A former registered financial advisor previously employed by
UBS Financial Services Inc. of Puerto Rico (UBS-PR) pleaded guilty today for
his role in a scheme to fraudulently obtain and misuse non-purpose credit lines
for purchasing securities, resulting in over $1 million in improperly generated
commissions, announced Assistant Attorney General Brian A. Benczkowski of the
Justice Department’s Criminal Division and Special Agent in Charge Douglas A.
Leff of the FBI’s San Juan, Puerto Rico Field Office.
José G. Ramirez-Arone Jr., 60, currently of Fulton,
Maryland, previously of San Juan, Puerto Rico, pleaded guilty to one count of
bank fraud before U.S. District Judge Thomas F. Hogan of the District of
Columbia. Sentencing has been scheduled
for Feb. 8, 2019, before Judge Hogan.
As part of his guilty plea, Ramirez-Arone admitted that, in
his role as a financial advisor, he participated in a scheme in which various
of his clients at UBS-PR fraudulently obtained non-purpose credit lines (i.e.,
credit lines for which purchasing securities was expressly prohibited by an
internal UBS-PR policy) offered by UBS Bank USA (UBS-UT), a Utah-based
subsidiary of UBS Financial Services, Inc.
He admitted knowing that his clients then misused them by drawing funds
from the credit lines for purchasing securities, directly violating the credit
lines’ terms of use.
Ramirez-Arone further admitted that the scheme took advantage
of the low interest rate of UBS-UT’s non-purpose credit lines, and the payout
interest rate of closed-end funds (CEFs) offered by UBS-PR, which were mainly
comprised of Puerto Rican bonds.
Ramirez-Arone admitted that the CEFs had a payout interest rate
exceeding the low interest rate of the non-purpose credit lines. To capitalize on the difference between the
low and high interest rates by engaging in arbitrage, Ramirez-Arone advised
various clients that they could draw funds from a UBS-UT non-purpose credit
line and invest the funds in a UBS-PR CEF, he admitted.
In addition, Ramirez-Arone admitted that, to circumvent the
prohibition against purchasing securities with non-purpose credit line funds,
and to obscure from UBS-PR the origin of the funds, he advised clients to
obtain a UBS-UT non-purpose credit line by misrepresenting in a credit line
application the proposed reason for needing the credit line, which was an
important piece of information for UBS-UT.
He further admitted that he advised clients—after the credit line was
issued—to transfer UBS-UT non-purpose credit line funds to a third-party bank
(i.e., outside of the UBS banking system), before transferring the same funds
back into the UBS banking system to UBS-PR for investment in a CEF. This practice diminished UBS-UT’s ability to
recognize that funds originating from a UBS-UT non-purpose credit line were
later being invested in a UBS-PR CEF. As
a result of at least a portion of his illicit activity, from in or about
January 2011 through in or about September 2013, Ramirez-Arone improperly
generated approximately $1,225,500 in commissions, he admitted.
This case was investigated by the FBI. Trial Attorney Cory E. Jacobs of the Criminal
Division’s Fraud Section is prosecuting the case.
The Criminal Division’s Fraud Section plays a pivotal role
in the Department of Justice’s fight against white collar crime around the
country.
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