St. Petersburg securities lawyer Kevin Carreno says he was targeted to prevent his appointment as Florida’s top financial watchdog because he threatened to expose regulators for failing to uncover the multi-billion dollar Ponzi schemes of Bernard Madoff and Allen Stanford.
“Thirty billion dollars of what Madoff stole was taken from residents of Florida; Stanford ran his operation out of Miami,” Carreno said. “I made no bones about it. I’d have issued subpoenas against FINRA.”
Carreno said his appointment as commissioner of Florida’ s Office of Financial Regulation was sabotaged in 2009 by the Financial Industry Regulatory Authority (FINRA) which falsely accused him of two charges of wrong-doing as chief operating officer of the now-defunct Empire Financial Group.
Broward Bulldog has confirmed Carreno’s assertion that he was in line for the commissioner’s job in March 2009 when FINRA notified him he was the target of an enforcement action. The post requires approval by the Financial Services Commission – comprised of the governor and the Cabinet – and a vote was being sought when FINRA acted.
Carreno was cleared this month of technical violations of licensing and other rules of the National Association of Securities Dealers. Prior to the FINRA charges, legal papers say, Carreno had an unblemished record.
FINRA may have dodged a grilling from Carreno
FINRA is a private corporation established and funded by the securities industry to police itself. Its web site says it oversees nearly 4,600 brokerage firms, about 163,500 branch offices and more than 630,000 individual stockbrokers.
Florida’s Office of Financial Regulation regulates the state’s securities, banking and financial services industries, including mortgage brokers.
FINRA spokeswoman Nancy Condon declined to comment on the outcome of Carreno’s case. She said, however, that the charges against him were filed in good faith “based on the facts at hand.”
As commissioner of Financial Regulation, Carreno said he would have grilled FINRA for its inaction regarding Madoff and Stanford.
“They would have had tough questions to answer about how they missed all this. I think that got back to FINRA,” Carreno said.
Madoff, a part-time South Florida resident who owned a mansion in Palm Beach, was an investment advisor and a former chairman of the NASDAQ who pleaded guilty in 2009 to operating a record-breaking Ponzi scheme that cost clients about $65 billion in actual and paper losses. He is serving a 150-year prison sentence.
Stanford, who operated out of offices in downtown Miami, has yet to stand trial in federal court in Texas, where he is accused of bilking as much as $7 billion from clients in an elaborate Ponzi scheme. Stanford, who has denied any wrongdoing, faces spending the rest of his life in prison.
Hearings held and charges dismissed
The charges against Carreno were dismissed by a three-person panel of FINRA hearing officers that took several days of testimony last spring. The panel’s decision was issued Jan. 19, 2011, but did not become final until earlier this month.
Carreno, who now works as a consultant, said he was “pleased” with the panel’s decision.
But Florida lost a strong presence to protect investors, said Scott Silver, a Coral Springs attorney who specializes in stockbroker fraud cases and has worked with Carreno.
“This decision is a right that can’t correct the wrong that was done to Mr. Carreno,” Silver said. “The people of Florida lost the opportunity to have a man in charge who would truly have served investor protection.”
Carreno’s attorney, James Sallah of Boca Raton, said the decision “clearly vindicates” his client and “reflects the meritlessness of the complaint.”
In defense documents, Carreno alleged the charges were “retaliation” for a lawsuit he caused to be filed in 2008 against FINRA and several of its officials while he ran Empire.
“FINRA gave Mr. Carreno notice of its intentions [to pursue charges] just 36 hours after he was advised by the Florida governor’s office of his nomination for the Commissioner of Florida’s Office of Financial Regulation,” says one document. “As a result of this action, Mr. Carreno’s appointment…was terminated.”
Empire’s lawsuit accused FINRA of improper efforts to shut down the company. The suit was eventually dismissed, but it sought internal FINRA documents and named as several FINRA staff as defendants – including regional director Mitchell Atkins of Parkland.
FINRA’s Condon said the regulators’ case against Carreno “had nothing to do with retaliation” for the lawsuit.
Retaliation days before possible vote?
FINRA attorneys served notice of their investigation to Empire’s general counsel, Todd Zuckerbrod, days before Carreno was scheduled to travel to a March 2009 Cabinet meeting in Tallahassee for a possible vote on his nomination.
Zuckerbrod, of Palm Beach Gardens, said one FINRA lawyer made a point of telling him during a phone call to make sure the governor’s office was notified.
“She said something like, “I know what’s going on and you’ve got an obligation to report this to the governor,” said Zuckerbrod.
The commissioner’s position became open in August 2008 after Don Saxon, who had been in charge of Florida’s Office of Financial Regulation since its creation in 2003, resigned under pressure. The Miami Herald, at the time, reported how his agency had licensed thousands of former criminals as mortgage brokers. Those individuals later stole millions from consumers, the newspaper reported.
After Carreno’s bid to succeed Saxon fell apart, the job went to former J. Thomas Cardwell, longtime general counsel of the Florida Bankers Association.