March 28, 2008

Auction-Rate Securities to be Priced this Weekend by UBS – Others to Follow?

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After weeks in limbo, some holding auction rate securities may gain some insight about their fate this weekend as UBS reports it will be “pricing” ARS securities in its customers' accounts.

Brokerage firms and other financial institutions sold many ARS securities as comparable to money market funds, commercial paper and other liquid investments. Investors were later shocked to learn that the auctions "failed," they were unable to sell securities and given little if any guidance in evaluating their situation. Many have been told their securities retain their "full value" but they would have to wait on their funds.

Perhaps realizing that this sham can go on no longer, using an internal model to value the securities, UBS will reportedly mark these down this afternoon and inform clients of such valuations via their online statements. Markdowns will apparently range from a few percentage points to more than 20%. Many believe that a portion of ARS securities are worth far less.

Yet, the UBS valuations will not actually reflect a true market because UBS states that it is not prepared to honor such prices or buy the securities at any price, leaving one to wonder what such prices will actually represent. It remains to be seen whether this move will comfort or exacerbate unrest among investors.

According to Moody's Investors Service, the currently seized–up ARS market, estimated at over $300 billion, includes investments issued by corporations, municipalities and other borrowers, including through the issuance of “preferred” shares by Nuveen and other mutual funds.

Although many of the issuers are fairly creditworthy, “default” interest rates paid on many ARS securities will not be competitive as long term instruments. The further problem is that a huge amount of these now long term securities are in the hands of investors who seek liquidity. This, along with the stain of the present situation, will no doubt put further strain on any attempt to establish a market for ARS securities.

Auctions on ARS securities failed because, as buyers who were privy to the potential problems bailed out, less sophisticated investors could not absorb the volume. UBS, Goldman Sachs, Merrill Lynch, Citigroup and Wachovia, which conducted more than 100 ARS auctions per day, had taken up the slack in auctions they managed. While this feature was sold to many investors as a guarantee, in late February, these and other firms all balked on this practice almost in concert.

UBS’s planned pricing action may serve as the test for other brokerage firms, some of which have indicated that they may soon take similar action. Merrill Lynch priced its clients' ARS securities at full value or "par" in their February statements, but warned that the value these securities could fall based on illiquidity. There has been no further comment from the firm.

A broker at RBC Wealth Management said that auction-rate securities were still being carried at par value on his clients' electronic accounts. A spokesman at Oppenheimer said the firm had not decided whether to mark the securities to market. A Morgan Stanley spokesman declined any comment. However, it is rumored that other firms plan to follow UBS's lead in pricing.

UBS, Deutsche Bank AG, Merrill Lynch, Morgan Stanley and Citigroup have been named in a suit in U.S. District Court in Manhattan alleging deceptive marketing of ARS securities. As other lawsuits are anticipated, firms have denied any improper conduct and say they are working with clients on a case-by-case basis to address liquidity issues. Some firms have made loans to their clients - while charging lucrative rates on such loans.

The securities law firm of Shepherd Smith Edwards & Kantas LTD LLP has for decades handled claims by investors worldwide against brokerage and other financial firms. We are currently working on claims for both institutional and individual investors whose funds are now locked into ARS securities. Contact us to arrange a free, no obligation consultation with one of our attorneys regarding your situation or if you wish to receive our weekly newsletter regarding ARS securities.

LINK TO ARTICLE ON ARS SECURITIES: (Our firm does not endorse any opinions or allegations of the article's author but believes the information and opinions stated therein are helpful in understanding the nature of this debacle.)

ARC and ARP Securities: How Wall Street Brokerage Firms May Have Defrauded Their Clients Out of Billions Overnight Trading, February 24, 2008 (Author’s name withheld by request)

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Posted In: Auction-Rate Securities

March 26, 2008

Court Says Investor Must Arbitrate Claims Against Broad Street Securities, Pershing LLC, and Bank of New York Mellon Over Contract Alterations

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The U.S. District Court for the Eastern District of Michigan has concluded that Mouayad Shammami, an investor that is accusing brokerage firm Broad Street Securities Inc. of fraudulently inducing him to change his investment goals, must arbitrate this dispute rather than pursue the matter through the courts.

In 2004, Shammami entered into an agreement with Broad Street stating that the brokerage firm would give him investment and management advice. Broad Street and clearing broker Pershing LLC had their own agreement between them that allowed Broad Street to ask Pershing to trade securities for Shammami. Shammami and Pershing entered into a marginal agreement in 2005, which contained a pre-dispute arbitration clause.

