Former Grand Forks, Grafton Stockbroker Pleads Guilty to Illegal Securities SalesFormer stockbroker Ross Haugen, 59, pleaded guilty today in state district court here to illegally selling $2.5 million worth of securities to six elderly Walsh County residents in 2006 and 2007.
By: Stephen J. Lee, Grand Forks Herald
GRAFTON, N.D. - Former stockbroker Ross Haugen, 59, pleaded guilty Wednesday in state district court here to illegally selling $2.5 million worth of securities to six elderly Walsh County residents in 2006 and 2007.
Each of the seven felony counts of acting as an unregistered broker/dealer carries a maximum prison sentence of 10 years.
But Haugen, who initially faced more than 50 felony counts of fraud and acting as an unregistered securities dealer, still might avoid prison time if he can come up with $2.1 million by the end of the month.
The main thing is making the elderly victims whole, said Walsh County State’s Attorney Barbara Whelan, who agreed to a possible plea deal. “If restitution of $2.1 million is paid back to six Walsh County residents, I will consider that a success.”
In November 2011, facing similar charges here, Haugen pleaded guilty and paid about $185,000 in restitution. Whelan agreed then that he would serve no time behind bars, but serve supervised probation that prohibits him from acting as a financial advisor.
Haugen now offers a similar deal with restitution on a larger scale, hoping again to avoid prison.
State District Judge Laurie Fontaine gave him until Jan. 29 to make full restitution on the seven counts, which Whelan figures would be about $2.11 million. If he does come up with the money, Whelan said she will not ask for any prison time, although supervised probation still would be on the table.
Haugen’s attorney, Steve Meshbesher, assured Judge Fontaine that Haugen would come up with the money, though the attorney has said Haugen has lost “everything” since being arrested in early 2010.
Last spring, Meshbesher quit Haugen’s case because Haugen failed to pay legal fees. A couple months later, the attorney was back, saying Haugen had paid.
Despite that history and Haugen’s dire straits, he’s the kind of person who “eventually” pays his debts,” Meshbesher said. “Friends and family… people who care about him,” will come up with the money, the attorney said.
Haugen’s wife and their two married daughters accompanied him to Wednesday’s hearing, as they have to previous ones. He’s been out on bond since spending a few weeks in the Walsh County jail in 2010.
After winning several delays the past two years, Haugen had been scheduled to go to trial Jan. 29. After months of denying wrongdoing, he admitted Wednesday he sold phony investments long after losing his license to deal in securities.
His clients, who range from 55 to 87 years old, live in the Grafton area. One, an elderly widow, invested $1.15 million with Haugen.
The phony investments were part of an international Ponzi scheme, according to Whelan and federal authorities. Using the name Coadum, Haugen and his associates sold more than $30 million in phony securities to 150 investors in the United States and Canada, said U.S. Securities and Exchange Commission officials who brought civil judgment of $2.5 million against Haugen in 2009.
They said Haugen was the main salesman, accounting for more than half the $30 million.
Haugen assured investors their money was safely invested when he knew Coadum’s founders actually were shipping it to overseas bank accounts in Malta and Switzerland, according to the federal charges.
The founders, James Jeffery and Thomas Repke, pleaded guilty to federal fraud charges and are serving prison terms. The SEC took only civil action against Haugen.
A federal receiver has recovered some of the $30 million, but much of it has been spent.
Meshbesher, however, said the fact that federal authorities are not criminally charging Haugen shows he intended no fraud himself. Haugen was a “Minnesota farm boy who trusted the wrong people,” the attorney said.
Haugen lived and worked as a stockbroker in the 1980s in Grafton and in the 1990s in Grand Forks, where one firm fired him for exploiting vulnerable clients.
He has been prohibited from selling securities for several years by federal and state authorities, and the terms of his probation keep him from any kind of financial advisement work.
More than once in court the past three years, Whelan angrily described Haugen’s tactics as preying on elderly people who trusted him, often because of church-related connections.
Haugen has many other victims who lost money to his slick sales pitches, Whelan said. “I’ve heard from many people in several states, wondering how they can get their money back.”