Heafner: Investment disaster ‘couldn’t have been foreseen’
High-profile financial adviser Jim Heafner says he, too, lost ‘significant’ money in investment that will be ‘the one black mark on my career’
This article appeared in the Sept. 4, 2019, edition of the Charlotte Ledger, a 3x/week e-newsletter focusing on local business news. Sign up for free here.
Financial adviser Jim Heafner — who dispensed retirement advice frequently on Charlotte radio and TV stations — says he feels horribly about steering clients toward an investment in a Florida company that the SEC has accused of fraud. But he says he doesn’t know what more he could have done.
“I wish I had never heard of 1 Global,” he said. “Other than that, my practice was terrific. We were well-known, we had the ear of the market, we had some great clients. We really helped a lot of people. I really enjoyed what I did. I never thought I’d retire, but I never had migraines until this.”
In a wide-ranging phone interview with the Ledger, Heafner at times sounded saddened that he had let his clients down by recommending that they invest in 1 Global, which he says at the time appeared to be a reputable company that helped businesses gain access to capital. The SEC later said that 1 Global fraudulently raised nearly $300M from more than 3,400 investors and channeled millions to its CEO, a former porn publisher named Carl Ruderman, in part to fund “lavish expenses such as a luxury vacation to Greece and monthly payments for his Mercedes Benz.” Ruderman last month agreed to settle his SEC case and pay $33M in profits he made from the venture.
Many investors did not receive their money back, though they could recover some of it as a part of 1 Global’s bankruptcy proceedings.
Local effect: Heafner said he estimates that about 50 of his 600 clients had money in 1 Global at the time it filed for bankruptcy protection last year. Three of those clients have filed complaints with FINRA, the securities industry’s regulatory body, alleging that Heafner’s investment recommendations were unsuitable and resulted in losses of between $100,000 and $238,000 each. Records show that in July, Heafner and FINRA investigators reached a settlement barring Heafner from “associating with any FINRA member firm in any capacity.”
At times, Heafner also sounded frustrated, especially when discussing additional allegations made against him last month in a lawsuit involving Baker Wealth Management, the firm Heafner agreed to transfer his clients to for $600,000 last year just a few months after the 1 Global investments came to light. (The Ledger disclosed those allegations last week.) Baker has balked at paying the full price, saying Heafner’s inappropriate investments soured some clients on working with him.
Asked about Baker’s allegations, Heafner said they’re just part of Baker’s attempt to wriggle out of a deal: “There’s not one bit of truth anywhere in there. … If they lost clients, it’s because they lost them.”
Heafner, 70, now lives in Puerto Rico. Other highlights from Heafner’s interview with the Ledger:
On dealing with clients: “Everything we sold, I think, is appropriate. But the one thing was 1 Global. I have always acted in my clients’ best interests. I’ve never done anything that would reward me financially over a client’s future. It doesn’t mean I haven’t made mistakes. It doesn’t mean markets haven’t gone down. 1 Global was presented as a great opportunity for clients.”
On his evaluation of 1 Global: “It looked solid as a rock. I put all my free cash in there – which was not a small amount as well – because it was a great deal for the short term. It was secured by assets or receivables or something solid. Now, the SEC says that wasn’t quite true and the audited statements they promised they were giving you weren’t really audited. So what’s true, we don’t know.”
On how much money he lost: “It’s significant.”
On whether its sensible to have retirement money in annuities, which pay high commissions to people like Heafner who sell them: “It is a high-commission product relative to the commission I make in one year on managed money on a stock or bond. But if I have that client for 10-20 years, I’m making a lot more having them in the market than in annuities. In fact, they call annuities ‘annu-icide.’ It suicides your commissions because it’s one and done. So the commission sh— is bull.”
On why he moved to Puerto Rico: “People say, ‘You moved to Puerto Rico to run away.’ Puerto Rico is part of the United States! It is subject to federal law. It is under the SEC’s jurisdiction. I’m not escaping anything by being here. We made a commitment some years ago that when we retired, we’d spend some time in Puerto Rico to help the economy out here. … This is for the year. Next year, we’ll see what we do. We didn’t escape anything by coming here.”
On what he’s up to nowadays: “I still am dealing with these issues with Baker and so forth. I’m retired. I go to the gym every other day. I walk my dogs in the mornings and try to do some fun things. But it will be some time, I think, before we are done dealing with all this mess.”
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