In 2007, Shammami filed a lawsuit alleging that Broad Street and Pershing traded securities and churned his account without honoring his stated investment goals. Pershing and its parent company Bank of New York Mellon LLC filed a motion to have the case dismissed. Per the terms of the agreement with Shammami, both firms wanted to resolve the dispute in arbitration.

In its opinion, the court said that there was “no allegation” that Shammami was fraudulently induced into agreeing to the arbitration provision, which was included in its contract with Pershing LLC.

As a result, even if the charges applied to the margin agreement, they would be applicable to the entire contract and therefore must be dealt with in arbitration.

The stockbroker fraud law firm of Shepherd Smith and Edwards has recovered $100 million in investor losses for our clients in negotiation, mediation, arbitration and litigation. We would be happy to discuss your case during a free consultation.


Related Web Resources:

Shammami v. Broad Street Securities, Incorporated et al, Justia

Arbitration, SEC

Broad Street Securities

Pershing LLC

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Posted In: Arbitration

March 25, 2008

W.P. Carey & Co Settles SEC Charges Over Payments of Undisclosed REIT Compensation

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REIT Manager W.P. Carey & Co has reached a $30M settlement agreement with the SEC over antifraud charges.

According to the SEC, W.P. Carey, its ex-CFO John J. Park, and its former chief accounting officer Claude Fernandez paid $10 million in undisclosed compensation to a brokerage firm that sold real estate investment trusts (REITs). The three parties then misrepresented these moneys in periodic filings to keep the compensations secret.

These activities allegedly benefited the broker-dealer and W.P. Carey, which received larger fees as a result, including $6.4 million in reimbursements and illegal fees. Park and Fernandez are accused of using fake invoices to hide the payments and get around the regulatory limitations about compensation.

The SEC says W.P. Carey is supposed to disclose such payments and that investors are entitled to know whether a brokerage firm is being compensated when making a sale.

The commission is also accusing W.P. Carey of taking part in a $235 million illegal and uregistered offering of REIT shares and being responsible for a broker-dealer receiving $100,000 from two REIT’s for proxy solicitation services. The SEC Is also accusing W.P. Carey of failure to comply with other disclosure requirements.

W.P. Carey has agreed to pay $20 million in interest and disgorgement and $10 million in penalties, which will be given to REITs that were adversely affected by the scheme.

Park, who is now in charge of W.P. Carey’s strategic planning, will pay a $240,000 penalty and serve a five-year ban from that prevents him from working as a director or officer of a public company. Claude Fernandez, now W.P. Carey’s managing director, is suspended for two years and will pay a $75,000 fine. All three defendants are permanently enjoyed from violating federal securities laws.

Shepherd Smith and Edwards represents victims of investor fraud in arbitration and in court. Our stockbroker fraud lawyers have helped thousands of people across the United States get their money back.


Related Web Resources:

SEC Closes $30M Case against REIT Manager, CCHWallstreet.com, March 24, 2008

Read the Complaint (PDF)

What Are REITs?, Investopedia.com

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Posted In: REITs , Securities Fraud

March 24, 2008

JP Morgan Chase’s Bear Stearns Acquisition Could Make The Firm Vulnerable to Lawsuits

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Following JP Morgan Chase & Co’s acquisition of Bear Stearns Companies Inc., JP Morgan Chase Chief Financial Officer Michael Cavanagh says the firm is reserving as much as $6 billion for "transaction-related costs," including possible litigation.

Class action lawsuits could come from investors regarding corporate disclosure, as well as from employees over pension plans. Any securities lawsuits targeting Bear Stearns as the plaintiff will also go to JP Morgan Chase.

Lawsuits expected may include those related to the 1934 Securities Exchange Act Section 10(b) (a general antifraud provision) by investors that may feel that Bear Stearns did not disclose accurate information about the company’s health. Employees may sue if they believe that the Employee Retirement Income Security Act (ERISA) had been violated.

On March 16, The Federal Reserve, accompanied by shareholder consent, had approved of a financing plan that allowed JP Morgan Chase & Co. to extend up to $30 billion in nonrecourse lending to the combined entity. This allowed the Wall Street firm to acquire the faltering Bear Stearns. The vote by Federal Governors to allow the loans was unanimous.

The loans gives JP Morgan Chase assurances over $30 billion worth of assets, including subprime lending arrangements and commercial mortgage-backed securities, that were part of the acquisition.

On Monday, the terms of the loan was revised so that JPMorgan will be responsible for the first $1 billion, while the remaining $29 billion will be available as financing to JP Morgan at the Fed’s 2.5% emergency lending rate.

The Fed’s move followed JPMorgan’s change in offer to buy Bear Stearns shares at $10/share instead of $2/share. JP Morgan Chase’s acquisition of Bear Stearns came after a crisis in client confidence placed the firm at risk of bankruptcy.

