LOS ANGELES (CN) - A Redlands, Calif. money manager stole $4.4 million from a college scholarship trust account and from another trust for an 80-year-old dementia patient, the SEC claims in court.
The SEC sued broker-dealer John Thornes, 47, on Monday in Federal Court.
The SEC claims Thornes misappropriated money and gave some of it to a friend, relief defendant Christopher Burnell, who used it to pay gambling debts and taxes and to charter a private jet for his sick wife.
Thornes gave another friend, relief defendant Kyle Larick, more than $1.2 million, which he spent on a $800,000 Big Bear vacation home and $93,000 luxury vehicle, according to the SEC complaint.
The SEC claims that Thornes stole money from the trusts from December 2010 to January 2013.
Thornes managed the Shultz Trust and Harbison Scholarship Trust accounts through his firm, Thornes & Associates.
An 80-year-old woman with dementia was the beneficiary of the Shultz account, which was set up to provide her with around-the-clock nursing care, the SEC says. Thornes became trustee of the account in May 2007.
Thornes' mother, relief defendant Doreen Thornes, had been the trustee for the Harbison account, which had been created in the will of a Thornes' family friend, who died in the early '90s. Doreen asked her son to manage it because she had no accounting or financial experience, the SEC says.
"With respect to the Harbison Trust brokerage account, Thornes usurped control from his mother and engaged in unauthorized trading in the account as the registered representative," the 10-page lawsuit states. "Thornes used this control to misappropriate and transfer more than $4.1 million from these accounts to his friends, relief defendants Christopher L. Burnell (Burnell) and Kyle W. Larick (Larick), for improper and unauthorized purposes, including $2.9 million to Burnell for, among other things, payment of Burnell's gambling debts and tax liens, and more than $1.2 million to Larick for, among other things, the purchase of a vacation home and a luxury vehicle."
Thornes and his business received tens of thousands of dollars in margin interest and brokerage commissions, the SEC says.
As of March 2011, the Shultz trust account had a balance of $2.08 million, the SEC claims. But by April 2013, the balance was $384,000. The Harbison trust account allegedly held $3 million in 2013, and $155,000 in April 2013.
Thornes & Associates was expelled from the Financial Industry Regulatory Association after the association filed an administrative action against Thornes and his firm last year, the complaint states.
The SEC seeks disgorgement and fines, and wants Thornes ordered not to do it again.