What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: September 18, 2019

Financial Services firms sometimes breed their own cyber crooks and for reasons you might not suspect.  And while it is overseas based hackers that get the lion’s share of the publicity, it is internal company crooks who are responsible for much of the thievery.

Scott Capps is an interesting example as he allegedly stole $2.1 million. Recently, Capps told his tale to Philadelphia Inquirer reporter Joseph DiStefano before a month before the 48-year-old husband and father of one was scheduled to start a four-year federal prison sentence.  In the article, Capps said his path to the crime started out of a series of frustrations—that the source of the money he took was from dormant funds of various Vanguard clients.   After a period of time, those funds must be handed over to state governments as unclaimed property.

Capps acknowledged “”I stole $2.1 million, because I was [upset], because of what happened to my career.” As he explained: “Vanguard, as well as its many competitors, was not finding all the dormant accounts in its systems and didn’t seem to be trying really hard to improve. Checking the laws and questioning company lawyers, Capps became convinced that “we are all doing this wrong.”  The article went on to say he wanted to do it right by sending out a mass mailing or making mass calls to the account holders to tell them to respond and then their accounts wouldn’t be inactive, but Vanguard told him they didn’t want to do it.

The straw that broke the camel’s back was another frustration—that Vanguard wasn’t doing enough to protect the dormant funds from hackers. “Capps says he brought up the system’s vulnerabilities at a Fourth of July family party. “I said I could steal this money, if I had someplace to deposit the checks.”  His brother-in-law volunteered.

Capps told the reporter of still another frustration that entered his thinking while at Vanguard: “They talked a lot about ’people management.’ The problem was that the middle management, the supervisors who run Vanguard, got rewarded for business results only. Not for developing people. And they squeezed too hard.”

Unfortunately, multiple clients at Vanguard have had their accounts hacked into or have had funds stolen by third parties.  Firms like Vanguard must have a reasonable supervisory system in place in order to protect client funds to prevent this sort of activity from occurring.  Lax supervision is the primary reason why schemes like this are able to mushroom out and lead to devastating losses for clients.  For clients who were defrauded at Vanguard, the Financial Industry Regulatory Authority (FINRA) arbitration forum can be used by clients to recover converted funds.  Please call our law firm in Chicago for more details on how to sue Vanguard to recover stolen or converted funds.


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