Northwestern Mutual brokerage fined
$350K penalty relates to ex-broker awaiting trial
Northwestern Mutual Life Insurance Co.’s brokerage arm has been hit with a $350,000 regulatory fine for failing to prevent a former broker from pocketing hundreds of thousands dollars from client accounts, records show.
The broker, Sampson Pearson, is awaiting trial in federal court in North Carolina on charges that he stole $570,000 from his former clients. He was an independent contractor in North Carolina for Northwestern Mutual Investment Services from 2001 to 2017 and has since been barred from the securities industry, according to the Financial Industry Regulatory Authority, or FINRA.
Pearson is charged with mail fraud, aggravated identity theft and filing false tax returns for masterminding a scheme from 2005 to 2016 that defrauded 10 Northwestern Mutual Investment clients by taking money from their annuities.
The money was taken from client annuities through withdrawals and fraudulent loans, according to an indictment .
Pearson directed Northwestern Mutual Investments to “deposit the proceeds of the fraudulently obtained loans into an account he secretly controlled and then used the funds to pay personal expenses and fund his lifestyle,” the indictment charges
To perpetrate the scheme, Pearson used client “names, Social Security numbers, addresses, unique electronic identification numbers,” the indictment charges.
Pearson “has asserted his innocence” said his attorney, Kevin Tate, of the Federal Defenders Office.
The federal probe of Pearson came after Northwestern Mutual Investments launched an investigation into the broker’s activities after it was tipped by a customer who noticed a discrepancy in her loan records, according to a recently signed consent agreement between FINRA and Northwestern Mutual.
The investigation came after Pearson voluntarily left the company.
Northwestern Mutual “immediately brought information to law enforcement when we found discrepancies in a registered representative’s client accounts after the representative’s contract terminated,” Northwestern Mutual Life said in a statement. “We worked closely with law enforcement as part of their investigation.”
The registered representative in the statement appears to be Pearson.
The company has reimbursed “each affected client,” according to the statement.
Northwestern Mutual Investments was not involved in the wrongdoing that Pearson is charged with committing. In its agreement with FINRA, the company accepted the fine and a censure, and agreed to improve its oversight.
The company declined further comment.