Spokane, Washington – Vanessa R. Waldref, United States Attorney for the Eastern District of Washington, announced today that Ronald Walter Hannes of Spokane, Washington, was sentenced after pleading guilty to Investment Advisor Fraud. United States District Judge Thomas O. Rice imposed a sentence of five years of probation. He also ordered Hannes to sell his assets, including his home valued at more than $700,000, in order to pay restitution to his victims.
According to court documents and information provided at sentencing, Hannes was the owner and operator of Hannes Financial Services, Inc (“HFS”). Through HFS, Hannes provided brokerage services to clients under the authority of Woodbury Financial Services.
In December of 2019, following complaints from one of Hannes’s clients, Woodbury Financial Services terminated Hannes’s employment and brokerage relationship. The Financial Industry Regulatory Authority (FINRA) later barred Hannes from acting as a broker or otherwise associating with a broker-dealer firm. The Federal Bureau of Investigation (“FBI”) also opened an investigation into Hannes after receiving information from the Washington State Department of Financial Institutions.
The FBI’s investigation established that Hannes engaged in a scheme to defraud at least 21 investors (“Victims”). The Victims were Hannes’s previous clients, who had established accounts through Woodbury Financial Services. Some of the Victims were Hannes’s friends, while others were referred to Hannes by family and friends. Hannes persuaded the Victims to invest in separate “high rate, tax free” bond investments. Hannes also convinced the Victims to write checks to HFS, or directly to third party companies at Hannes’s request, to invest in the bonds. Hannes also encouraged clients to “roll-over” their investments once their bonds purportedly matured. The investigation, however, revealed there were no bonds or securities attached to these investments. When a Victim demanded the return of their funds or chose not to “re-invest,” Hannes would provide a pay out to those individuals.
As part of the scheme, Hannes falsely claimed to his victims that he pre-purchased the bonds and that the victims’ money was being used to reimburse Hannes for bonds he had purchased in advance on their behalf. Hannes also provided his victims with fictitious account documents falsely indicating the amount of money the investors would make at maturity if they re-invested or requested a full redemption. Again, however, there were not actual bonds or securities connected with these investments.
Ultimately, investigators determined Hannes was operating several investment accounts where he received payment to invest in bonds that did not actually exist. An audit showed that between April of 2012 and March of 2020, approximately 288 checks were written from investors to HFS or entities associated with Hannes. In total, Hannes’s fraudulent scheme resulted in victims losing more than three-million dollars.
“Mr. Hannes’s clients trusted him with their hard-earned money and expected him to safeguard it. Instead, Mr. Hannes pulled them into a fraudulent scheme to enrich himself and leave his investors with nothing,” said U.S. Attorney Waldref. “Today I heard directly from the investors who Mr. Hannes swindled, and my resolve is further strengthened to protect the hard-working people of our community from investment schemes and hold fraudsters accountable.”
“This $3 million loss tragically represents investors’ careful savings, financial freedom, and hopes for the future,” said Richard A. Collodi, Special Agent in Charge of the FBI Seattle Field Office. “Not only did Mr. Hannes fail to provide honest investment services, but he also defrauded people he knew by taking advantage of previous business clients, friendships, and referrals for his own gain. Every one of the hundreds of checks he deposited into his own accounts was a betrayal of his responsibilities and relationships.”
This case was investigated by the Federal Bureau of Investigation. It was prosecuted by Assistant United States Attorney Patrick Cashman.
A video statement from U.S. Attorney Waldref
