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The Securities and Exchange Commission (SEC) has charged a California investment advisor with defrauding four clients out of an estimated $3 million that she used to pay for her own personal expenses that included a luxury car lease, credit card bills, private school tuition and airline tickets.
On Tuesday the SEC filed a civil injunctive action in the U.S. District Court for the Central District of California charging Brenda A. Eschbach, 55, of Tustin, Calif., with securities fraud, investment advisory fraud and acting as an unregistered broker-dealer.
In its complaint, the SEC alleges that Eschbach between 2003 and 2009 misappropriated over $3 million in client funds. She began to misappropriate those funds while operating a franchise of a large unidentified investment advisor and broker-dealer, the SEC says, and the theft continued after Eschbach founded Aventine Investment Services Inc., a now-defunct California corporation.
The SEC claims that Eschbach didn't invest her client's money, but stole it to pay for her living and business expenses, credit card payments, car lease payments, private school tuition for her daughter, and trips to Las Vegas and Atlanta.
The SEC also alleges that Eschbach concealed her misappropriations by issuing and mailing false and misleading account statements to those clients whom she had defrauded. In addition, the SEC complaint claims that Eschbach was neither registered as a broker or a dealer nor an associated person acting under the supervision of a registered broker or dealer when she opened up her own business.
Without denying the Commission's allegations, Eschbach has consented to
entry of a proposed final judgment. She has also consented to an SEC
order barring her from association with any broker, dealer, investment
advisor, municipal securities dealer or transfer agent, and from
participating in any offering of a penny stock.
The SEC is seeking for Eschbach to turn over all profits or proceeds received, along with prejudgment interest, and to pay a yet-to-be-determined civil penalty.
Issuance of such an order is predicated on entry of the proposed injunction against Eschbach and her plea of guilty in the federal prosecution. Entry of the proposed final judgment is subject to approval by the U.S. District Court for the Central District of California.
In a related federal prosecution, Eschbach entered a plea of guilty on Sept. 30, 2011, to one count of mail fraud and one count of money laundering. She is awaiting sentencing.
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