Possible defenses to pending litigation could include Bear Stearns not knowing how dire its financial health was and its willingness to disclose negative information about the firm, including news that two of its hedge funds collapsed last year.

Please contact Shepherd Smith and Edwards if you are an investor who believes that you are a victim of broker misconduct. Our investment fraud lawyers represent clients living throughout the United States and abroad.


Related Web Resources:

Fed Backs JPMorgan, Bear Stearns Deal, AP, March 24, 2008

JPMorgan Buys Bear Stearns in Fire Sale, The Street, March 17, 2008

Board of Governors of the Federal Reserve System


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Posted In: Bear Stearns , J P Morgan - Chase

March 20, 2008

Too Little Too Late: Fund Compies' Attempts to Refinance Auction Rate Preferred Securities Using Leverate or Varible Rate Securities Unlikely

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Some closed end funds which issued preferred shares in the auction rate market suggest they might obtain liquidity in Auction Rate Preferred Securities (ARPs) using leverage and Variable Rate Demand Preferred Securities. Such statements may give hope to those holding ARPs, yet we believe that these solutions unlikely create the liquidity sought.

This action by the closed-end fund companies is likely intended to benefit these companies and will not help the preferred share holders. If the goal were truly to benefit ARP holders, such action would have been initiated prior to the lock-up of the ARP market. As the broker-dealers actually increased sales to unwary investors, the fund companies were silent as risk to ARP investors grew and liquidity disappeared.

According to the Investment Company Institute, closed end fund companies manage a total of $314 billion dollars worth of assets for their common shareholder clients. Closed-end funds have borrowed about $60 billion of this total using preferred shares. The preferred shares were created to use a low rate paid to preferred holders in order to boost yield to common mutual fund shareholders. Risk to preferred shareholders could have been avoided by liquidating holdings within each respective fund when possible. This would have also greatly reduced risk to common fund shareholders by "getting them off margin."

Reading between the lines of the press releases and deciphering feedback on industry conferences calls with the closed-end fund companies, it appears there is little that can now be done. The current credit crisis has made liquidity difficult for all market participants and fund companies missed the window of opportunity to assist ARP shareholders.

Perhaps the primary reason for funds companies to attempt to provide liquidity to ARP holders is to bale out brokerage firms who may otherwise never again sell the funds' products. Or, it could be that it is no longer profitable to closed-end fund’s common shareholders to pay the interest rates to preferred shareholders.

Last week, Eaton Vance announced plans to redeem the preferred shares of three of its thirty closed end funds. All three are equity based funds. With the stock market performing poorly, it may no longer be profitable to continue the payments. Unlike municipal bond funds, there is no spread, or difference between what the funds were earning and what was paid to the preferred shareholders.

Eaton Vance is not alone. Of the fund companies who have discussed a solution, all have stated that the initial focus of their remedial efforts will be on the taxable closed end funds. Why? According to the Investment Company Institute (www.ici.org) the vast majority of taxable closed end funds are equity based. The figures for year end 2006 indicate there is about $203 billion in taxable closed end funds, about $122 billion of which are in equity funds. It should also be noted that a majority of funds that issued preferred shares were bond funds.

A third reason that a closed-end fund company may act is to issue a new product in furtherance of their business. At least one firm has suggested a new product called a Variable Rate Demand Preferred (VRDP). To date, this is the only solution suggested for tax free (bond) closed end funds. According to the industry, a VRDP is a “new financial instrument” which could potentially be sold to money market funds. Yet, on March 12, 2008, Nuveen issued a press release stating “we cannot be certain that VRDP will be a viable form of financing for our funds.”

The problem is that VRDP is yet another "contrived” product being floated, and at the worst possible time in a market understandably leery of anything associated with the terms “variable rate” and “preferred”. While money market funds could absorb a portion of this product, if news leaked that a particular money market fund held a product associated with the tainted ARS market it could hurt its standing as a cash equivalent. Further, before VRDP could be marketed to any money market fund, it would have to find third parties willing to provide “put commitments at a reasonable cost” or in other words, take on risk without charging an undue premium - a tall order in this economic environment.

We are of the belief that a credible solution is not yet in sight for holders of ARS securities, including ARPs, although limited liquidity may emerge in the near future.

The securities law firm of Shepherd Smith Edwards & Kantas LTD LLP has for decades handled claims by investors worldwide against brokerage and other financial firms. We are currently working on claims by investors whose funds now locked into ARS and ARP securities. Contact us to arrange a free, no obligation consultation with one of our attorneys regarding your situation or if you wish to receive our weekly newsletter regarding ARS securities.

