Former Employee of Deceased Friendswood Financial Adviser Ordered to Prison for Running Ponzi Scheme
|U.S. Attorney’s Office June 14, 2013|
HOUSTON—Brian Anthony Bjork, 43, of Missouri City, has been ordered to prison in connection with an investment scam that defrauded nearly a dozen investors of more than $1 million, United States Attorney Kenneth Magidson announced today. While Bjork pleaded to just one count of wire fraud, he admitted all of his fraudulent conduct during his plea hearing on February 19, 2013.
Today, U.S. District Judge Gray Miller, who accepted the guilty plea, handed Bjork a sentence of 52 months to be immediately followed by a term of three years of supervised release. Judge Miller further ordered Bjork to pay a $1,131,491.74 in restitution to his victims. One of those victims, who had invested approximately $400,000 in death benefits she received after her husband passed away from cancer at the age of 41, addressed Judge Miller at the hearing. She stated, “What I want to know is when did Brian decide he needed that money more than my daughter and that it was OK to just take it.”
Bjork was a registered investment advisor formerly employed at J. David Financial Group and later Select Asset Management (SAM), two businesses owned and operated by deceased Friendswood financial advisor David Salinas. Bjork also served as treasurer of Houston Athletics Foundation (HAF), a non-profit organization that contributes funds to the Athletic Department at the University of Houston.
In 2006, SAM became a registered investment adviser with the state of Texas and the Securities and Exchange Commission (SEC). In July 2010, the SEC began investigating SAM for certain disclosure irregularities in connection with its lending funds. In particular, the SEC was concerned that SAM was lending money to affiliated entities (namely, other businesses owned by Salinas) without disclosing that fact to investors. As the investigation of SAM proceeded, the SEC learned that Salinas, through J. David Financial, had for years been offering corporate bonds that Salinas was purportedly able to purchase in bulk at a discount. In pressing for further information on the Salinas bond offerings, the SEC became troubled that there was little to no evidence of the actual purchase of the bonds and that Bjork was unable to provide information concerning the entity purportedly serving as the custodian for the bonds.
As the SEC’s investigation came to head in July 2011, Salinas’ behavior became erratic, and he stopped returning phone calls to bond investors and others who had learned that there was now a concern over whether or not Salinas’ bonds existed at all. Salinas ultimately took his own life by shooting himself at his home in Friendswood on July 17, 2011. A criminal investigation was initiated soon thereafter. On August 1, 2011, United States District Judge Keith P. Ellison signed an order authorizing the SEC to take J. David Financial Group, SAM and other Salinas entities into receivership on the grounds that SAM’s lending funds failed to disclose certain self-dealing and that Salinas’s bond offerings never existed in the first place as he was simply running a Ponzi scheme.
The ensuing criminal investigation revealed that on September 1, 2004, Bjork opened Bank of America account under the name “Brian A Bjork dba: J David Financial Group” for the purpose of defrauding a subset of the J. David Financial investors. Bjork was the sole signatory on this account. Preying largely upon current and former family members, as well as using his position of trust within HAF, Bjork began perpetrating a scheme whereby he would solicit and obtain money under the false pretense of intending to invest those funds in Salinas’ pawn shops or in Salinas’ corporate bond offerings but instead simply converted the funds to his own use. The investigation of this unusual “scam within a scam” revealed that Bjork selected as his victims various family members or other individuals he knew personally and that were not likely to speak to Salinas about their investments. Bjork would also create fictitious “Consolidated Statements” to trick investors into believing that he had made certain investments when, in fact, he had not.
With respect to the funds Bjork fraudulently obtained from HAF, the investigation revealed Bjork used his position as treasurer and signatory on HAF’s bank account to simply write checks disguised as bond investments with J. David Financial. Bjork would sign the checks as HAF’s treasurer, forge the signature of any other individuals required to sign checks on the HAF account, and then deposit the checks into his Bank of America account. He used the funds to support his lifestyle and pay prior investors. In order to deceive the firm auditing HAF’s financials, Bjork would generate fictitious duplicate Consolidated Statements and would then provide those bogus statements to the auditing firm to enable HAF to pass the audit. In total, Bjork stole approximately $550,000 of HAF’s funds. HAF was unfortunately also victimized in the larger Salinas bond scam by an even greater amount.
Bjork was permitted to remain on bond and voluntarily surrender to a U.S. Bureau of Prisons facility to be determined in the near future.
The investigation leading to the charges in this case was conducted by the United States Secret Service and the FBI. Assistant United States Attorney Jason Varnado is prosecuting this case.