Maryland Attorney General Brian E. Frosh seeks to put investment adviser and infomercial star Philippe Rousseaux and his Towson firms out of business.
Frosh alleges in an administrative filing that Rousseaux, either independently or through his Everest financial companies, has misled clients about service charges and the firms’ stock market successes and falsified forms intended to protect investors when transferring assets.
Frosh seeks revocation of Rousseaux’s registration as an investment adviser representative in Maryland and a prohibition on him and his two firms — Everest Wealth Management Inc. and Everest Investment Advisors Inc. – from operating in the securities or investment advisory business in Maryland.
On Wednesday, Maryland Securities Commissioner Melanie Senter Lubin signed an order requiring Rousseaux to respond to the claims by early July and state whether he seeks a hearing before the commission. Failure to respond will result in a subsequent order revoking Rousseaux’s registration and barring him and his companies from operating in the state, Lubin’s signed order stated.
“When investment promises sound too good to be true, they almost always are,” Frosh said in a statement Thursday.
“Consumers need to be on the lookout for slick advertising campaigns that highlight the upside while minimizing the risk of the investment program,” Frosh added. “We took this step to stop these activities and to raise awareness of these misleading tactics. We also want to prevent unlawful activities in the future.”
Rousseaux, whose “Money Guys” advertisements run on Baltimore-area television, and his two companies issued a statement Thursday afternoon denouncing Frosh’s allegations.
“The order contains many spurious accusations, unsupported by the facts and not reflective of the close and productive relationships that EIA, EWM, and Mr. Rousseaux have forged with their clients over the years,” the statement read.
“The order also fails to acknowledge EIA’s substantial efforts to make their compliance programs more robust, in the best interests of their clients,” the statement added. “Finally, in no place in its order or its press release does the attorney general or [his securities] division explain why, if they believed EIA and EWM posed any risk to investors, it waited over four years to bring this unjustified order. This division’s actions now provided EIA, EWM, and Mr. Rousseaux with an opportunity to present to a neutral hearing officer the true facts and circumstances about their disagreements with the division’s lawyers, and EIA and Mr. Rousseaux look forward to many more years of providing exemplary service to their clients.”
In the administrative filing, Frosh alleges Rousseaux and EIA “falsely represented to investors” that the company’s “wrap fee” investment program enabled them to invest in certain products without being charged brokerage commissions or transaction fees. But the attorney general said the securities division found in March 2014 that clients were being charged transaction fees of about $8,000.
Advertisements for the wrap-fee investments also included “false and misleading” information by using outdated data of investment returns and failing to depict how clients fared relative to their initial and subsequent investments, Frosh claims.
“EIA’s performance advertising was especially misleading because many of the persons solicited to invest in EIA’s wrap program were not sophisticated investors,” the administrative filing states. “EIA knew or should have known that the disclosures relating to its performance were misleading.”
Frosh also alleges Rousseaux, prior to opening the Everest properties in 2011, improperly used a Medallion stamp in 2006 and 2007 to pre-stamp documents in which clients authorize their funds to be transferred from one investment to another. The stamp, which belonged to Rousseaux’s prior employer, MetLife, is used to verify the client’s signature after the document is signed, not before.
Rousseaux stamped “approximately 100 blank [authorization to transfer assets] forms that were subsequently used to transfer client assets from one institution to another,” the filing states. “Rousseaux did so to benefit himself financially by reducing the risk of clients changing their minds and keeping their assets with another broker.”
In all, Frosh filed 13 administrative counts against Rousseaux and his firms under the Maryland Securities Act, including fraud in connection with the offer, sale or purchase of securities; fraud in connection with the offer and sale of investment advice; dishonest and unethical practices; employment of an unregistered investment adviser; and failure to maintain and timely produce books and records.