LINK TO ARTICLE ON ARS SECURITIES: (Our firm does not endorse any opinions or allegations of the article's author but believes the information and opinions stated therein are helpful in understanding the nature of this debacle.)

ARC and ARP Securities: How Wall Street Brokerage Firms May Have Defrauded Their Clients Out of Billions Overnight Trading, February 24, 2008 (Author’s name withheld by request)
:

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Posted In: Auction-Rate Securities

March 19, 2008

Wachovia Securities Analyst Comments on Bear Stearns’ Sale and Calls Merrill Lynch the “Riskiest” Investment Bank

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In a note to investors, Wachovia Securities Analyst Doug Sipkin commented on the state of the leading Wall Street securities firms in light of the worsening global credit crisis.

Sipkin blamed the “The failure of Bear Stearns” on a “management issue” rather than a “market issue.” JP Morgan Chase & Co. recently purchased Bear Stearns, the fifth largest securities company, for $236 million—that’s $2/share—a 90% market drop in just two days. The securities firm ran out of money after clients took away funds.

Sipkin, however, reassured investors that the action taken by the Federal Reserve to reduce emergency lending rates will keep the other four big securities firms in business.

The Wachovia analyst says that worries about Lehman Brothers are misguided and that the bank has sufficient liquidity to keep business running. Sipkin cited Lehman’s “superior management” and “superior business.”

Lehman and Goldman Sachs are expected to garner new business from the Bear sale. Sipkin said Goldman will likely benefit from “migrating prime brokerage balances,” while Lehman would likely pick up “material market share" in mortgages.

Morgan Stanley, said Sipkin, seems to be weathering the crisis because it has its asset management and brokerage businesses.

Sipkin pointed to Merrill Lynch as appearing to be the weakest of the top Wall Street firms—but said that it would also likely stay afloat, considering that its balance sheet had the highest leverage.

Related Web Resources:

Ahead of the Bell: Investment Banks, Chron.com/AP, March 18, 2008

US stock market drops as Bear Stearns sold for $2/share, Reuters, March 17, 2008

JP Morgan Shares to Acquire Bear Stearns, Bear Stearns


If you have been the victim of investor fraud, you are entitled to the recovery of your lost investment. Contact Shepherd Smith and Edwards today to schedule your free consultation with one of our stockbroker fraud lawyers.

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Posted In: Bear Stearns , Goldman Sachs , J P Morgan - Chase , Lehman Brothers , Merrill Lynch , Morgan Stanley

March 18, 2008

Wells Fargo Brokerage Services. FTN Financial, and Stone Youngberg Among Founders of Regional Bond Dealers Association

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14 regional bond dealers have founded Regional Bond Dealers Association (RBDA). The purpose of the association is to tackle issues that are important to U.S. regional, fixed-income securities dealer. Issues to be examined include revising the tax code and matters affecting auction-rate securities.

Founding members are:

• Wells Fargo Brokerage Services LLC.
• Crews & Associates Inc.
• Vining-Sparks IBG
• Cronin& Co. Inc.
• Tejas Securities
• Duncan-Williams Inc.
• Stone Youngberg LLC
• Fifth Third Securities
• Southwest Securities Inc.
• FTN Financial
• Seattle-Northwest Securities Corp.
• G.X. Clarke & Co.
• ML Stern & Co
• Incapital LLC

Mike Nicholas and Michael Decker, both formerly with Securities Industry and Financial Markets Association (SIFMA), will serve as co-chief executives. Decker was the former senior managing director for Research and Public Policy at SIFMA and Nicholas was its former managing director of Capital Markets Group. President and CEO of FTN Financial Mark Medford will serve as RBDA chair.

Membership is expected to come from a pool of up to 90 registered dealers that can be considered regional dealers of fixed income securities.

Related Web Resources:

Regional bond dealers band together, Investment News, March 7, 2008

Regional Bond Dealers Form U.S. Trade Group, SecuritiesIndustry.com, March 7, 2008


The stockbroker fraud law firm of Shepherd Smith and Edwards represents investors that have been the victims of investor fraud. Contact Shepherd Smith and Edwards today.

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Posted In: Bond Dealers

March 17, 2008

Bear Stearns Sold to JP Morgan – One Firm’s Trash Is Another Firm’s Treasure!

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Yesterday – Sunday – it was reported that JP Morgan bailed-out Bear Stearns by paying its shareholders a measly quarter of a billion dollars. One question plaguing Wall Street is how many other victims of sub-prime mortgages will emerge? Below we assess the winners and losers of this deal and also report some good news: Claims by investors who had accounts at Bear Stearns are not dead!

Winners and Losers?

