The founder of a Geneva-based investment firm was indicted Friday for embezzling $3.9 million from clients.
Stephen C. Browere, the founder and principal of Stephens Capital Management Inc., used client funds to trade his own stocks and to purchase a yacht and luxury vehicle for himself, according to a statement from the U.S. Department of Justice.
Using the promise of lucrative and guaranteed returns, Browere, 56, persuaded his clients to purchase $1.66 million in promissory notes in Douglas Capital Corp., which is a company where Browere’s relative was president and Browere had access to company lines of credit, according to the statement.
He initially promised an annual interest return of 8.5 percent from the promissory notes, plus full repayment of the principal at the end of a year or upon expiration of the notes, according to the statement.
Many of the investors pledged their life savings or funds from their qualified retirement plans or retirement accounts, according to the statement.
“Browere concealed the scheme by using principal payments from some investors to make interest payments to others, and by mailing phony account statements that inflated the market performance of their portfolios,” according to the statement.
The Geneva resident used the money from the promissory notes for his own investments and to cover personal expenses, like buying a yacht and luxury vehicle, according to the statement.
Browere also obtained the power of attorney on behalf of an elderly client who suffered from dementia. This gave him access to the client’s money and property valued at $2.1 million, which he used to buy four vacant lots in Lisle and to make interest payments to other clients, according to the statement.
“After the client died, Browere maintained control over the estate and continued to misuse the estate’s assets,” according to the statement.
When the elderly client’s money began to run out and some clients began requesting reimbursement of their principal investments, Browere announced that interest on the notes would be reduced to 2.5 percent and payment of principal amounts would be delayed “until further notice,” according to the statement.
Browere blamed Douglas Capital’s financial problems on the “economic melt down” and the “current banking system and new government rules and regulations that continue to create havoc in this area of the economy,” in a Aug. 25, 2010 letter to investors.
Browere could not be immediately reached for comment.
The indictment alleges that Browere embezzled funds from 2007 until February 2014.
The indictment charges Browere with eight counts of mail fraud, and it seeks forfeiture of the four vacant lots in Lisle and other properties in Geneva and Lisle, according to the statement.
Each count of mail fraud carries a maximum sentence of 20 years in prison, a $250,000 fine and mandatory restitution.
An arraignment hearing will be scheduled at a later date.