August 31, 2011

Wedbush Securities Ordered by FINRA to Pay $2.8M in Senior Financial Fraud Case Over Variable Annuities

A FINRA arbitration panel has fined Wedbush Securities Incorporated, founder Edward Wedbush, and broker Debbie Michelle Saleh to pay $2,865,885 in damages. The victim of this securities case was Rick Cooper, an elderly investor. His securities claim alleged breach of fiduciary duty, fraud, negligent misrepresentation, failure to supervise, intentional misrepresentation and omissions, unauthorized transaction, unsuitable transactions, emotional abuse, elder abuse, and churning related to transactions of unspecified variable annuities.

Cooper’s securities fraud lawyers claim that Saleh sent him bogus monthly account statements, forged his signature, and conducted transactions that he hadn’t authorized, including the buying and selling of annuities and other financial products that were not suitable for him.

While Cooper’s account balances went down to one-third of $1.86 million, Saleh is accused of making money from fees and commissions that she charged him. The FINRA panel found that Saleh purposely misrepresented information about Cooper’s investments and she did make unauthorized transactions. The panel believes that Saleh of acting intentionally to defraud her clients. They said her actions either bordered on or actually were acts of “criminal misconduct.”

Of the $2.9 million, Saleh must pay $500,000 plus $1 million in punitive damages. Wedbush and its founder have to pay $500,000. Saleh, Wedbush, and Edward Wedbush also have to pay 10% annual interest on the damages, Cooper’s legal fees, and his other costs. Wedbush has to pay 100% of the arbitration forum fees, which is about $33,300. Two years ago, Saleh, who is no longer with Wedbush, has been permanently barred from the securities by FINRA.

Cooper is not the only person to file a securities claim against Saleh accusing her of misconduct. She is at the center of 4 investigations and 10 client complaints.

Wedbush has been named in at least 53 regulatory events and 52 arbitrations. Failure to supervise was a common complaint.

Failure to Supervise
Our securities fraud lawyers cannot stress how important it is for broker-dealers and investment advisers to properly supervise their brokers, advisers, other employees, and independent contractors. Not only must appropriate supervision take place, but also procedures of supervision have to be designed, implemented, and executed. Also, an employee assigned a supervisory role must complete specialized training to receiver a supervisor license from the National Association of Securities Dealers (NASD).

In the event that the broker engages in any type of misconduct or other wrongdoing, his/her supervisor and the financial firm can be held liable for allowing the alleged acts to take place—even if the employee that actually engaged in the wrongdoing isn’t found liable. You will want to work with a securities fraud law firm that knows how to prove that failure to supervise occurred.

FINRA Panel Orders Wedbush, Former Broker to Pay Investor $2.9M,, August 31, 2011

FINRA Arbitrators Award Millions in Elder Abuse Case, Forbes, September 1, 2011

More Blog Posts:

FINRA Panel Orders Wedbush Securities to Pay $233,000 in Securities Fraud Damages, Stockbroker Fraud Blog, March 28, 2011

Wedbush Ordered By FINRA Panel To Pay $3.5M to Trader Over Withheld Compensation, Institutional Investor Securities Blog, July 16, 2011

SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees, Stockbroker Fraud Blog, August 29, 2011

Continue reading "Wedbush Securities Ordered by FINRA to Pay $2.8M in Senior Financial Fraud Case Over Variable Annuities " »

August 30, 2011

FDIC Objects to Bank of America’s Proposed $8.5B Settlement Over Mortgage-Backed Securities

In the State Supreme Court of New York, the Federal Deposit Insurance Corp. has fled an objection to Bank of America proposed $8.5 billion mortgage-backed securities settlement. The FDIC, which is the receiver for failed banks and owns the securities that the settlement is supposed to cover, says it doesn’t have sufficient information to assess the settlement.

Per the agreement, Bank of America would pay to resolve claims brought by investors of mortgage bonds from Countrywide Financial Corp., which the investment bank acquired in 2008 for $4 billion. Already, the claims related to the Countrywide MBS has cost Bank of America over $30 billion.

The $8.5 billion securities settlement with Bank of America is over $424 billion in mortgages from Countrywide and was reached with 22 institutional investors, including:

• BlackRock Inc.
• Pacific Investment Management Co. LLC
• Federal Reserve bank of New York
• MetLife Inc.

If approved, the terms of the MBS settlement will apply to other investors that weren’t part of the original deal. However, not all of these “other” investors are satisfied with the terms.

Walnut Place LLC I-XI, another party that represents other investors, recently submitted its petition accusing trustee Bank of New York Mellon of reaching an agreement that was really only on behalf of the 22 institutional investors. Also opposing the Bank of America MBS settlement is the Federal Housing Financing Agency, which is the overseer of Freddie Mac and Fannie Mae. The federal agency submitted its “conditional objection.”

Recently, six Federal Home Loan Banks (of Indianapolis, Boston, Pittsburgh, Chicago, Seattle, and San Francisco) also noted their opposition of the securities settlement. They believe that investors could be owed at least three times more than what the $8.5billion agreement is offering (under the proposed agreement, Bank of America would have to buyback 40% of the securities that defaulted.)

New York Attorney General Eric Schneiderman, who also doesn’t want the $8.5 billion settlement to go through, is accusing Bank of New York Mellon of securities fraud. He claims that not only did the trustee fail to act in the best interest of investors, but also it did not ensure that the MBS were set up in compliance with state law.