A year ago, BSC’s stock sold for $150 per share. Last Friday BSC’s shares fell from 57 to 30. Reportedly, as government big-wigs and financial moguls met on Saturday to attempt to salvage BSC, there were discussions with several firms to pay around $15 per share but on Sunday only JP Morgan was left – offering $2 per share. Although BSC faced certain bankruptcy if nothing were done, Bear Stearns shareholders say they are the big losers.

Meanwhile, while brokering a sale of BSC to the highest bidder, our government put up $30 billion in loss guarantees. That's $100 per warm body in the U.S. This amount also translates to $115 per share of BSC stock. Yes, we as citizens will be exposed to losses of over $100 per share for Bear Stearns’ folly! Who are the real losers? You and me!

Are there any winners? The “efficient market theory” holds that the price of a company’s stock on any given day is what that firm is worth. If so, how did J.P Morgan fare? Today, the first after the BSC deal was reported, JP Morgan’s stock rose more than 10% - a $13 billion increase in total market capitalization!

Meanwhile, shares of other investment banks today lost as follows: Merrill Lynch fell 5%, Goldman Sachs fell 6% and Lehman Brothers lost a whopping 20%! Had J.P. Morgan shares lost only 5%, that firm would have fallen over $6 billion in market capitalization. Thus, as of today, J.P. Morgan is almost $20 billion better off thanks to the BSC takeover. This is two-thirds of the exposure to U.S. taxpayers, which made the $20 billion windfall to JP Morgan possible. Some would call this welfare for the rich. Big winner: JP Morgan

Not too late to recover from Bear Stearns!

Many institutional and individual investors claim they were sold “trash” or otherwise cheated by Bear Stearns. Many fear their claims will disappear after the Bear Stearns bailout. Yet, according to reports, JP Morgan will set aside $5 to $6 billion as a reserve for litigation and arbitration claims against Bear Stearns. Those who lost should contact an experienced securities law firm soon to learn if they should seek recovery.

The law firm of Shepherd Smith and Edwards represents institutions and individuals nationwide with significant claims against Wall Street financial firms. We have handled dozens of claims against against Bear Stearns. We seek recovery of losses for improper actions by firms as well as for broker misconduct . Contact us to arrange a free confidential consultation with one of our attorneys to learn whether we can seek recovery for you or your firm.

Who is/was Bear Stearns?

Founded in 1923, Bear Stearns Companies (BSC) is/was a maverick Wall Street investment banking firm with few friends. Former CEO Allen “Ace” Greenberg, who reportedly issued strange memos including about the cost of paper clips, ruled BSC for decades before being criticized for earning almost $16 million in 1992, his final year (although a paltry sum by today’s standards). Perhaps clairvoyant about his firm’s future, Ace was also rumored to have a hard hat in his office with his name on it.

For decades, BSC was criticized for acting as a “clearing agent” for hundreds of small thinly-capitalized “introducing” brokerage firms. A number of these were actually “boiler room” operations, such as one portrayed in a movie by that name. Brokers at these firms often touted their connection with Bear Stearns to persuade victims to part with their savings. Yet, BSC could not resist the huge profits earned from this operation, primarily from margin interest income it charged investors, many who could not afford these costs or to take the high risks involved in margin trading.

BSC’s most recent CEO is/was “Jimmy” Cayne, who allegedly was playing bridge at his country club as the firm’s largest hedge fund imploded last summer. Sources report he was also playing golf (and perhaps cheating) at the same club. In the firm’s financial game, Cayne’s score last weekend was way over par and, in bridge terms, down 7, doubled and redoubled!

Oddly enough, Bear Stearns faced another bailout situation a decade ago, but as a “bailor” not “bailee”, when an infamous hedge fund “Long Term Capital” threatened to bring down world financial markets. Bear Stearns was the only major U.S. investment firm which refused to participate in the bailout, earning it low marks among its peers. As the saying goes, “what goes around comes around.”

Additional Information About Bear Stearns:

Profile and Background of Bear Stearns Companys

For more blog stories about Bear Stearns Companies Click Here


Additional Information About JP Morgan Chase:

Profile and Background of JP Morgan Chase

For more blog stories about JP Morgan Chase Click Here

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Posted In: Bear Stearns , J P Morgan - Chase

March 16, 2008

A.G. Edwards & Sons Stockbrokers Ordered to Pay $750,000 Fine for Market-Timing Scam

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Three A.G. Edwards & Sons Inc. brokers are being ordered to pay $750,000 in fines for their participation in a market-timing scheme that involved mutual funds that benefited certain customers.

