosecuted by the bureau," Quirk wrote in court papers. "By siding with the bureau, a hearing officer who works for the Bureau would be doing what any reasonable person would assume their employer would want them to do."

On Monday, Quirk said: "Mr. Ridlon looks forward to responding to the Bureau of Securities' allegations and clearing his name."

Assistant Attorney General Scott Sakowski said state security regulations came about after the state's constitution was adopted.

"If a jury trial right didn't exist in 1784 but came about later through a statute, then you don't get a jury trial under the constitution," he said.

In the consent order dated December 2016, Waddell & Reed, based in Overland Park, Kansas, agreed to refund financial planning fees paid by clients totaling more than $2 million. The firm agreed to pay the bureau's investigation costs of $300,000, an administrative fine of $300,000 and a contribution to the bureau's investor education fund, also $300,000.

The bureau said "Waddell has taken steps to enhance its supervision of the financial planning" by its representatives, including a transition of financial planning supervision from local supervisors to a financial planning supervision unit in Kansas as well as starting a new system for the submission, review and approval of financial planning contracts.

Forcier said he believes a majority of Ridlon's affected clients live in New Hampshire. Ridlon resigned from Waddell in October 2016, according to bureau records.

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The Bureau of Securities Regulation ruling against Ridlon from April can be viewed below:

Courts Crime Business

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