Fired Wells Fargo investment adviser charged in $5M alleged fraud

A fired Wells Fargo investment adviser in the Twin Cities is facing federal securities fraud charges for allegedly stealing more than $5 million from clients.

In a statement released Tuesday, Minnesota U.S. Attorney Andrew Luger said Bradley Smegal, 63, is facing two counts of securities fraud.

Authorities said from mid-2007 through early 2013, Smegal convinced at least 14 of his clients to invest in entities where he had a personal stake. The charging document, known as an information, says Smegal did not disclose his involvement to his clients, falsely described the investments as conservative, and "guaranteed specific rates of return."

Smegal and his wife Catherine Sue Smegal, who have since moved from Minneapolis to Bainbridge Island, Wash., filed for Chapter 7 bankruptcy in 2013.

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They claimed estimated personal assets of $77,420 including three Rolex watches, two Cartier gold bracelets, and a Mercedes-Benz sports car. In their filing, the couple listed $4.4 million in estimated liabilities, including $2.7 million in claims from two Prior Lake women who were Smegal's clients.

Prosecutors said Smegal diverted more than $825,900 to his personal bank account and sometimes made "Ponzi-type payments" to investors.

Wells Fargo fired Smegal in late 2011. Six months later, the Financial Industry Regulatory Authority banned him from the securities industry.

However prosecutors said even after Smegal was fired, he led some clients to believe he still worked for the bank.

Smegal declined comment when reached by phone Tuesday.