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Couple snared in scheme recovers $760,000

Claimed financial adviser altered checks, stole proceeds

Anne C. Vitale//September 3, 2009

Couple snared in scheme recovers $760,000

Claimed financial adviser altered checks, stole proceeds

Anne C. Vitale//September 3, 2009

A Kansas City couple has recovered nearly $760,000, including $400,000 in punitive damages, from a Florida-based brokerage firm whose financial adviser allegedly altered two checks payable to the firm, took the money and obtained more under false pretenses.

Donald and Patricia Halfmann, both in their 60s, were clients of the VFinance Investments Inc. brokerage firm, in Boca Raton, Fla. Patricia Halfmann, a beautician who works in her home, had been referred to the firm by a customer.

The customer’s nephew, Jeff Lafferty, worked in VFinance’s New Jersey branch office. Lafferty, 42, became the Halfmanns’ financial adviser.

The Halfmanns alleged that in 2004 Lafferty came to Kansas City to pick up two checks from them payable to VFinance totaling $109,803. The Halfmanns claimed that Lafferty, or someone acting on his behalf, altered the checks to make them payable to another person. Thus, the Halfmanns’ money was not invested through VFinance as they intended.

The Halfmanns also alleged that later in 2004 and in 2005 Lafferty accepted two checks from the Halfmanns for investments of $150,000. The Halfmanns believed that Lafferty was acting as an agent of VFinance, said their attorney, John J. Miller, of Kansas City.

In reality, Lafferty no longer worked for VFinance. But the Halfmanns claimed VFinance did not give them notice it had terminated Lafferty’s agency. The Halfmanns received “interest” checks on their investments from Lafferty from 2004 through mid-2007.

Lafferty has been imprisoned in New Jersey for running a Ponzi scheme, Miller said. The Halfmanns contended they were a victim of this scheme.

The Halfmanns alleged VFinance knew or should have known of similar misconduct by Lafferty before hiring him, that they failed to adequately supervise Lafferty while he was their agent, and that they failed to give notice of the termination of his agency. The plaintiffs claimed violations of the Missouri Securities Act as well as common law fraud, breach of fiduciary duty and negligence.

In defense, VFinance contended that the Halfmanns should have discovered the alteration of their initial checks and should have been aware that Lafferty no longer was an authorized agent of VFinance at the time of their subsequent investment.

The parties submitted the case to arbitration before the Financial Industry Regulatory Authority in Kansas City. The FINRA arbitrators awarded the Halfmanns $259,803 in compensatory damages, $400,000 in punitive damages, $100,000 in attorney’s fees plus interest at 8 percent on the compensatory award from July 1, 2007, until payment.

Defense attorney Adam H. Smith, of Boca Raton, Fla., declined to comment on the award. Mark Roth, General Counsel for VFinance, did not respond to requests for comments.

$759,803 arbitration award

Securities fraud/ breach of fiduciary duty

Court: Financial Industry Regulatory Authority, Kansas City

Case Number/Date:  08-0472/Aug. 6, 2009

Arbitrators: Michael Fitzgerald, Michael Kleinman, Robert McElwain

Defendant’s Experts: Lisa Roth, San Diego (securities industry)

Special Damages: $259,803 investment funds

Caption: Donald Halfmann and Patricia Halfmann v. VFinance Investments Inc.

Plaintiffs’ Attorney: John J. Miller, Swanson Midgley, Kansas City

Defendant’s Attorney: Adam H. Smith, Adam H. Smith P.A., Boca Raton, Fla.

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