Panel finds Charlotte-area financial advisor committed securities fraud, awards punitive damages

Panel finds Charlotte-area financial advisor committed securities fraud, awards punitive damages

CHARLOTTE, N.C. (WBTV) - An arbitration panel found that a well-known financial advisor in the Charlotte area committed securities fraud. The law firm Goodman & Nekvasil, P.A. announced that they have won a $1.03 million FINRA arbitration award for their clients against James Hal Heafner.

Clients of Heafner claim he squandered hundreds of thousands of dollars by investing in a risky business, according to complaints filed with the Financial Industry Regulatory Authority. The company he invested in is facing a lawsuit from the Securities and Exchange Commission.

The arbitration award includes $400,000 in punitive damages.

Heafner is accused of investing clients’ money in 1st Global Capital, according the complaints filed with FINRA. 1st Global is a South Florida company that has now had its assets frozen by the Securities and Exchange Commission. The SEC claims that 1st Global was paying commissions to registered and unregistered investment advisors to fraudulently raise $287 million in investments.

According to the SEC court filing, the owner of 1st Global put $35 million into his own pocket or his own companies. The SEC also claims 1st Global falsified financial information, including the return on investment.

“Evidence of the arbitration hearing showed that Heafner falsely represented that 1 Global was a safe investment and failed to disclose the risks of the investment,” legal documents state.

The panel awarded $1,033,362 against Heafner, which included attorney fees and $100,000 in punitive damages to each of the claimants.

"The Arbitration Panel specifically found that Heanfer committed ‘fraud, intentional misrepresentation, reckless disregard of high risk and reckless disregard of securities statutes by selling unregistered securities,’” documents state.

When 1 Global filed for bankruptcy, Heafner reportedly sent each of his clients a letter. Court documents state the letter read, “I could easily retire and move to an island, but our job is to try and do our best for you, knowing that life is full of perils.” The document says “ironically,” Heafner moved to Puerto Rico and abandoned his clients.

Viewers may recognize Heafner, as he paid for sponsored content on WBTV’s lifestyle program Morning Break. That relationship ended in November 2017. Heafner also advertised on WBTV until February 2018.

According to FINRA, Heafner was fired from a company for his outside business activities. Heafner confirmed to WBTV it was related to investments he made for his clients.

Heafner provided an email statement to WBTV in response to the FINRA ruling.

“It is important to know three things about 1Global and my involvement: 1) My clients will lose a substantial amount of their 1Global investment 2) I, alone, am responsible for recommending 1Global to my clients, and 3) I would never have recommended it to my clients, or invested myself had I known the extent to which 1Global represented itself,” Heafner wrote.

Attorney Kalju Nekvasil, who represented the Heafner’s clients in the FINRA case said they will continue to pursue Heafner to collect the award. He says so far Heafner has not provided any personal financial information.

Nekvasil also said they will file a claim against 1st Global’s insurance carrier to try and collect on the FINRA award.

On the FINRA website three customers of Jim Heafner claim he was negligent in investing their money in 1st Global. They say the losses add up to almost a half a million dollars.

"I did receive commissions on this like most anything else that certainly wasn't the motivating factor," Heafner said.

He did not tell WBTV how much he made in commission or whether it was more than other security commissions. Heafner estimated he had 45 clients whose money he invested in 1st Global.

WBTV obtained a letter a client says was sent to them from Heafner. The client does not wish to be named. In it Heafner compares himself to Captain 'Sully' Sullenberger, the pilot who landed the plane in the Miracle on the Hudson.

The letter reads "I always did the best for my clients and like Sully I am being accused of making the wrong call by clients, authorities and attorneys."

It also reads "The authorities say I didn’t follow protocol and that I should lose my licenses for my mistake.

Heafner’s material on WBTV was paid advertising and paid sponsored content and was not endorsed by WBTV. That relationship ended in February 2018. Six months later Heafner was terminated from the company that employed him. He is no longer a registered broker according to information publicly available on the FINRA and SEC websites.

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