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Written by 2:15 pm Blog, Securities Fraud Articles

Montana Ponzi Scheme

In the beginning of 2010, Arthur Leroy Heffelfinger, a former financial advisor with KMS Financial Services, Inc., was arrested in Montana on a felony charge of exploitation of an older person amid allegations he raided the account of a woman in her 90s to sustain a Ponzi scheme he had been operating for years.

Heffelfinger, 63, of East Helena, also was charged with a felony count under Montana state law of operating a pyramid promotion scheme and a felony count of theft. Officials said Heffelfinger stole at least $2.02 million from clients to fund a Ponzi scheme.

The elderly woman, who died in October, was a patient in a nursing home. She suffered from “advanced dementia” and cognitive impairment, according to prosecutors.

Monies for the elderly couple were entrusted to Heffelfinger beginning in 2001. The woman’s husband, who also was in his 90s, died in 2002, according to court records.

Two days after Heffelfinger received the elderly couple’s initial investment of nearly $97,000 on March 12, 2001, prosecutors said, he started doling in out in Ponzi payments. Records suggest he set aside more than $36,000 of the opening deposit for his own use, and also caused “unnecessary tax consequences.”

After the woman’s husband died, according to records, Heffelfinger continued to manage money for the woman. Subsequent funds entrusted to him also went to Ponzi payments. Records in the case suggest a tax-refund check for the woman in the amount of $28,776 received in June 2003 and entrusted to Heffelfinger immediately was used to make Ponzi payments and pay Hellelfinger’s bills.

In September 2009, the woman’s daughter reported that checks to her mother’s nursing home had bounced. Believing that her mother’s funds had been invested in a Real Estate Income Trust (REIT) through Heffelfinger — the local manager of KMS Financial Services — the woman became alarmed, fearing that her mother suddenly would have to go on Medicaid to pay for her care.

Shortly thereafter, a KMS official flew to Helena to shut down Heffelfinger’s office, according to court filings. A state investigation ensued, and the Ponzi scheme was exposed. Before long, investigators determined that the scheme dated back at least to 1998 and that at least 28 investors from at least eight Montana counties had been fleeced.

In July 2010, Heffelfinger pled guilty to two felony charges arising from the scheme.

If you have questions about an investment you madewith Heffelfinger or KMS Financial Services, The White Law Group may be able to help.  For a free consultation, call the firm’s Chicago office at 312-238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida. With over 30 years of securities law experience, including experience working at FINRA (f/k/a the NASD) and the SEC, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions.

For more information on The White Law Group, please visit our website at https://whitesecuritieslaw.com.

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