On January 17, 2014, the Illinois Securities Department filed a Notice of Hearing against investment adviser representative, David Matthew Lisnek. As of November 13, 2013, the Department suspended Lisnek’s registration and further prohibited him from offering or selling any securities or otherwise engaging in the business of rendering investment advice in the State of Illinois. Lisnek was registered as an LPL salesperson and an investment adviser representative since September 23, 2004 but was terminated from LPL when the State of Illinois suspended Lisnek’s registration. Lisnek has also been charged with one count of Financial Exploitation of the Elderly – a class 1 felony.
The Notice alleges that Lisnek engaged in fraud involving at least three clients who are either elderly or nearing retirement. The alleged loss is $270,918 in client funds. The Notice also alleges that Lisnek held himself out as “an expert in investments and retirement planning and authored multiple books and articles advising the public, including advice on how to avoid getting defrauded by your financial adviser…” The purported fraud committed by Lisnek is detailed as follows.
Lisnek allegedly approached an 84 year old client (“PC’) with an investment opportunity to provide funds to another customer of Lisnek’s (so that the customer could renovate her home) in exchange for the customer’s REIT stocks. LPL specifically prohibits a rep’s involvement with any cross transactions between clients. Despite LPL’s policy, between June and September of 2013, Lisnek instructed PC to write him eleven checks totaling $65,000. Lisnek either deposited the checks into a personal account or cashed them rather than purchasing REIT stock on behalf of PC. The Notice alleges that Linsek used the $65,000 for his own benefit. After further investigation, it was discovered that in 2011, Lisnek advised the client to purchase other REIT stock at over 2.5 times its actual value.
The second client in which Lisnek is purported to have defrauded is a 54 year old client (“RJ”). Around 2010 and 2011 Lisnek advised RJ to purchase real property for $272,500 if he allowed Lisnek and his family to reside there. Lisnek promised to purchase the residence from RJ a year and a day later for $321,550. In the interim, Lisnek agreed to pay RJ $2,000 in monthly rent. Lisnek apparently advised RJ to withdraw the funds to purchase the property from an annuity Lisnek sold him the year prior. RJ incurred approximately $17,418.29 in surrender charges from the early withdrawal. To date, Lisnek has never made any of the monthly rent payments or purchased the property from RJ as agreed.
In December 2010, Lisnek also advised RJ to invest in Lisnek’s own publishing company whose only purported asset was the copyrights to a book written by Lisnek. RJ invested $50,000 in the publishing company pursuant to the terms of a buy-sell agreement which Lisnek never abided by. It was later discovered that the publishing company was not a legal entity and Lisnek’s book had no registered copyright.
Around 2010-2011, Lisnek approached RJ with an opportunity to loan $40,000 to another client of Lisnek’s. The Notice states the client, who is referred to as AB, was 69 years old. Around January 31, 2011, Lisnek drafted a Promissory Note between RJ and AB whereby RJ agreed to provide AB with a loan of $40,000 and that AB would repay RJ the principal plus $5,000 by May 31, 2011. Lisnek advised AB to write the $45,000 check to Lisnek and that he would deposit the check into RJ’s account. However, Lisnek only deposited $30,000 in RJ’s account and deposited the remaining $15,000 into Lisnek’s personal account.
From 2012 through 2013, Lisnek also convinced AB to write him nine checks totaling $80,000. Lisnek purportedly gave AB two checks totaling $115,000 in payment for the loans but instructed her not to cash the checks.
The lesson to investors here, which may seem obvious to some, is never write a personal check to your financial advisor under any circumstance. Entering into investment “opportunities” that involve your advisor is also extremely questionable and we recommend avoiding those types of transactions.
Lisnek’s hearing is currently set for February 19, 2014 so stay tuned for updates relating to this matter.