The brokers, Thomas Bridge, James Edge, and Jeffrey Robles, were also ordered to serve suspensions from the securities industries. Bridge, a former registered representative in the firm’s Boca Raton, Florida office, must also disgorge $39,808.53. Edge was the branch manager at the same office. Robles worked as a branch manager at Edwards’ Back Bay office.

Securities and Exchange Commission Chief Administrative Law Judge Brenda Murray ordered the sanctions. The market-timing scam occurred from the Edwards’ branch offices in Lake Worth, Boca Raton, and Boston.

According to the ALJ, Bridge participated in market timing to benefit a customer, while Edge failed to properly supervise Bridge—despite notices from mutual funds that Bridge was in violation of certain policies.

The ALJ is also accusing Bridge of market-timing in secret—concealing transactions by using several broker ID numbers and account numbers.

Robles failed to properly supervise Charles Sacco, who is accused of engaging in market timing for two hedge fund customers. Sacco has already settled the SEC charges against him.

Edwards also has settled SEC supervisory charges-related to the market-timing scheme. The firm agreed to pay $3.86 million in civil penalties, fines, and disgorgement, as well as hire an independent consultant.

Broker misconduct of any kind is wrong—especially when it negatively affects the money of investors. The law firm of Shepherd Smith and Edwards is dedicated to fighting for investors who do lose money from this type of misconduct and helping them recover their losses.


Related Web Resources:

Read the SEC Order (PDF)

Boca brokers fined in trading scheme, Miami Herald, March 15, 2008

Boca Brokers Suspended, Fined in Fraud, Black Enterprise, March 15, 2008


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Posted In: A G Edwards , Market Timing

March 13, 2008

Ex-UBS Executive Pleads Guilty to Insider Trading And Could Spent 90 Years in Prison

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Former UBS Executive Mitchel Guttenberg is looking at a possible 90 years in prison. Guttenberg recently pled guilty to two counts of conspiracy and four counts of securities fraud for his involvement in an insider trading scam.

Prosecutors had accused Guttenberg of selling nonpublic data from UBS stock analysts about potential downgrades and upgrades to trader to David Tavdy. Tavdy then allegedly used this private information to illegally make at least $15 million for hedge funds and $10 million by trading on his own account.

According to the U.S. Justice Department, Guttenberg repeatedly sold insider information to Tavdy over a nearly five-year period.

Guttenberg is one of over a dozen people, including attorneys and securities professionals, who were involved in two massive insider trading schemes.

More Insider Trading Guilty Pleas and Sentences;

Ex-Morgan Stanley compliance attorney Randi Collotta was sentenced to four years’ probation for providing insider information about Morgan Stanley to her husband Christopher and others. Christopher must serve three years’ probation.

Former Bank of America Corp. securities trader Paul Risoli was issued a seven-month jail sentence, in addition to two months supervised release after pleading guilty to one count of wire fraud and one count of conspiracy to commit wire fraud and commercial bribery. He was also ordered to forfeit $12,500.

Risoli was indicted a year ago for allegedly allocating shares in initial public offerings and secondary ones to someone at Q Capital Investment Partners LP in return for kickbacks.

In January, Laurence McKeever, a stockbroker, pled guilty to charges that he tried to conceal illegal trading activities and received $50,000 in return.

It is wrong for an investor to ever lose money because of the negligence or misconduct of a member of the securities industry. Shepherd Smith and Edwards has helped thousands of investors get their money back.

Related Web Resources:

Guttenberg & Tavdy Guilty Pleas, USDoj.gov, February 27, 2008

UBS Executive and Former Morgan Stanley Lawyer Among 13 Charged in Massive Insider Trading Schemes, Department of Justice, March 1, 2007

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Posted In: Insider Trading

March 12, 2008

Countrywide Financial, Merrill Lynch, and Citigroup Executives Defend Their Hefty Compensations Following Subprime Mortgage Crisis

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Appearing before the U.S. Congress last week, Countrywide Financial CEO and founder Angelo Mozilo, Ex-Citigroup CEO Charles Prince, and Ex-Merrill Lynch Chairman and CEO Stanley O’Neil gave their testimonies to the House Committee on Government and Oversight Reform.

The three men say that reports about their compensation are “grossly exaggerated” and that they too have lost millions of dollars from the mortgage debacle. On Thursday, the Congressional issued a report stating that the three men earned $460 million between 2002 and 2006.

All three men say their income from the firms are tied to the profits that the companies made in the years prior to the mortgage crisis and that their company stock has dropped dramatically since then.

Mozilo reportedly stood to earn $115 after Countrywide’s pending sale to Bank of America is completed. He now has agreed to forfeit $37.5 million.

O’Neal received $161 million after stepping down from Merrill Lynch. Prince left Citigroup last November with about $68 million.

