Jeffrey Kluge, a former Merrill Lynch broker based out of St. Paul, Minnesota, pleaded guilty to two counts of bank fraud at the end of March 2017 for his role in a long, complex ploy that defrauded two banks out of $8.7 million. Kluge create fake Merrill Lynch account statements as part of the scheme to pledge false collateral to the banks to build multi-million dollar lines of credit, his plea agreement filed with the U.S. District Court in Minnesota said.
Also, Kluge made a fake internet domain name, www.mymerrillonline.com, which he use to make a false email account: email@example.com. From that account, he sent false Merrill Lynch account statements to one of the banks, Platinum Bank. Jeffrey Kluge additionally made a fake identity of a supposed Merrill Lynch employee that he used when emailing the bank, said the plea agreement.
Kluge’s operation began in 2001 and continued until November 2016, court documents reflected. He left Merrill Lynch early that month. At that time, he was a defendant in two Minnesota state court actions claiming breach of contract, fraud, and claim and delivery.
In April 2001, Jeffrey Kluge acquired a line of credit for $150,000 with Alliance Bank, a Minnesota commercial bank, representing to it that he had shares in municipal bond funds sufficient to serve as collateral, the plea agreement stated. He gave false account statements to back up the claim. These statements to Alliance concealed that he had already pledged the assets in his Merrill Lynch account for loans he had received from the firm. In November, the outstanding balance on the line of credit was almost $6 million.
In May 2007, Kluge acquired a $1 million line of credit from Platinum Bank, a Minnesota commercial bank. He used the same scheme as with Alliance Bank, pledging assets as collateral for loans he had already used as collateral with Merrill Lynch and hiding that information from the bank. In November, the line of credit had a balance of $2.7 million.
FINRA suspended Kluge last month.
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