BY ETHAN FORMAN
---- — PEABODY — A Peabody resident and former broker has been named in an administrative complaint that claims he defrauded four former elderly clients out of almost $500,000.
Secretary of the Commonwealth William Galvin, whose office filed the complaint, calls the incidents “an egregious example of senior financial abuse.”
Three of the four former clients live on the North Shore.
Galvin alleges that John Michael Babiarz, 39, of 67 Pulaski St., illegally transferred clients’ assets to personal and family accounts without their consent, according to a statement from Galvin’s office. Some of the money went to pay $1,000 in taxes to the city of Peabody, according to the complaint.
The complaint alleges that “John Michael Babiarz ... willfully engaged in unregistered and fraudulent activities in the Commonwealth of Massachusetts in violation of the Act and Regulations.”
“They all are false,” Babiarz said of the allegations, when reached yesterday. He said he had to be careful about what he says, but he intends to fight the charges. He also said he was blind-sided by the complaint.
“The first I’m hearing about this are the details from the release,” Babiarz said. He said information he has seen appears incorrect and twisted. “I am going to deny them and have everything explained. There is nothing to hide there.”
“There was no fraud done intentionally, absolutely no fraud done intentionally,” Babiarz said.
The administrative complaint against Babiarz “seeks a full accounting and return to investors of their losses, a permanent bar from the securities business in Massachusetts, and an administrative fine,” the statement said. The fine is determined by the hearing officer and is limited by statute, said Galvin spokesman Brian McNiff, who said the proceedings take place within the office’s Securities Division.
“It would go before a hearings officer, and that officer would render a verdict,” McNiff said.
The Registration, Inspections, Compliance and Examinations Section of the state Securities Division opened its investigation at the end of August after getting a complaint from one of the elderly victims, who claimed Babiarz “had improperly withdrawn assets from her Fidelity Brokerage Services LLC accounts,” according to the complaint. Babiarz failed to appear before the division on Sept. 12 after being subpoenaed to do so, the complaint states.
“As far as the division knows, he is not represented by counsel at this point,” McNiff said.
Babiarz said he does have an attorney who has been in contact with the state. He acknowledged that he had been subpoenaed but said he was under the impression he had some time to respond.
“The thing was, we were never even given the opportunity to respond,” Babiarz said. “I don’t know if this was a registration issue ... we were never given the opportunity to address this.”
According to the complaint, Babiarz worked for three broker-dealers from 2004 to September 2011 when he was terminated due to customer complaints that he misrepresented the features of a certificate of deposit, the complaint says. Babiarz has not been registered with the state Securities Division since then, and he said the matter may boil down to his “acting independently as an adviser.”
The complaint alleges that after September 2011, Babiarz told his clients he had become a broker-dealer agent of Fidelity Brokerage Services LLC, but the address he gave was to a place that rents out corporate office space at One International Place in Boston. He then created multiple Fidelity accounts that were opened in the victims’ names but with Babiarz’s contact information.
While Galvin’s office did not identify the victims, the complaint said a 72-year-old Boston woman lost almost $184,000; a 75-year-old Peabody man lost $25,000, an 81-year-old Swampscott man lost at least $172,000, and an 83-year-old Danvers man lost $111,000.
The complaint details how Babiarz shifted money, nearly $500,000, from his clients’ accounts to his own, many times the next day. Some money wound up in his E*Trade account labeled with the investment objective of “speculation,” the complaint says. Other funds wound up in a family bank account.
Barbiarz also made a large number of large cash withdrawals, which were spent at local stores, pharmacies, fast-food outlets, restaurants, supermarkets and a gas station, according to the complaint.
He is also said to have written out checks for large amounts, including $1,000 for Catholic school tuition, $2,000 for a bankruptcy attorney and $1,000 for city taxes.
“We are looking forward to hearing all the allegations and hearing them explained, and in the end they will be clarified,” Babiarz said.
While the proceedings are administrative and not criminal in nature, McNiff said the allegations can lead to criminal prosecution from another local, state or federal agency that has the jurisdiction to do so.
Staff writer Ethan Forman can be reached at 978-338-2673, by email at firstname.lastname@example.org or on Twitter at @DanverSalemNews.