Swindle brings misery, blame, flood of claims
(Daily Oklahoman, The (KRT) Via Thomson Dialog NewsEdge) Aug. 27--There's no shortage of victims -- or legal filings -- in the wake of convicted money manager Marsha Kay Schubert's misdeeds.
"I wish to hell I had never met that woman," said one former investor, who asked that her name not be used for fear that other victims might take offense. She and her husband earned more than $150,000 from their investments with Schubert, but last week repaid all those profits to a court-appointed receiver and now must sell their new home.
Schubert, a former licensed investment advisor based in Crescent, is serving a 25-year prison sentence after pleading guilty last year to money laundering and fraud charges in state and federal court. From 2000 into 2004, scores of clients lost more than $9 million, most of which Schubert redistributed to other investors in a classic Ponzi scheme.
When Schubert's shell game collapsed, more than $3 million had disappeared and even the winners -- who earned more than $6 million in "profits" -- turned into losers.
The case continues to generate a flood of legal actions. Among those named in filings are anybody who made money investing with Schubert; the Oklahoma City-based securities firm that employed Schubert when her scam was discovered; the large national firm where Schubert worked when she launched her scheme; and the Crescent bank where Schubert moved more than $200 million through her personal account.
Court-appointed Robin Hood
Doug Jackson, the Enid lawyer charged with securing as many assets as possible for the victims, has filed a civil case against more than 150 people who profited from their dealings with Schubert. He is seeking to redistribute those earnings to victims.
Even though the investors who profited were unaware that Schubert was running a Ponzi scheme, they shouldn't stand to gain from their involvement in the illegal action, Jackson said.
"If I were to go rob a bank in Enid and walk down the street giving money to people, you wouldn't get to keep it," Jackson said.
Although Jackson has collected more than $400,000 from former investors, he's not prepared to provide an estimate on how much victims should expect to receive when the case is closed, which likely won't happen for months.
Follow the money
The Oklahoma Department of Securities has filed a civil suit against the Crescent bank where $267 million flowed through Schubert's personal account. The agency is seeking restitution from Farmers & Merchants Bank, its Chairman John V. Anderson and his son, bank President John Tom Anderson.
John Tom Anderson said the bank and its officers were not negligent.
"We're very confident by the end of this deal whether we get in court with a judge or a jury, that they will find that we didn't do anything wrong," Anderson said.
Department administrator Irving Faught declined to discuss the pending case in detail.
"I'm very confident in the facts that we allege in the petition, and believe that it states the case and will be resolved by the court," Faught said.
Three bank officers contributed nothing to Schubert's program, but received a total of more than $190,000 from her account, the agency's suit claims. A bank teller contributed $75,000 to Schubert's scheme, but received more than $150,000 in distributions, according to the lawsuit. John Tom Anderson said no bank employee has been disciplined for actions related to the Schubert case.
In a one-month period ending Nov. 18, 2003, more than $29 million moved through Schubert's account at the Farmers & Merchants Bank. At the time, the bank controlled total deposits of about $70.7 million.
The bank's loan committee, which met daily to review transactions of more than $2,500, "ignored numerous 'red flags' and suspicious circumstances," the lawsuit said. The securities department claims the bank also loaned funds to Schubert that she used "to further the 'Ponzi' scheme," and referred bank customers and others to Schubert's venture.
John Tom Anderson said the average daily balance in Schubert's account didn't generate suspicion because she moved sums out of the account as quickly as she deposited them.
"It's not quite that cut and dried," Anderson said of the allegations. "The point in that that they miss is there was several other banks involved that she either had accounts at or customer accounts at."
The securities department disclosed earlier this month that it is considering disciplinary action against Wilbanks Securities, and its operators, Aaron and Randy Wilbanks. Schubert was affiliated with Wilbanks Securities from May 2004 until her scheme unraveled in October 2004.
The recommendation of two staff attorneys to Faught is that Aaron and Randy Wilbanks be stripped of their supervisory authority, and that the firm's broker-dealer registration be revoked and the company be liquidated. The pair have the opportunity to request a hearing, and their attorney said they will this week.
In a 33-page report, the securities department's enforcement division claims that Aaron and Randy Wilbanks failed to establish an adequate supervisory system and failed to enforce proper procedures. In one instance, the agency claims that Aaron and Randy Wilbanks "failed to reasonably supervise Agent Schubert ... who committed violations of the Oklahoma Securities Act," according to the report.
Aaron and Randy Wilbanks declined to comment on the allegations or potential penalties, but their lawyer, Bill Wilkinson of Tulsa, rejected those claims.
"We vigorously deny that there's any reason for criticisms of any of our oversight procedures," Wilkinson said. "Wilbanks is a good, solid, reputable company that has served its investors very well in this state. ... We hope that people will reserve making judgment until all the true facts come out and that only occurs at the time of the hearing before the Department of Securities."
Wilkinson said the state agency is attacking Wilbanks Securities at least partly to deflect criticism of the department's failures in the Schubert case.
"That's not correct," Faught said. "I disagree with that. That had nothing to do with bringing this action."
Victims fight back
Some of the biggest money losers have filed claims seeking at least $3.5 million from AXA Investments, the firm that employed Schubert during her busiest periods of shifting money among her clients.
Oklahoma City attorney Joe Bocock, who represents some of the victims, said a three-person panel of arbitrators representing the National Association of Securities Dealers heard evidence during a two-week closed hearing in Oklahoma City. Bocock said he expects a decision in the matter shortly.
More victims will file a similar claim in the near future, Bocock said. That likely won't be the last action filed against someone or something in the Schubert case, Bocock said.
"There is an open investigation of AXA by the state Securities Department, who sat through 10 days of heavy-duty trials," Bocock said.
It's not yet apparent that any of the blizzard of filings, claims and documents will ease the suffering of those whose trust in Schubert was betrayed.
Linda Wilcox, a victim and former longtime friend of Schubert, spoke at length during Schubert's sentencing about the appalling impact of the swindle.
"There is nothing about our lives that this has not affected," Wilcox said.
Copyright (c) 2006, The Daily Oklahoman
Distributed by McClatchy-Tribune Business News.
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