Wall Street Fraud
SEC Looking into Subprime Mortgages
Category: Fraud in the News
The Securities and Exchange Commission has opened 12 investigations regarding securities fraud in the packaging and sale of securitized subprime mortgages. Recently two of Bear Stearns Companies hedge funds nearly collapsed due to investments in collateralized debt obligations that included subprime loans. Bear Stearns agreed to provide up to $3.2 billion in financing for one of the funds after investment bankers discovered that the underlying value of the funds were much less than the had thought them to be.
Another Hedge Fund Manager Pleads Guilty
Category: Fraud in the News
In the unregulated Wild West World of hedge funds where just about anyone can open a hedge fund and accept millions of dollars from investors, another hedge fund manager has pleaded guilty for defrauding investors in his commodity pool and stealing their capital.
Anthony M. Ramunno Jr., 46, of Alphretta, Ga. faces up to 40 years in prison and a fine of $500,000 on two counts of wire and mail fraud by a grand jury in the U.S. District Court for the Northern District of Georgia.
Weekly, I receive calls in my law practice representing investors who have invested with unscrupulous hedge fund managers. With hedge funds going down as rapidly as they climb up, this is a market of the buyer beware. While there are supurb hedge fund managers, one has to be very careful with whom one gives their money to. securities practice about people who have invested with unscrupulous hedge fund managers.
$357M Fannie Mae Fund to Be Distributed by SEC
Category: Interesting News
Fannie Mae settled allegations in May 2006 that it altered its Securities and Exchange Commission financial reports and filings by $11 billion between 1998 and 2004. A fund was set up to provide partial compensation back to the victims of this fraud. The U.S. Securities and Exchange Commission began a distribution process on April 30th in the amount of $357 million to settle fraud charges with Fannie Mae.
Managers at Mutual Benefits Corp. Pleaded Guilty
Category: Fraud in the News
Mutual Benefits sold viatical which are investment interests in life settlement. Investors would buy interests in life insurance companies at a discount from terminally ill or elderly people in need of cash and would collect the benefits when the insured died. Mutual Benefits Corp. was closed in May 2004 by Federal Regulators.
One of the Managers, Carol Triana admitted to acquiring the insurance policies, knowing that the sales agents were misleading investors. The Managers have agreed to payback investors $830 million in restitutions and plead guilty to securities fraud. The question to ask is if these two Managers have such funds to payback investors.
Defrauded investors should consider bringing lawsuits against the sales agents who sold these investments to them. I am representing several families in a lawsuit against the brokerage firm that sold these investments to them.
Ebbers Conviction Upheld
Category: Fraud in the News
Bernie Ebbers will now begin his 25-year prison term. His conviction was upheld by a three-judge panel. This was no surprise to anyone following his case. He was part of an $11 billion fraud. Ebbers who had been a milkman and bouncer built a small phone company into the second largest long distance provider in the USA. Although Ebbers can appeal to the full appeals court, his bail will likely be revoked by the judge in charge of the case. In addition to Ebbers and Chief Financial Officer Scott Sullivan going to jail, the brokerage firms that were involved with the misrepresentation involving the public offerings of WorldCom bonds and stock have paid close to $10 billion in class action and individual settlements and litigations.
Former Chief of Enron Dies
Former Enron chief, Ken Lay died. What may be procedurally interesting is that because he had not been sentenced prior to his death and a final judgement had not been issued, his conviction could be set aside, and as a result, his estate would therefore not be subject to criminal forfeitures and fines, only civil forfeiture.
Wachovia to pay $25 mln over research conflicts
Category: Interesting News
After a 28 month probe involving biased research of their stock analysts in order to help win investment banking business, Wachovia agreed to a $25 million fine by the North American Securities Administrators Association.
This is the latest and possible the last brokerage to pay a fine for biased research. Other brokerage firms that previously paid large fines for biased research included Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Chase & Co., Lehman Brothers, Merrill Lynch, Morgan Stanley, Piper Jaffray and Thomas Weisel. Citigroup paid out the largest fine of $400 million.
Court Strikes Down Hedge Fund SEC Registration Rule
Category: Interesting News
A U.S. Court of Appeals for the District of Columbia Circuit struck down a Securities and Exchange Commission rule requiring Hedge Fund advisers to register with the Securities and Exchange Commission as investment advisers.
The SEC rule provided for stricter regulations and random inspections of Hedge Funds which are now a $1.1 trillion industry.
The court ruled that the SEC rule was "arbitrary" since it required registration for those with fifteen or more investors and $25 million in assets to register with the SEC as an investment advisers by early 2006 while at the same time exempted Hedge Funds with one hundred or fewer investors from the Investment Company Act regulations.
