State Crime Reports

Founder of West Suburban Investment Firm Indicted for Embezzling Client Funds in $3.9 Million Fraud Scheme


CHICAGO —(ENEWSPF)–September 18, 2015.  The founding member of a Geneva investment firm used client funds to trade his own stocks and to purchase a yacht and luxury vehicle for himself, according to a federal indictment announced today.

STEPHEN C. BROWERE, the founder and principal of Geneva-based Stephens Capital Management Inc., used the promise of lucrative and guaranteed returns to persuade his clients to purchase $1.66 million in promissory notes in Douglas Capital Corp., located in Lisle.  What Browere didn’t reveal was that a relative was the president of Douglas Capital, and that Browere himself had access to Douglas Capital’s lines of credit and ran its day-to-day operations, according to the eight-count indictment returned Wednesday in U.S. District Court in Chicago.  Instead of investing the funds as promised to clients in the promissory notes, Browere used the money to perform trades in his own investment portfolio and to cover personal expenses, including the purchase of a yacht and luxury vehicle, the indictment states.

Browere, 56, of Geneva, also obtained the power of attorney on behalf of an elderly client who was infirm and suffering from dementia, according to the indictment.  The power of attorney gave Browere access to the client’s cash and property, which were valued at $2.1 million.  Browere misappropriated some of this money to purchase four vacant lots in Lisle and to make interest payments to other clients, the indictment states.  After the client died, Browere maintained control over the estate and continued to misuse the estate’s assets, according to the indictment.

The indictment charges Browere with eight counts of mail fraud.  It seeks forfeiture of the four vacant lots in Lisle, as well as properties in Geneva and elsewhere in Lisle.

An arraignment hearing will be scheduled by the Court at a later date.

The indictment alleges that Browere’s scheme began no later than 2007 and continued until approximately February 2014.  Browere initially promised an annual interest return of 8.5% from the promissory notes in Douglas Capital, plus full repayment of the principal at the end of a year or upon expiration of the notes, the indictment states.  Browere concealed the scheme by using principal payments from some investors to make interest payments to others, and by mailing phony account statements that inflated the market performance of their portfolios, according to the indictment.  Many of the investors pledged their life savings or funds from their qualified retirement plans or individual retirement accounts, the indictment states.

When the elderly client’s money began to diminish, and some clients began requesting reimbursement of their principal investments in Douglas Capital, Browere announced that interest on the notes would be reduced to 2.5% and payment of principal amounts would be delayed until further notice, according to the indictment.  In a letter to investors on Aug. 25, 2010, Browere blamed Douglas Capital’s financial problems on the “economic melt down” and the “current banking system and new government rules and regulations that continue to create havoc in this area of the economy,” according to the indictment.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Jeffrey A. Monhart, Director for the Chicago Region of the U.S. Department of Labor – Employee Benefits Security Administration; Antonio Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago; and Illinois Secretary of State Jesse White, whose Securities Department participated in the investigation.

Each count of mail fraud carries a maximum sentence of 20 years in prison, a $250,000.00 fine and mandatory restitution.  If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The public is reminded that an indictment contains only charges and is not evidence of guilt.  The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

The government is represented by Assistant United States Attorney Patrick Otlewski.

Related Material:

Indictment

Source: www.justice.gov

 


ARCHIVES