WASHINGTON — A former broker for First Command Financial Planning was fined $25,000 this week and suspended from working in the industry for 10 months for cheating 12 retired military customers out of more than $50,000 combined.

Investigators with the National Association of Securities Dealers said that between August 2002 and January 2003, Louis E. Stough, a broker for the investment and insurance firm, convinced customers to liquidate certain investment plans and put the money back into others, collecting commissions on each transaction.

Herb Parone, spokesman for NASD, said First Command officials refunded the $34,400 in commissions they received shortly after discovering the scheme. Stough also was forced to refund his profits, which totaled $16,500.

Rather than having customers directly roll money from one fund to the next — which would not have cost the investors any extra fees — Stough instructed his clients to liquidate their plans, place the money in a bank account, then write a check to purchase the new mutual funds, investigators said.

The extra money movement enabled him to collect sales charges of up to 5.75 percent. Stough also misrepresented his process in financial filings of the transactions, noting the money was coming from “bank IRAs” and not from other First Command investments.

In a statement, First Command officials noted they were the first to report the improper fund movement and fired the employee shortly after the problems were discovered. The actions also violated company policies.

“First Command is deeply committed to pursuing our clients’ best financial interests,” the statement said.

Stough did not admit to the charges leveled by NASD, but did accept the penalty, officials said.

In December, NASD fined First Command $12 million for misleading customers about fees and returns from their systematic investment funds.

That investigation also included a $25,000 fine and 30-day suspension for First Command district supervisor James Provo, who responded to an Air Force officer’s complaint about the company by contacting his military officials and suggesting the critic should be punished.

Perone said Stough’s actions are unrelated to First Command’s December settlement.

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