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Milberg Weiss Prosecution Is it Overkill or is it Justified?
Category: Fraud in the News
The very successful class action law firm Milberg Weiss has the claim to fame for being the second business (Arthur Anderson was the first) to be prosecuted by the Feds.
The so-called Holder and Thompson memorandums in 1999 and 2003 have given the Justice Department the ammunition to go after "business organizations". As a result, more businesses either agree to cooperate with the investigation and sign a no prosecution deal or deferred- prosecution agreement or face being indicted. With the deferred-prosecution agreement, the company is charged with a crime but the Feds agree to drop the charges if the firm lives up to the agreement it made with the government.
For ongoing businesses, the threat of being indicted or prosecuted can destroy a business almost overnight. How many clients will go to a business that is under investigation or can possible be shut down due to conviction.
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Tax Talks between SEC and IRS
Category: Interesting News
There were recent discussions between Chairman of the Securities and Exchange and the Commissioner of the IRS to require public companies to make public their Corporate tax returns.
While Corporate watchdogs would like to see tax returns made public, corporations are concerned that if their tax returns were made public, their competitors would learn information about the corporations such as research and development budgets which would not be in the best interest of that corporation.
The conflict in the relationship between tax and corporate earnings is that corporations want to show maximum earnings to shareholders while paying the smallest amount in taxes. Right now, companies financial reports include a line for tax expenses.
Securities Class Actions Settlements Doubled in Value
Category: Fraud in the News
Per a report of the accounting firm PricewaterhouseCoopers, there were a total of 168 securities class actions that were filed in 2005. In 2004, 203 securities class actions were filed. Although this is a decrease of seventeen percent from 2004 and slightly below the ten year average of 188 cases per year, the value of settlements more than doubled in value.
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Checking Out your Investment Advisor or Stockbroker
Category: Avoiding Investment Fraud
I have previously told investors how to get background information about a financial consultant (stockbroker) who is registered with the NASD. One goes to the NASD website. There you can find information about that financial consultant's licenses, employment history, arbitrations against him or her and disciplinary history.
There are many financial consultants who are not registered with the NASD. They are instead registered with the SEC. More than 11,000 investment advisor firms and 173,000 investment advisors are registered with the SEC. To check on the firm's background, go to the SEC website under "Check Out Brokers & Advisers" under Investor Information. That will take you to a firm's "Form ADV." That
form tells an investor if the firm has had regulatory problems or lawsuits. To get an individual investment advisor's background information, one can do that by asking the investment advisor or contacting your State Securities Regulators.
Ameriprise (formerly American Express Co.) Faced Being Shut Down by Regulators
Category: Arbitration
Ameriprise brokerage firm had faced being shut down by the NASD for failing to pay an arbitration award. Under the NASD arbitration system, a claimant who wins an arbitration against a brokerage firm receives their monetary award within thirty days of the award or the firm faces being shut down by the NASD. The situation with Ameriprise is a very unusual one. Typically brokerage firms that lose in arbitration pay the award due to the claimant.
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Lincoln Financial Advisors Stockbroker Fraud
Category: Fraud in the News
A Lincoln Financial Advisors Broker was charged with stealing $2.25 million in a Ponzi scheme. Surprisingly Lincoln allowed this broker Richard Daniels who had previously been banned by the securities industry to manage investor's monies. More surprising, the SEC who had banned him from the industry for defrauding investors in the sale of phony promissory notes gave him back his license.
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Pump and Dump Schemes
Category: Fraud in the News
Investors - Beware of Internet postings. You never know who is really posting them and whether they are true.
Scam artists often post false information about companies on chat room or stock message board to push up the stock of a company that the scam artist has purchased for much less per share with the hope that people reading the false postings will purchase the shares and the stock price of that company will rise. That is called market manipulation and it is illegal. The underlying company that the scam artist is manipulating may be very legitimate and that company may not know why all of a sudden its stock has doubled in price. Market manipulation is easier with low priced thinly traded stock.
Senior Specialist Seminar Scams
Category: Fraud in the News
Baby boomers beware. Baby boomers are coming of age and beginning to celebrate 60th birthdays this year. 77 million baby boomers (those Americans born from 1946 to 1964) will also be looking to what to do with their retirement nest egg- and the unscrupulous are there ready to assist. The North American Securities Administrators Association has identified three problem areas in which baby boomers and current senior citizens will be scammed.
