Peabody Man Accused of Defrauding Local Seniors of Nearly $500K

A Peabody man is accused of defrauding local seniors out of nearly $500,000 via a scheme in which he allegedly convinced his victims he was a registered brokerage dealer and then stole money from their accounts, using it for among other things, meals at restaurants and shopping at local stores.

The complaint against John Michael Babiarz, 39, who lives on Pulaski Street in Peabody, was filed by Secretary of State William Galvin's office, claiming Babiarz violated the Mass. Uniform Securities Act.

Four victims are identified: a 72-year-old Boston resident, a 75-year-old Peabody resident, an 81-year-old Swampscott resident and an 83-year-old Danvers resident. Investigators believe, however, Babiarz engaged in similar fraudulent practices with additional investors not accounted for in the complaint.

The restitution sought by Galvin is for Babiarz to immediately stop his activities, provide a financial accounting of such and fairly compensate his investors for losses attributable to his alleged misdeeds, turn over any profits he received and pay a fine.

Galvin also wants Babiarz barred from any future work in broker-dealing, securities or investment advice.

The Securities Division of Galvin's office launched an investigation on Aug. 29 upon receiving a complaint from Babiarz' Boston client that he improperly withdrew assets from her brokerage services accounts. Authorities then learned Babiarz was fired in 2011 from Bishop, Rosen & Co., Inc. for finance industry regulatory violations.

Authorities also discovered Babiarz, while unregistered, allegedly deceived his recent elderly clients telling them he was an agent of Fidelity Brokerage Services, LLC in Boston and convinced them to transfer their funds to the firm for him to manage.

Authorities say Babiarz transferred at least $486,790 of those clients' assets to personal and family brokerage and bank accounts, although later in the complaint they say the four investors have suffered total losses of at least $491,755.

"These transfers allowed Babiarz to utilize the stolen funds for his and his family's own benefit, both via significant amounts of cash withdrawals and expenditures at various restaurants and stores in the Commonwealth," reads the complaint.

According to authorities, Babiarz worked for three different firms between 2004 and 2011, including Bishop, Rosen & Co., until his termination after allegations from a customer that Babiarz "misrepresented features of a certificate of deposit" in violation of industry regulations.

He also paid a $5,000 fine and was given a 20-day suspension from the National Association of Securities Dealers following allegations by clients, and then this past January, he was slapped with a 90-day suspension and a $20,000 fine after the Financial Industry Regulatory Authority determined he settled or attempted to settle complaints with customers without the knowledge or approval of his employer.

The Securities Division says Babiarz hasn't been registered to work in any capacity in the securities business in Massachusetts since Sept. 7, 2011. At least one of his recent clients, however, he apparently met several years ago.

So where he did he spend their money?

The complaint says that from September to November, Babiarz wired $54,000 from the Boston investor to his E*TRADE account and spent it at Market Basket, Target, Walmart, Community Health in Woburn, CVS, Dunkin' Donuts, Downtown Pizza, the Onion Town Grill and TJ Maxx, among other stores, as well as making several cash withdrawals at local banks.

He also withdrew $124,740 this past spring and wired it to a joint bank account held with his father. According to the complaint, those regular withdrawals only increased when Babiarz' unwitting investor saw the receipts of numerous transactions and contacted him in July.

That one investor has suffered losses of $183,690 at Babiarz' hands, according to Galvin's office. The Peabody investor has lost about $25,000, while the Swampscott client lost $172,000 and the Danvers client lost $111,000.

Some of Babiarz' other expenditures were at Canobie Lake Park in Salem, N.H., various gas stations, stores at the Northshore Mall, Treadwell's Ice Cream and McDonald's.

Babiarz was subpoenaed to testify before the Securities Division at a hearing Sept. 12, but failed to appear. He is accused of three different violations under state law.