← Broker database 2023-10-02
John David Sullivan Charged with Failing to Provide Documents in Check Kiting Investigation
According to FINRA, John David Sullivan was named a respondent in a FINRA complaint alleging that he failed to provide documents and information requested by FINRA during an investigation into allegations that he engaged in a check kiting scheme by writing checks without sufficient funds across multiple personal accounts and a business account. The complaint alleges that FINRA requested Sullivan's personal and business tax returns for two years, but he produced incomplete personal returns and did not produce any business returns.
Check kiting is a form of fraud involving writing checks from accounts with insufficient funds and depositing them in other accounts, temporarily taking advantage of the float time between when checks are deposited and when they clear. This scheme artificially inflates account balances and can cause losses to banks. When FINRA investigates potential check kiting by registered persons, it raises concerns about financial stability, honesty, and fitness to work in the securities industry. Individuals engaged in check kiting schemes may also be misappropriating customer funds or engaging in other misconduct.
Subsequently, when FINRA requested that Sullivan appear for on-the-record testimony, his counsel stated that Sullivan would not be able to appear due to an asserted personal medical condition. However, Sullivan did not provide any information about his medical condition to substantiate this claim. Sullivan's failure to provide documents responsive to FINRA's requests significantly impeded the investigation and deprived FINRA of material information regarding his alleged check kiting scheme and his asserted medical condition.
The complaint represents allegations that have not yet been proven. However, if the allegations are established, Sullivan's refusal to cooperate with the investigation would warrant significant sanctions. Registered persons have an obligation to respond to FINRA requests for information and documents, and assertions of medical inability to testify typically must be substantiated with medical documentation. Without such documentation, claims of medical inability can appear to be pretextual excuses to avoid testimony. For investors, this case illustrates several important points. First, check kiting allegations against financial professionals raise serious concerns about honesty and financial stability. Second, refusal to cooperate with FINRA investigations typically results in bars from the industry, as cooperation is a fundamental obligation. Third, investors should check BrokerCheck regularly to see if complaints or regulatory actions have been filed against their financial professionals. While Sullivan is entitled to defend against these allegations, investors may wish to consider the risks of maintaining relationships with individuals facing such serious charges.