State Says Financial|Adviser Rolled Clients

DENVER (CN) - The financial adviser who runs Wealth By Design stole hundreds of thousands of dollars from a firefighter and used it to buy a house, the Colorado securities commissioner claims in court.

Click here to read Courthouse News' Securities Law Review.

The securities commissioner sued Clinton D. Fraley and Wealth by Design Inc., in Denver County Court. Commissioner Fred Joseph also sued the Clinton D. Fraley Living Trust.

The commissioner accuses Fraley of "gaining unauthorized access to investors' mutual fund accounts, illegally converting the investors' securities into cash, then forging checks to gain access to the funds for his own personal use."

Fraley's last known address was in Greenwood Village; he ran his business out of Englewood, the commissioner says.

The complaint continues: "Fraley, who was a licensed securities professional employed with licensed broker dealers until he was terminated in 2011, solicited hundreds of thousands of dollars from Colorado investors, promising the investors that their money would be invested in 'a well balanced portfolio of investments' consisting of Roth IRAs, traditional investments such as stocks and bonds, mutual funds and other nonqualified investments. Contrary to his representations, Fraley gained unauthorized access to the investors' accounts, forged the investors' signatures on checks, deposited the money in a Wealth bank account and converted the money for his own personal benefit, including the purchase of a house."

Two of Fraley victims, married firefighters, were his "friends," the commissioner says. The wife told Joseph's investigators that Fraley "forged her signature" on four checks: checks made out to Wealth By Design for $281,500 and for $60,000; a check to the IRS for $1,250; and one for Colorado state taxes for $350, according to the complaint.

One week after forging the $281,500 check, Fraley/Wealth By Design wired $322,752.58 to a title company to buy a townhome in Greenwood Village, the commissioner says.

Fraley also failed to tell his victims that "he had been fired by Mass Mutual for misconduct and left Northwestern in 2011," the commissioner adds.

The commissioner seeks imposition of a constructive trust, restitution, disgorgement and penalties for securities fraud and investment advisory fraud.

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