Robert Bales never paid any of a $1.5 million award to the Ohio couple he defrauded
Former client Gary Liebschner: "He is not a good person, in my opinion"
Arbitrator found Bales engaged in fraud, breach of fiduciary duty, unauthorized trading
Bales attorney: "[My client's] financial problems have nothing to do with this, PERIOD"
The U.S. soldier accused of killing 16 Afghan civilians engaged in fraud during his career as a financial adviser and skipped out on paying nearly $1.5 million to an elderly client, according to financial records.
Before joining the military in late 2001, U.S. Army Staff Sgt. Robert Bales was accused of multiple instances of securities fraud. That includes a May 2000 complaint alleging Bales bilked over $600,000 from an elderly Ohio couple’s retirement fund, according to the Financial Industry Regulatory Authority, an independent securities regulator.
“We were taken advantage of,” said Gary Liebschner, a former client of Bales. “He took an awful lot of money from us that he turned into commissions for himself.”
Liebschner said when photos first began to surface of Bales, he didn’t recognize him. But when he saw a high school photo of Bales, he realized the suspect in the Afghanistan killings was his former broker.
Bales served as Liebschner’s financial adviser and stockbroker from mid-1998 to late 1999 and defrauded the Ohio senior citizen out of at least $637,000, according to FINRA records.
“He didn’t pay any of what was owed to us,” said Liebschner.
“[Bales’] financial problems have nothing to do with this, PERIOD,” said John Henry Browne, Bales’ attorney, in an e-mail response to a request for comment about the securities complaints.
The arbitration conducted by FINRA in 2003 found Bales jointly responsible for paying Liebschner $1,490,875 in damages and legal fees, excluding interest, according to the securities regulator’s records.
Bales did not appear at the dispute resolution hearing, and Ohio and FINRA records indicate he never paid any of the amount for which he was found liable.
Michael Patterson Inc., the now-shuttered firm that employed Bales, and the firm’s founder, Michael Patterson, were also found responsible for paying the award. Both the firm and Patterson never paid any of the restitution either, according to Liebschner. Michael Patterson Inc. was barred from dealing securities in Ohio, according to the state’s Commerce Department.
Multiple voice messages left by CNN for Michael Patterson were not returned.
The Securities Investor Protection Corporation, a federally mandated corporation, did award Liebschner a small amount of reparations, he said. SIPC could not disclose any settlement details.
“We were able to get a few thousand dollars from SIPC, nowhere near the arbitration award,” said Liebschner. “Not even close.”
Liebschner, a lifelong epileptic, was admitted to Ohio State University Hospital in November 1998 for seizures and remained bedridden for six months after his liver failed. It was during that time Liebschner believes Bales swindled him.
“He took advantage of the fact that I was in the hospital, said Liebschner. “I didn’t feel I was a dummy. I have two master’s degrees. But at the time I couldn’t walk, talk, or swallow.”
Liebschner said that by the time he returned from the hospital, mail containing the status of his individual retirement account had piled up in a cardboard box his wife, Janet, had set aside. After opening the letters, Liebschner discovered that Bales had sold off his AT&T and Lucent shares, trading them for penny stocks. His account had been reduced to $30,000 from roughly $1 million, Liebschner said.
“He traded away my AT&T shares, probably worth about $75 a share, that I had saved up since the early ‘60s,” said Liebschner, a former AT&T employee.
The Ohio couple was never able to locate Bales after filing their formal complaint against him, making it very difficult to take him to court. Leibschner said his attorney at the time, Earle R. Frost Jr., advised him not to press forward with a criminal case.
“We heard he was in the Bahamas and Florida, and I think he was in a couple different cities here in Ohio,” Liebschner said. “He seemed pretty good at the start, but he was pretty flashy, too – a bit arrogant. He led on like he was a big dealer, and could do just about anything that you wanted him to do.”
According to regulatory records, Bales moved around between several different brokerages during his five years as a securities broker, never settling in for long at any of them.
Three years after the Liebschners’ complaint was filed, a FINRA arbitrator found that Bales engaged in fraud, breach of fiduciary duty, unauthorized trading, unsuitable investments and churning. The latter occurs when a broker engages in excessive trading of securities in a customer’s account primarily to generate commissions that only benefit the broker. He was ordered to pay Liebschner $637,000 as compensatory damages plus interest and another $637,000 in punitive damages.
The arbitrator also found Bales and the company responsible for paying $216,500 in attorneys’ fees and a filing fee.
FINRA, which was formerly the National Association of Securities Dealers, is a private, nongovernmental securities regulator.
The U.S. government’s regulatory arm is the Securities and Exchange Commission.
Under FINRA rules, the securities regulator can suspend or cancel the registration of a broker or brokerage firm if that party does not comply with an arbitration award. FINRA does not take any further action to recover awards.
FINRA would not disclose whether Bales’ broker license was suspended, but Bales was last registered with FINRA in December of 2000, seven months after the Liebschner dispute was filed. He never returned to trading securities, according to FINRA records.
A separate complaint of unauthorized bond trading was filed against Bales by an Ohio woman on June 9, 2000, according to an Ohio Commerce Department report. In the report, Bales claims the illegal trading occurred after he left Michael Patterson Inc.
“I wouldn’t have expected him to do that,” said Liebschner when asked about the recent murder allegations. “But he is not a good person, in my opinion.”