Monday, March 28, 2011

The Widow’s Mite (James Konaxis learns the hard hard way that churn can burn.)

A Massachusetts broker has been kicked out of the securities biz for managing to rack up over half a million in commissions. James Konaxis merrily traded a 9/11 widow’s accounts down from $3.7M to $1.6M, over a two-year period from 2008-2010. Now he’s been fired by his brokerage firm, which is providing restitution to the widow. The Massachusetts Secretary of State has banned him from working as a broker. And the SEC’s looking to claw back some of his “ill-gotten gains,” as well.

While Konaxis was churning away, making butter for himself out the widow’s milk, he was also BS-ing her, assuring her that, while her wealth was being impacted by The Great Recession, her losses were less than that of the other guy.

Konaxis has been tripped up by his excessive account churning, i.e., how often he made trades (which yield a commission whatever the direction of the sale). An average trading frequency of 6 is considered out of range, and Konaxis had a veritable trading mill going. His frequency on the poor widow’s account was allegedly 16.

About 75 percent of the commissions earned by Konaxis came from the widow's accounts, according to the complaint. Those commissions accounted for a large share of the decline in the value of the widow's holdings, the SEC charged.

Way to go, Jimmy!

That’s showing us how the Konaxis of evil, greed, and stupidity works.

Gosh, you’d think if you were going to screw your clients, you might want to even it out some, and not do most of the skimming off one account where it might be noticed. Perhaps he thought she wouldn’t catch on, what with being a widow with three kids and all, including a disabled child, in whose name one of the squandered accounts was held. (That’s an especially nice touch, isn’t it?)

Maybe he thought that, because the money in the accounts wasn’t earned the old-fashioned, sweat of the brow or luck-of-the-inheritance-draw way – its source was the Congress-funded September 11 Victim Compensation Fund – that it was okay to tap into it. After all, that was some of his tax money in there (assuming he paid taxes).

But if the widow – referred to in the Boston Globe article I saw on this as S.T., but named elsewhere online – didn’t earn the money the old-fashioned way, she sure did earn it the hard way. Her husband was a military officer killed in the attack on the Pentagon.

Konaxis is apparently no stranger to churning. I saw elsewhere that he’d churned up a storm at some prior brokerage firms, which had ended up settling with the victims on several occasions.  Apparently, being a churn-artist doesn’t prevent you from finding another brokerage firm willing to hire you.

Bad enough to be nabbed for churning, but widow and orphans…Even in this anything goes era, that still sounds bad. And a 9/11 widow yet. (Something’s are sacred, Jimmy boy, especially as we approach the tenth anniversary of the attacks.)

And now that he’s in the news, with both the Commonwealth of Massachusetts and the SEC after him – and his name splashed all over the news and the blogosphere – Konaxis’ illustrious brokerage career is likely a thing of the past. There’s knowing and then there’s knowing. And, at this point, there’s no excuse for any brokerage firm or prospective client not to.

It’s been a good many years since F. Scott Fitzgerald wrote that “there are no second acts in American lives.”

Fitzgerald was wrong: just think of Richard M. Nixon and Suzanne Somers. And what would he make of Charlie Sheen?

But maybe he was on to something.

In this day of instant info on everyone, if you screw up big time in Act One, you get the hook and curtain is wrung down on whatever play you happen to be performing in.

Which is not to say that James Konaxis won’t surface elsewhere. Let’s face it, until you drop dead in the footlights, your own personal show has to go on. And for most of us, that involves earning a living. But Konaxis won’t work as a broker again – that particular career is in shambles.

By now he’s probably learned the old-fashioned way that, in the end, churn doesn’t pay. And the new-fashioned way that, once your name’s in lights, thanks to The Google, it tends to stay there.

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