Lindeen Shuts Down Alleged Ponzi Scheme
Kalispell Man Bilked Investors Out of Over $1.5 Million
HELENA, Mont. – Montana Commissioner of Securities and Insurance Monica Lindeen announced today that her office has shut down an alleged Ponzi scheme operated by a Kalispell man who allegedly bilked investors out of at least $1.5 million, including some of his own friends.
The agency filed a Notice of Proposed Agency Action and issued a Temporary Cease and Desist Order against a Kalispell securities salesperson, Donald Chouinard, and his companies, DC Wealth Management, Inc., and DC Associates, Inc. Commissioner Lindeen’s Cease and Desist Order prohibits Chouinard and his companies from committing further violations of the Securities Act of Montana and the Montana Insurance Code.
“Today's enforcement action alleges that a trusted adviser defrauded long-standing clients, friends and associates for his personal financial gain,” said Lindeen. “Ponzi schemes are never easy to detect because friends and family of the perpetrator generally end up being the victims.”
Commissioner Lindeen’s action results from an extensive investigation that was conducted after consumers complained to her office after investing in what they thought was a “day-trading” program, but instead became a Ponzi scheme in which investors got bogus proceeds taken from money contributed by newer investors. In particular, Chouinard convinced one investor to obtain a $100,000 loan and invest with him because he could guarantee a 40% return in 30 days. Instead of investing the $100,000 in the “day-trading” program, Chouinard used $50,000 to pay off a previous investor, deposited $25,000 into his personal joint-checking account, and gave the other $25,000 to his attorney.
The agency also alleges that Chouinard, who was a broker/dealer salesperson and investment adviser for LPL Financial Corporation (LPL), traded in their LPL accounts without authorization, traded excessively, and forged their signatures to authorize the trades. The excessive trades resulted in nearly $250,000 in commissions for Chouinard.
“If a broker does excessive buying and selling within your investment account, you may end up paying more in commissions than you earn on your investment,” said Lindeen. “It's a good idea to regularly check your monthly brokerage statements to see what you are earning, what commissions you are paying, and what changes there have been in your account holdings.”
Chouinard failed to provide the investors with statements or tax documents for their “day-trading” investments. Instead, he routinely informed the Complainants about the values of their investments orally or via email. The complaints allege Chouinard also misrepresented the values of their investments—in one case by as much as 10,000%.
Commissioner Lindeen’s complaint charges Chouinard and his companies with violating the antifraud provisions of the Montana Securities Act. Commissioner Lindeen’s office is seeking to revoke Chouinard’s Montana securities license and suspend or revoke Chouinard’s Montana insurance producer license, as well as fines and restitution for investors including 10% interest from the dates of the wrong-doing. Lindeen’s office said the penalties in the case could amount to millions of dollars, because the fine for violating the Securities Act is $5,000 per violation and the pleading outlines dozens of violations.
“Montana citizens should be able to feel that their investments are suitable and secure,” said Lindeen. “This is a matter of consumer protection. We will not allow people who don’t play by the rules to defraud Montana investors of their hard-earned savings.”
Montanans who may have been solicited by or have invested with Donald Chouinard are asked to immediately notify Commissioner Lindeen’s office by calling toll-free at 1-800-332-6148 or in Helena at 444-2040