Other Wall Street CEO’s that have generated media buzz for their generous compensations:

-Last year, Goldman Sachs Chairman and CEO Lloyd Blankenfein received $68 million—the largest bonus ever for an industry head.

-Robert Nardelli, Chrysler Chairman and CEO, took away $210 million in stock options, money, and retirement benefits after being asked to leave Home Depot.

In 2006, 386 Fortune 500 firm chiefs received $10.8 million in compensation.

Shepherd Smith and Edwards represents stockbroker fraud clients that have lost money because of the negligence or misconduct of a member of a securities industry. One of our securities fraud lawyers can discuss your case during a free consultation.


Related Web Resources:

Mortgage mess CEOs defend pay, CNN Money.com, March 7, 2008

Congress quizzes financial execs on CEO pay 'lottery', USA Today, March 7, 2008

Committee Holds Hearing on CEO Pay and the Mortgage Crisis, House Committee on Government and Oversight Reform

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Posted In: Citigroup , Countrywide Financial , Morgan Stanley , Subprime Mortgage

March 10, 2008

Holston, Young, Parker & Associates Operator Pleads Guilty to $6.5 Million Forex Investor Scam

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Holston, Young, Parker & Associates Operator Boris Shuster has pled guilty to 14 counts of wire fraud and 13 counts of mail fraud in a foreign currency exchange scam that cost approximately $6.5 million and affected over 200 investors.

Shuster, also known as “Robert,” was sentenced to 12 years and six months in prison and ordered to pay $6.432 million in restitution, a $10,000 fine, and $7.895 million in disgorgement. New York prosecutors had tried to obtain a sentence of 20 to 25 years in prison for Shuster. He had already been sentenced to five years in prison for a different forex scheme.

According to prosecutors, Holston, Young, Parker & Associates is a fraudulent forex firm. The other owners and employees have also pled guilty to criminal charges related to the scam.

Employees working in the “boiler room” lied to potential investors and investigators. False statements made included bogus information about invested funds, lying about the firm and their own experience, and using bogus titles and names when talking to potential clients on the telephone. They also engaged in high pressure sales methods to get investments.

Investors’ money were sent to offshore bank accounts in Russia and Cyprus instead of used to make investments.

The law firm of Shepherd Smith and Edwards represents investors throughout the United States as well as abroad that have lost money because of investment scams. Contact Shepherd Smith and Edwards today for your free consultation.


Related Web Resources:

NYC Man Sentenced in Forex Scam, Forbes/AP, March 15, 2008

N.Y. man sentenced to 12 1/2 years in forex scheme, Reuters, March 15, 2008

US Charges Eleven Men in $6.5 Million Foreign Exchange "Boiler Room" Fraud, NewYorkFBI.gov, September 29, 2006

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Posted In: Investor Fraud

March 6, 2008

Fidelity To Pay $8 Million Fine To Settle SEC Charges Regarding Traders’ Improper Gift Taking

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Fidelity Investments has agreed to pay an $8 million fine to settle Securities and Exchange Commission charges that the company failed to properly supervise its stock traders that had improperly received gifts. 13 current and ex-Fidelity employees are targeted in the SEC investigation.

The gifts were given to traders by outside brokers who were soliciting Fidelity’s business. Fidelity has had a policy that prohibits employees from engaging in business transactions influenced by gifts received. Employees are also not allowed to receive gifts valued at more $100 over a one-year period.

The SEC alleges that accepting the gifts affected the Fidelity traders’ ability to obtain the best stock trades for Fidelity’s mutual fund customers.

Fidelity, the largest mutual fund manager in the United States, says it will pay $42 million to its mutual funds and pay a comparable amount to institutional clients that were handled by the brokers involved. Fidelity is not accepting or denying wrongdoing by paying the $8 million SEC fine. It also maintains that the government did not find that anyone had been hurt financially by the gift taking.

Expensive Travel Trips & Tickets to Sporting and Musical Events
Former star fund manager Peter Lynch allegedly received almost $16,000 in free tickets to high profile events, including a U2 concert, a Ryder Cup golf match, “The Lion King,” and “The Nutcracker.” One former fidelity trader, Thomas Bruderman, reportedly received $450,000 worth of gifts and travel, as well as marijuana and ecstasy pills from brokers.

Former head trader Scott DeSano reportedly knew these improper activities were taking place. He also received gifts from brokers, including trips on private jets to exclusive golf resorts and excursions to Las Vegas and Mexico. DeSano’s ex-Fidelity supervisor, Bart A. Granier, who has already settled SEC charges, allegedly accepted $38,000 in gifts from outside brokers.

