DEPARTMENT OF FINANCIAL SERVICES
DIVISION OF INSURANCE FRAUD
Enforcement Action Notification
Case Detective Gregg Tischler
Case Number: 09-456
Supervisor: Lieutenant Doreen Rivera Rapp
Nature of Occurrence
A. Warrant Arrest:
B. Probable Cause Arrest:
Pending
Pending
Completed
Completed
If Pending is checked, DO NOT RELEASE INFO TO MEDIA
C. Search Warrant:
D. Conviction:
E. Other:
Yes
Yes
No
No
Date of Action: 04/08/2013
Date of Anticipated Action:
Subject: Neal Seth Smalbach
Harbor, FL 34685
DOB: 12/21/1962
Co-Defendant:
DOB:
Address:
Co-Defendant:
DOB:
Address:
Address: 4427 Lavender Dr. Palm
Date of Actual Arrest if applicable: 5/15/2012
Arresting Detective(s): Detective Gregg Tischler
Charges(s): Eight (8) Counts of Grand Theft - FSS 812.014, Theft from Person 65 or
older - FSS 812.0145, Exploitation of an Elderly Person - FSS
825.103
Subject is booked into: Held at Hillsborough Jail
Maximum Possible Sentence: 7 years to 54 years
Victim: 33 Victims
Financial Loss: $2,074,846.19
Booked on Bond: $270,000.00
Synopsis
This matter was predicated based on multiple complaints received by
the Division of Insurance Fraud. It was alleged that Smalbach during
the course of conducting business, misrepresented the factual details
of investment products to senior citizens in order to make the sale.
Some of the alleged activity consists of “twisting” annuities.
Multiple Florida State Statutes have
Smalbach was the person who violated
committing crimes in the confines of
Sumter, Highlands and Levy Counties,
been violated and Neal Seth
these statute(s), thus
Pasco, Hernando, Citrus, Marion,
Florida.
Neal Seth Smalbach is a 50 year old white male. He has been a series
7 licensed broker since 1986 and originally worked for major wire
house (large financial institution) firms between 1986 and 1995
including E F Hutton, Shearson Lehman, Prudential, and Dean Witter.
By 1996, his reputation had significantly deteriorated due to
numerous customer complaints. His employment with GunnAllen Financial
(GAF) terminated in June of 2008: allegedly he impersonated a Schwab
client and forged a client’s signature on a new account form. In
April of 2009, he was suspended by FINRA for 6 months from
associating with any FINRA member, in any capacity, and fined
$10,000.00.
During the time frame of the following complaints, Mr. Smalbach
worked for Gunn Allen Financial until June 2008, and Summit Financial
Group / Summit Brokerage Services, Inc. After June 9, 2008, Mr.
Smalbach was no longer registered to sell securities in Florida and
obtained employment with Transfer Technologies International, Inc.
FINRA filed a disciplinary proceeding on July 18, 2011, in connection
with the numerous complaints received. In summary, Neal Seth
Smalbach fraudulently misrepresented the risks and omitted material
facts, sold unsuitable investments and falsified firm records in
connection with the sale of an oil and gas private placement
investment to retired, senior citizen customers. Some of the
investors were in their 70s and 80s when they invested in this highly
risky investment and they lost all or most of their investment. On
December 7, 2011, it was ordered that Neal Seth Smalbach be subject
to a permanent bar.
During the course of this investigation, Detective Tischler
interviewed 36 complainants / couples (only 33 were included as
victims due to statute of limitations). The majority of the
complainants were senior citizens. In all of these interviews, there
were several common factors in their complaints against Neal Seth
Smalbach. In sum, Mr. Smalbach concealed the true facts and risks to
the investors with the various investment products. A majority of
the investments required the investors to meet the suitability
requirements of an “accredited investor” in order to qualify to
participate in the investment. However, the majority of complainants
did not meet the investor suitability requirements. The majority of
the complaints involved high risk investments such as Provident Shale
Royalties, Royale Energy, AXA Equitable-Variable Annunity, Jackson
National-Variable Annuity, and Transfer Technologies InternationalStock Certificates and Promissory Notes.
This investigation revealed a systematic, ongoing course of conduct
perpetrated by Mr. Smalbach relating to his solicitation and sale of
securities to his clients / victims. On all of the listed
transactions, Mr. Smalbach never provided complete prospectus
materials to the victims. Most of the victims were unaware of the
details of the documents they were signing. Mr. Smalbach presented
forms to be filled out and directed them where to sign and place
their initials. These forms were never fully completed during Mr.
Smalbach’s visit with them. Mr. Smalbach would inform them that the
forms would be completed later.
Mr. Smalbach fraudulently induced the victims to sign blank
documents, which he completed himself, for the purpose of qualifying
the victims for investments that were unsuitable for them. He
intentionally failed to provide them with a prospectus knowing that
if he did, the information contained therein would directly
contradict the representations he had already falsely made about
these investments.
As a result of Mr. Smalbach’s misrepresentations, the estimated total
financial loss to all of the known victims (33 were included) is
$2,074,846.19. On May 15, 2012, Neal Seth Smalbach was arrested on
multiple counts of grand theft from persons 65 or older and
exploitation of an elderly person. On September 20, 2012 Smalbach
pleaded guilty to all counts charged.
On April 8, 2013, Neal Seth Smalbach was sentenced to 7 years in
prison, followed by 10 years of probation. He was ordered to pay
$2,074,846.19 in restitution to the victims.