Former CyberCare Executives Fined for SEC violations
Category: Fraud in the News
The Securities and Exchange Commission fined two former CyberCare executives for securities violations. Michael Morrell, the former CEO and John Haines, former Senior Vice President were fined and their future involvement with other corporations will be limited per an agreement with the SEC. CyberCare was delisted from NASDAQ after its stock fell from $100 a share down to pennies. The company filed for bankruptcy protection in 2005 as did numerous high flying internet firms during the tech burst. CyberCare listed its debt in the bankruptcy as between 50 and 100 million dollars.
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Quattrone Conviction Overturned
Category: Fraud in the News
Credit Suisse First Boston former high-powered technology banker Frank Quattrone was granted a new trial due to erroneous jury instructions from his previous trial. The case will be reassigned to a new judge. Quattrone had been sentenced for eighteen months in prison in May 2004 based on an obstruction of justice charge. He was allowed to remain free pending his appeal. His first trial ended in a hung jury. His charges of hindering a federal probe was a difficult case for the Government to prove. It may be time for the Government to move on and place its litigation resources elsewhere.
H & R Block Express IRA Civil Suit By Spitzer
Category: Fraud in the News
New York Attorney General Eliot Spitzer filed a civil law suit against H & R Block for advising 500,000 tax return customers to invest in Express IRA. H & R block failed to advise the clients of the hidden fees which would surpass the interest which could be earned on the IRA accounts. The law suit alleges that up to 85% of the people who invested in these IRA actually lost money. A total of 150,000 people, mostly working families actually invested in the Express IRA.
"The conduct described in the complaint is particularly appalling because many of those hardest hit were working families who struggle to save," Spitzer said. "Instead of providing these families with accurate information that would have allowed them to make informed choices, H & R Block steered them into retirement accounts that actually shrank over time."
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Stock Market Manipulation
Category: Fraud in the News
A California woman, Zahra Gilak was convicted of participating in a $14 million stock market manipulation scheme that was designed to give Scott Kelly control of the free-trading (unrestricted) shares in three publically traded securities, micro cap stocks, for which he had a controlling interest - M&A West, Virtualender.com and Digital Bridge. The "pump-and-dump" scheme used stock promotion and falsified revenue and profit to artificially inflate the Over-The-Counter Bulletin Board stock and then sell it for profit. As indicated in my earlier blog, Micro Cap stocks are more easily manipulated than Exchange traded stocks. Watch out and do your homework
before investing in a micro cap stock.
Micro Cap Fraud
Category: Fraud in the News
Paul Atkins, a member of the SEC has stated that the Federal securities regulators must do a better job of prosecuting Micro Cap Fraud. Because Micro Cap stocks are more thinly traded than stocks on the national exchanges, they can be more easily manipulated. My law office has represented investors involving micro cap stock losses. Consumers should be careful and know as much as they can when purchasing a micro cap stock as these stocks generally carry more risk and can be more easily manipulated to the detriment of the consumer.
Junk Fax Investment Fraud
Category: Fraud in the News
The SEC filed a lawsuit against an investment advisor, BMA Ventures, Inc. and its president, William Robert Kepler for illegally obtaining $1.9 million in profits by sending out investment fax blasts recommending the purchase of a stock. What they did that was illegal was at the same time they were recommending the purchase of a particular security through the fax blast, they were secretly selling the stock. This is called "Scalping."
International Management Associates Hedge Fund Fraud
Category: Fraud in the News
My law firm has been receiving phone calls from investors who have been scammed by this hedge fund fraud. International Management Associates was a large hedge fund with about 500 investors who investors millions of dollars each in this hedge fund. Kirk S. Wright, Nelson Keith Bond, Fitz N. Harper, Jr., and Thomas H. Birk were on the management team of this hedge fund.
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Brokerage firm David Lerner Associates Inc. Annuities Violations
Category: Investment Mismanagement
The brokerage firm David Lerner Associates Inc. was fined $400,000 and was suspended by the NASD for one month from doing new business in variable life and variable annuities for violating securities rules regarding replacement sales of annuities. My law firm has brought many arbitration actions against brokerage firms for switching individual investors into annuities and for placing investors into unsuitable annuities.
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NFL Players Scammed By Hedge Fund Fraud
Category: Fraud in the News
Several prominent NFL Footballs players were scammed by a hedge fund. International Management Associates was a hedge fund based in Atlanta who defrauded 500 investors by providing reports that the Hedge Fund was doing much better than it actually was. In fact none of the assets they reported on their accounting filings can even be located. My law firm has handled a number of hedge fund fraud cases. Deep pockets can sometimes be a problem because if their has been a fraud, often times the assets in the hedge fund are gone. One then must look to other deep pockets which may or may not be available.