Tickets to Super Bowl games, the World Series, Rolling Stones concerts, and Wimbledon tennis games were also among the gifts that the SEC said Fidelity brokers had improperly received from outside brokers between 2002 and October 2004.

Fidelity says it has taken a number of steps to curb such improper activities, including the creation of stricter gift policies, disciplining or terminating workers, and creating better oversight measures. Fidelity says that the majority of the 13 employees named in the SEC probe no longer work at the company.

If you have suffered a financial loss as a victim of investor fraud, contact Shepherd Smith and Edwards today. One of our stockbroker fraud lawyers would be happy to assist you.

Related Web Resources:

Fidelity Fined in SEC Probe of Private Jets, Escorts, Ecstasy, Bloomberg, March 6, 2008

Fidelity fined $8M in gifts investigation, USA Today/AP, March 6, 2008

Fidelity Investments

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Fidelity

March 5, 2008

Oppenheimer & Co. Agrees to Settle FINRA Market Timing Charges for $4.5 Million

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Oppenheimer & Co. has settled Financial Industry Regulatory Association charges regarding the market timing of mutual funds. The company has agreed to pay $4.25 million as restitution to five dozen mutual fund companies, as well as a $250,000 fine.

FINRA says that Oppenheimer failed to stop five traders’ engagement in improper, short-term mutual fund trading. The self-regulatory organization noted Oppenheimer’s failure to set up, manage, and enforce systems of supervision to detect and prevent market timing activities.

As a result, FINRA says that Oppenheimer disregarded hundreds of warnings and requests from mutual funds and life insurance companies that they stop making the improper trades. Some 65 mutual funds even warned Oppenheimer that short-term trades were not in the best interests of long-term shareholders.

FINRA says that five Oppenheimer traders maintained approximately 580 accounts for 15 hedge fund clients. FINRA says that the brokers tried to get around market timing trading blocks. They also tried to hide the real identities of the account holders and distributed the market timing money over multiple accounts.

51 registered representative numbers were used to make it look like reps that hadn’t been blocked were engaging in the trades. The traders used omnibus trading platforms run by Fidelity and Schwab to hide their identities. FINRA says that they also sold variable annuity contracts to hedge fund clients so that they could use the yearly sub-accounts for market timing activities.

The improper activities caused Oppenheimer to generate approximately $9 million in gross revenue. Oppenheimer is not admitting to or denying the allegations by agreeing to settle.

If you are an investor who has lost money because you were the victim of broker misconduct, contact Shepherd Smith and Edwards right way and ask for your free consultation with one of our stockbroker fraud lawyers.


Related Web Resources:

Oppenheimer Pays $4.5 Million in Market-Timing Probe, Bloomberg.com, February 21, 2008

Oppenheimer & Co, Inc.

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Oppenheimer

March 3, 2008

Former Refco Senior Executives Plead Guilty to $2.4 Billion Fraud-Related Criminal Charges

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Former Refco CEO and company co-owner Phillip Bennett has pled guilty to 20 criminal charges related to the $2.4 billion fraud-related downfall of his company. Former CFO Robert Trosten has also pled guilty to five counts stemming from similar criminal activities.

Under Bennett’s supervision, Refco lost millions of dollars while trading in securities and derivatives in the 1990’s. Bennett tried to hide the losses by making them appear as if they were debts owed to Refco by Refco Group Holdings Inc., which is a company that Bennett controlled. Trosten helped direct these fraudulent transfers to the holding company.

The scam came to light after the company was purchased in 2004 and went public. Thomas H. Lee Partners LP had bought a majority interest in Refco. In 2005, Refco announced the discovery that an entity owned by Bennett owed Refco $430 million.

The Securities and Exchange Commission has also filed a civil enforcement act against Refco Group Ltd. and Bennett. The SEC is holding Bennett responsible for coordinating the scheme.

The SEC says that Bennett and several others directed a number of short-term transactions over a six-year period. They would conceal the receivable by paying it down temporarily and replacing it with another receivable.

Debts owed to Refco from the holding company would be converted into a debt owed by a customer to Refco. Transactions were later “unwound” and debts given back to the holding company.

U.S. Attorney Michael Garcia says the debt owned to Refco by the holding company includes hundreds of millions of dollars incurred by customer trading losses.

Shepherd Smith Edwards & Kantas LTD LLP is dedicated to helping the victims of investor fraud recover their financial losses. Contact our investor fraud law firm today to schedule your free consultation.


Related Web Resources:

Ex-Refco Chief Bennett's Guilty Plea May Help Former Deputies, Bloomberg.com, February 16, 2008

Watching a $4 Billion Company Fall Apart in a week, Slate.com, October 17, 2005

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Crime

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