NEW YORK, NY / ACCESSWIRE / October 12, 2021 / Malecki Law filed an expedited FINRA arbitration lawsuit today on behalf of investors claiming $2.5 million in losses discovered after the death of an apparent Ponzi schemer. A retired Florida couple, originally from New York, allege that their Long Island-based brokerage firm, Henley & Company LLC, failed to supervise its registered financial advisor Philip R. Incorvia, and failed to audit his satellite Henley branch office, which Henley is alleged to have in essence permitted Mr. Incorvia to run his Ponzi scheme out of for many years until uncovered after his recent death in August. The filing was made while victims are still coming forward following Mr. Incorvia's passing on August 12, 2021; it is believed that there are at least 15 to 17 additional victims, possibly many more. Through these and other alleged supervisory shortcomings, it is alleged that Henley aided and abetted the fraudulent scheme conducted by Mr. Incorvia, which he operated through his own side business entity, Jefferson Resources Inc., openly registered - and easily found with a simple Google search - to the same street address as the Henley branch office at 10 Beatty Road, in Shoreham, New York. It is believed that many of the scheme's victims reside along the East Coast of the United States, possibly elsewhere as well, spanning from Florida through New York and Maine. And while details are still emerging, it is clear that Mr. Incorvia ran the Ponzi scheme for nearly fifteen years or longer, only unraveling upon his recent passing. From discussions with counsel for Mr. Incorvia's estate, it appears that the money invested by victims of the scheme has not been located.

Public New York registration documents show that Mr. Incorvia formed Jefferson Resources Inc. in 1992, though evidence suggests that he did not start operating the scheme through this entity until after he was hired by Henley in 2006. The plaintiffs in the action filed today had been investing with Mr. Incorvia since the mid-1980s, following him through four other brokerage firms, but believe they were not sold any Ponzi products until 2007, after Mr. Incorvia started at Henley.

"It appears that Henley's lax compliance culture made Mr. Incorvia feel right at home, finally giving him the opportunity and platform to steal that he was looking for," said the plaintiffs' attorney, Jenice L. Malecki. Ms. Malecki added that "investors have a right to rely on the reputation of the licensed brokerage firms they invest with, as the design of our securities laws require firms to supervise their employees and offices to detect and prevent against fraud and suspicious activity; it appears Henley did not do that."

Securities regulators, including FINRA and the SEC, have supervisory rules, and have issued numerous reminders to the firms they regulate about remote and branch office supervision, including FINRA Notice to Members (NTM) 01-79, which warned firms of their obligation to review their procedures for fraud detection given the rise in Ponzi-related schemes. NTM 01-79 emphasizes firm obligations to monitor all outside business activities conducted by their registered representatives, such as Mr. Incorvia and the Jefferson outside business that he openly ran from within a Henley branch office.

According to the complaint filed, there were many suspicious signs that Henley ignored and could not have missed, which should have prompted Henley to investigate. For instance, Mr. Incorvia's LinkedIn profile prominently lists at the top that he has been an executive with Jefferson from 1992 to the present. In a purported ADV disclosure sent to investors under SEC requirements, Henley's advisory affiliate (Henley & Company Wealth Management, LLC) reported Mr. Incorvia's relationship to Jefferson to the SEC, yet Henley's brokerage entity (Henley & Company LLC) apparently failed to make the same disclosure to FINRA, noting its complete omission from Mr. Incorvia's FINRA BrokerCheck Report. Meanwhile, these Henley affiliates unquestionably share common management, the same office space, and the same management team, per Henley & Company LLC's BrokerCheck Report. The complaint also alleges that any surface inquiry by Henley would have further uncovered the numerous Internet directories (e.g., Yellow Pages, MapQuest, AllBiz) that show the shared office address of 10 Beatty Road between Henley and Jefferson. Had Henley properly monitored Mr. Incorvia, his banking activities, his accounts, mail directed to Henley's own office, Mr. Incorvia's emails, social media, files, computers and devices, and its own offices generally, it is alleged that Henley would have easily discovered these irregularities and other red flags noted in the complaint. But Henley apparently conducted no such inquiry or supervision.

The complaint additionally alleges that Henley negligently hired Mr. Incorvia in the first place, noting that Henley failed to place him on any heightened supervision despite him joining Henley with past arbitration and regulatory findings of fraud, including forgery and churning of customer accounts, all publicly disclosed through Mr. Incorvia's FINRA BrokerCheck Report. According to the attorney for the plaintiffs, Jenice L. Malecki, "I have been representing investor victims for over thirty years and, in my opinion, it is virtually impossible for a Ponzi schemer, whether it is Bernie Madoff or Phil Incorvia, to run a complex fraud all by themselves and for so many years without the help and willful blindness of firms and those charged with supervisory responsibilities looking the other way." As alleged in the complaint, Henley missed many red flags about Mr. Incorvia's background and failed to conduct any reasonable inquiry or supervisory audit into his day-to-day activities taking place right out of a Henley office.

As with the plaintiffs in the filed action, Mr. Incorvia allegedly had Henley customers send checks and investment money for his fictious Ponzi funds made out to Jefferson but addressed to Henley's office address at 10 Beatty Road. Some of the names for these seemingly fictious funds included Jefferson Resources Inc. itself, but also Vanderbilt Realty Investors, Inc., as well as many others which Mr. Incorvia represented to investors as "legitimate" because they were supposedly linked to commonly known indices, such as the S&P 500. For some of these funds, Mr. Incorvia would apparently send out monthly distributions, but for the most part he would encourage his victims to reinvest their returns, likely to ensure that the Ponzi scheme would not run out of money. In practice, Ponzi schemes require a constant flow of new money from new investors in order to pay distributions to the earlier investors, otherwise the scheme falls apart. It is alleged that Henley provided this fertile base of customers and new money to Mr. Incorvia without any oversight, allowing the Ponzi scheme to remain ongoing and to flourish for at least well over a decade. When he passed, the jig was clearly up, as there were no real investments to find.

In the past, Malecki Law has filed similar Ponzi and supervision claims with successful results on behalf of investors defrauded through the inadequate supervision of their brokerage firm. Just within the last year, Malecki Law recovered millions of dollars in losses for investors victimized by Biscayne Capital and several of its corporate officers, indicted last month in federal court in Brooklyn on charges of defrauding Latin American investors of over $155 million. In 2018, Malecki Law recovered over $4 million for a group of 9 investors who fell victim to the Hector May Ponzi scheme in update New York. And earlier, Malecki Law previously recovered over $7.4 million in investment losses in the Robert Van Zandt Ponzi scheme, representing 120 victims from the Bronx, New York.

For further information about Philip Incorvia in relation to Henley & Company LLC, please call or email Jenice Malecki at 212-943-1233 or jenice@maleckilaw.com. Ms. Malecki was recently appointed as co-chair of the New York State Bar Association's Commercial & Federal Litigation Section's Securities Arbitration Committee. Her firm, Malecki Law, has a uniquely diverse background with experience representing clients in securities and investment fraud issues. Malecki Law also hosts a website providing information and resources dedicated to the securities industry: www.AboutSecuritiesLaw.com.

SOURCE: Malecki Law

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