New York Securities Fraud Lawyers Blog
This week, Malecki Law filed its second FINRA arbitration lawsuit against Henley & Company, LLC on behalf of a group of retirees who lost their money in an apparent Ponzi Scheme. Their arbitration alleges that they were victimized by the brokerage firm’s inadequate supervision over its registered representative, Philip Incorvia, by allowing him to run his alleged Ponzi scheme unchecked out of a Henley branch office.
It is alleged that for nearly fifteen years, Henley failed to supervise Mr. Incorvia as he sold fictitious investments in Jefferson Resources and Vanderbilt Realty out of Henley’s Shoreham, New York office. The scheme was uncovered when he died in August of 2021. Investors not only trusted Mr. Incorvia, but their trust was bolstered because Henley’s documents prominently featured a reassuring connection to Jefferson Resources, lending it a sign of legitimacy. For example, Henley featured Jefferson on much of its correspondence sent to customers, including monthly statements, tax documents, and general letterhead. Malecki Law filed its first lawsuit on behalf of a retiree in October of 2021, claiming losses of $2.5 million. Since then, more Henley customers have come forward after demanding answers and failing to receive financial restitution from Henley.
The five investors who are part of the second group lawsuit, filed this week, are claiming losses in excess of $900,000, and are all elderly retirees from New York, New Jersey, Massachusetts, and Florida. FINRA has already granted the group expedited status to the proceedings due to their senior age, which should help fast track a recovery. Some of the investors in the group were already delayed in learning about the scheme because it appears Henley failed to notify them of the fraud, which several of its corporate officers named in the lawsuit were believed to have known about for several weeks or months following Mr. Incorvia’s death. In November 2021, it is alleged that Henley further sent out a misleading letter to its customers, suggesting that they could recover their lost investment funds through an insurance policy benefitting Mr. Incorvia’s personal estate. Henley’s letter failed to mention that the investors seeking a recovery against the estate would likely not have legal standing to bring a claim, since the alleged investments were in the names of a companies, not Mr. Incorvia personally. The letter also omitted that Henley had apparently already sought to claim the proceeds of the policy for itself under contractual indemnification and contribution clauses within Henley’s own employment agreements with Mr. Incorvia.
As a FINRA- registered brokerage firm, Henley was obligated under industry rules to reasonably supervise and audit all registered members and branch offices. FINRA rule 3110 requires member brokerage firms to provide an equal level of supervision to remote branch offices as required for main offices. Firms must also review office activities, including periodically examining customer accounts to detect irregularities and prevent abuse. Throughout Mr. Incorvia’s fifteen-year employment history with Henley, the SEC and FINRA have each repeatedly stated the importance of firms to closely supervise their smaller, dispersed offices. Both regulators also jointly issued Regulatory Notice 11-54 to guide firms on how to perform their required supervisory duties in the inspection of their branch offices.
Numerous red flags indicate that Henley conducted no reasonable level of supervision over Mr. Incorvia and the branch office he worked out of. Countless documents indicate that Henley was well aware that Mr. Incorvia was running a side business, Jefferson Resources, out of its branch office. Mr. Incrovia allegedly ran his Ponzi scheme by soliciting investor funds through Jefferson, which investors mailed right to the Henley branch office he worked out of. Public documents show that Jefferson Resources is a New York business entity registered to Mr. Incorvia for at least a decade before he joined Henley. Henley clearly knew about it because it shared equal space on Henley letterhead in much of the correspondence it sent out to its customers, lending an apparent legitimacy to Mr. Incorvia’s fraudulent operation. As alleged in the complaint against Henley, the entire scheme would have been prevented had Henley performed even the most minimal level of supervision.
Due to Henley’s apparent failure to be more forthright with its affected customers, it is believed that there are still other investors who do not know where to turn and may be unaware that Henley itself has liability for the actions of its employees. Any former clients of Mr. Incorvia or Henley are encouraged to pursue legal action to recoup their losses. Our New York securities lawyers have expertise in Ponzi cases, successfully recovering tens of millions of dollars in other Ponzi matters, including representing more than 120 victims from the Bronx in the Robert Van Zandt Ponzi case, another group of upstate New Yorkers and pension plan recipients defrauded by imprisoned Ponzi schemer Hector May, and more recently recovering losses in 2020 and 2021 for Latin American investors defrauded by Biscayne Capital and its principals, currently under indictment for a $155 million investment fraud in the Eastern District of New York. If you suffered losses with Mr. Incorvia and Henley & Company LLC, contact our top-rated investment fraud attorneys for a free case consultation.