Kenneth Wayne Graves, a former investment adviser representative in Corpus Christi whose license to sell securities was revoked last year by the Texas Securities Commissioner, has been indicted in Nueces County on fraud and other charges related to the sale of investment contracts to his clients and charging excessive fees for services.
Graves was indicted June 4 and arrested June 15. The indictment alleges that in 2012, Graves defrauded six clients of his firm, Warren Financial Services LLC, through the sale of $420,720 in investment contracts.
The indictment alleges that in a separate fraud in 2013 and 2014, Graves misapplied $128,918 in unreasonable fees he charged clients of Warren Financial.
The Securities Commissioner entered a Default Order in June 2014, revoking the registrations of Graves and Warren Financial.
The order found that Graves made unauthorized withdrawal of client funds, recommended unsuitable investments, failed to pay clients their promised return, and charged excessive fees. Graves sold a security that promised to pay between 2.5% and 5% of Warren Financial's monthly gross income for periods of between three and seven years. The firm underpaid investors and in many months didn't make any payments to certain investors.
According to the Nueces County indictment, Graves deceived his clients by not disclosing facts they needed to make informed decisions.
In 2012, when Graves was selling the investment contracts, he did not tell investors that he was under investigation by the Financial Industry Regulatory Authority (FINRA) in connection with his employment at a previous investment firm. In March 2012, FINRA suspended him for six months.
The indictment also alleges that Graves failed to tell the clients who bought the investment contracts that Warren Financial was in financial straits. A large portion of client accounts at Warren Financial had already been sold to another firm, according to the indictment, reducing the amount of accounts from which Warren Financial could collect management fees.
Nor were investors told their money would be used for purposes other than earning a return on their investment.
The Nueces County District Attorney's Office has appointed State Securities Board enforcement attorneys as special prosecutors in the case.