Two broker-dealers were permanently barred by the Financial Industry Regulatory Authority for their alleged role in multi-million dollar Ponzi schemes, including one that involved fictitious investments with NYLife Securities totaling $3.7 million.

FINRA barred Oren Eugene Sullivan Jr. of Rock Hill, S.C., for misappropriating about $3.7 million in a decades-long Ponzi scheme involving more than 30 clients, including 15 widows, two Alzheimer’s victims and an individual with developmental impairments. At least eight of the affected clients were over 80 years old and another four were over 70 years of age. Numerous victims considered Sullivan a close family friend, authorities said.

William Walter Spencer Sr. of Franklin, Tenn., who “borrowed” nearly $2 million from elderly members of his church and from customers of his employing broker-dealer, Wiley Bros.-Aintree Capital LLC, was also barred.

“The misconduct of these brokers was nothing short of egregious – and their financial exploitation of the elderly, the infirm and people who considered them trusted friends shocks the conscience,” said Susan L. Merrill, FINRA’s executive vice president and chief of enforcement, in a statement.

Sullivan, a broker for NYLife Securities, was found from late 1988 to October 2008 to have obtained money for personal use by misleading his victims to believe they were investing in promissory notes or other legitimate financial products issued by NYLife or its affiliates. FINRA said. Most of the victims had already invested in one or more NYLife products sold by Sullivan. In exchange for the money he took from customers, Sullivan usually provided a one-page “note” stating the amount of principal and promising an annual interest rate, which ranged from 6% to 12%.

The notes stated that the borrower was an entity named “IFP.” “IFP” was a term Sullivan created that stood for “insurance financial product” or “insurance financial professional,” but no valid corporation or other legal entity named “IFP” ever existed, FINRA said.

Sullivan asked clients to pay for the “notes” with personal checks made out to “IFP-NYL” or “IFP-NYLife.” FINRA officials say the bank allowed him to deposit the proceeds of the checks into his own account, even though the checks did not bear his name. Sullivan then used the money for personal expenses, including the purchase of cars for his children and the payment of his children’s tuition at private colleges. Sullivan eventually had to take money from newer victims to meet the obligations owed to earlier victims, FINRA said.

FINRA said Sullivan obtained about $3.7 million in his scheme and owed about $2.2 million at the time he was caught. NYLife has reimbursed the $2.2 million to the affected customers.

Sullivan’s scheme came to light when one customer and her daughter discovered that he had misappropriated $10,000 given to him for the purchase of variable annuities for the benefit of her great-grandchildren. Instead of investing the money as promised, Sullivan used the funds to pay for his son’s wedding, officials said. Over three years, the customer had never received a statement showing the purchase or the investment performance of the variable annuities despite numerous requests. When the customer and her daughter visited Sullivan at his office and demanded to see the statements, he attempted to give the customer an interest-bearing note for the $10,000. He also attempted to avoid being reported to his superiors by giving the customer a letter he fabricated and fraudulently claimed to have been written by his firm’s compliance officers, officials said.

The letter falsely stated that he had already been reprimanded for his misappropriation. The customer’s daughter was suspicious of the letter and contacted Sullivan’s superiors, who then commenced an internal investigation and discovered Sullivan’s vast Ponzi scheme.

In the second case, from December 1997 to May 2008, Spencer induced investors to invest in promissory notes falsely promising rates of return 10% to 12% higher than rates available on traditional investments. In all, there were 234 such transactions and 80% of the investors were elderly members of his church community who had previously invested their funds in certificates of deposit or savings accounts, FINRA said.

FINRA found that Spencer knew at the time that he procured the loans that he did not have the liquid assets or ongoing income necessary to pay the interest and return the principal to the investors. Spencer failed to repay many of the individuals as promised and used the proceeds of new loans to satisfy existing loans.

FINRA described all of the individuals from whom Spencer borrowed funds as of “modest means.” For example, one customer was a 62-year-old school bus driver for special needs children who loaned Spencer $60,000 after her husband’s death. Spencer used the loan to repay other customers. Another customer faced the threat of foreclosure on his home due to Spencer’s failure to repay the $12,250 loan he made.

To avert the pending foreclosure, Spencer used funds from another customer to make the payment owed. An 80-year-old customer loaned Spencer $20,500. She later needed to make repairs to her home, but was unable to do so because of Spencer’s failure to repay the principal and interest due.

As is customary in FINRA cases, neither Spencer nor Sullivan admitted nor denied the charges, but consented to the entry of FINRA’s findings.