FINRA barred broker Steven Joseph Corzan of Aliso Viejo, California for allegedly engaging in private securities transactions that his then—employing firm, MML Investors Services, Inc., had not approved; the private securities were not available for sale through the firm and were eventually linked to a Ponzi scheme. Since MML (2001-2006), Corzan was a member of Chelsea Financial Services (2009) and Lighthouse Capital Corporation (2009-2010).
According to the findings, by October 2005, Corzan began actively soliciting sales of notes for the now-suspended California corporation Diversified Lending Group, Inc. ("DLG"), telling investors that the corporation was related to real estate and that investors stood to receive a guaranteed annual return of nine percent through 12 percent.
These sales were conducted outside of the scope of Corzan's employment with MML and its parent, the Massachusetts Mutual Life Insurance Company.
In 2005, Corzan allegedly contracted with marketing subsidiary Applied Equity, arranging for a nine percent commission for sales of five-year notes with a 12 percent annual interest rate and a lower commission for short-term notes and those with a nine percent interest return.
According to FINRA, firm MML never approved DLG note sales nor did MML offer DLG notes for sale through the firm. Similarly, Corzan did not disclose his agreement with the marketing subsidiary to MML nor did he inform MML whether in writing or otherwise of his intention to sell DLG contracts or notes.
The findings state that Corzan solicited $4,090,921 in principal investments, reaping a net commission of nearly $300,000.
In 2009, the Securities and Exchange Commission ("SEC") filed a lawsuit in the US District Court for the Central District of California against DLG, alleging that principal Bruce Friedman had committed securities fraud by misrepresenting how investor funds were to be used.
According to the SEC complaint and confirmed by a subsequent Court-appointed receiver, DLG had raised $222.6 million but itself was in fact a Ponzi scheme with distributions to existing investors created by funds from new investors.
MML's first written notice that Corzan had participated in DLG sales outside of the firm was allegedly a 2009 document associated with arbitration naming the firm—as Corzan's employer—as a respondent to a complaint.
When investing, it is important to ensure such transactions occur within and with the knowledge and permission of a broker's employing firm. If transactions are conducted outside of the firm's purview, the investor becomes susceptible to greater risk, generated not only by the increased personal interest a broker may have in completing the transaction at the expense of the customer's financial health, but by the fact that investing outside the scope of a FINRA-member firm also allows the broker to attempt to circumvent the firm's supervisory and compliance systems.
On March 27, 2013, a Los Angeles, California based FINRA arbitration panel found MML Investors Services, LLC and Kimberly Alicia Michel jointly and serverally liable to individual investors for $1,120,175.00 plus expert's and forum fees for sales of the DLG ponzi scheme. FINRA Case No. 10-4047.
If you have invested with Steven Joseph Corzan or another broker or financial adviser who has solicited sales in outside and unapproved business activities, private securities transactions, or ponzi schemes, and such involvement has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.