Also, in an unrelated claim, a US Bancorp unit requested that a court make Countrywide Financial buyback over 4,000 loans in a $1.75 billion mortgage pool to remedy breaches of contract over improper underwriting. In its securities fraud lawsuit, the unit claims that in 2005 when Countrywide sold the pool, it agreed to buyback all loans within 90 days of notification that there had been a material breach.

Our stockbroker fraud lawyers represent investors that have lost money because of broker misconduct and other acts of securities fraud.

Bank of America Settlement Faces Growing Challenges, New York Times, August 30, 2011

FDIC Objection Throws A Wrench Into Bank Of America's $8.5 Billion Settlement, Forbes, August 29, 2011

Bank of America Settlement Faces Growing Challenges, NY Times, August 30, 2011

FDIC Petition (PDF)

Federal Deposition Insurance Corporation

New York Attorney General Eric Schneiderman

More Blog Posts:

Federal Home Loan Banks Say Countrywide Financial Corp Mortgage Bond Investors May Be Owed Way More than What $8.5B Securities Settlement with Bank of America Corp. is Offering, Institutional Investor Securities Blog, July 22, 2011

$63 Million Mortgage-Backed Securities Lawsuit Against Bank of America is Second One Filed by Western and Southern Life Insurance Co. Against the Financial Firm, Institutional Investor Securities Blog, August 29, 2011

Bank of America and Countrywide Financial Sued by Allstate over $700M in Bad Mortgaged-Backed Securities, Stockbroker Fraud Blog, December 29, 2010

August 29, 2011

SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees

The Securities and Exchange Commission has filed securities charges against James Davis Risher and Daniel Joseph Sebastian. The two men are accused of running a Ponzi scam that raised over $22 million from over 100 investors. Many of the victims were Florida retirees and teachers that entrusted the two men with their life savings.

Charges against Sebastian and Risher include two counts of fraud in the sale or offer of securities, unregistered securities sales, fraud related to the sale or purchase of securities, investment adviser fraud, and violations of aiding and abetting. This would include alleged violations of the Securities Act of 1933, the Investment Advisers Act of 1940, and the Securities Exchange Act of 1934.

According to the SEC, the two men ran a bogus private equity fund and lured people in by promising 14-124% investment gains. The fake account was called "The Preservation of Principal Fund." Investors fake bogus account statements claiming high returns. Also, money being brought in from new investors was used to pay the older investors. The names that Sebastian and Risher used to market the fund were Safe Harbor Private Equity Fund, Preservation of Principal Fund, and Managed Capital Fund.

From January 2007 through July 2010, Sebastian allegedly gave out materials to potential investors. $100,000 was the supposed minimum that one could invest. Even though only $3.8 million of the money they raised was actually invested, the two men allegedly paid themselves more than $16 million in bogus performance and management fees.

RIsher, who is accused of spending over $140,000 of the money on designer jewelry, cars, and artwork, allegedly told investors that he was experienced in wealth and asset management and trading equities when, in fact, he did not have this experience and had spent 11 years of the last two decades behind bars.

Meantime, Sebastian allegedly approached former customers that he worked with when he was an insurance broker. In addition to seniors and teachers, he also targeted church members, as well as investors outside Florida and in Canada.

The SEC is accusing the two men of making misrepresentations and omissions to clients about the fund’s investment strategy, returns, risks involved, audited financial statements, and Risher’s criminal past. Sebastian allegedly even told investors that they couldn't lose their principal investments and gave some of them written guarantees that any losses would be reimbursed.

The FBI, the IRS, the Florida Department of Law Enforcement, the US Postal Inspection Service, and the State of Florida Office of Financial Regulation all investigated this Florida financial scam. In the related criminal case, Risher has pleaded guilty to money laundering and mail fraud. He faces up to 50 years in prison. However, because he cooperated with federal authorities on this case, his punishment may not be so severe.

Risher also has prior criminal convictions for securities fraud, mail fraud, and money laundering. In 1990, he pleaded guilty to violating Georgia’s securities act, as well as multiple counts of theft.

Related Web Resources:

SEC Charges Two Florida Men in Ponzi Scheme Defrauding Teachers and Retirees, SEC, August 29, 2011

James Risher pleads guilty in $21 million Florida Ponzi scheme, WTSP, August 30, 2011

Two named in $22 mil. ponzi scheme case, News Chief, August 31, 2011

More Blog Posts:
Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions, Stockbroker Fraud Blog, August 22, 2011

Even as Ponzi Schemers Serve Time Behind Bars, Investors Are Left Coping with Millions in Financial Losses, Stockbroker Fraud Blog, January 25, 2011

Madoff Trustee Files Securities Lawsuit Against Safra National Bank of New York Seeking to Recover Almost $111.7M for Ponzi Scam Investors, Stockbroker Fraud Blog, May 12, 2011

Continue reading "SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees" »

August 28, 2011

Texas Securities Fraud: FINRA Fines Bluechip Securities for Ex-Employee’s Alleged Churning of Public Customer Accounts

The Financial Industry Regulatory Authority has fined Bluechip Securities Incorporated for Texas securities fraud over the alleged churning of public customer accounts by principal Muhammad Akram Khan. The fine against the Houston-based financial firm is $15,000. Khan, who was fined $385,000, has been suspended from associating with any FINRA firm for 18 months. Bluechip and Khan agreed to the securities settlement without admitting to or denying the findings.

According to FINRA, Khan executed or caused to be effected options transactions at unfair prices and that the commissions he charged were excessive. The SRO claims that Khan made about $380,296 in commission charges from theses transactions that he effected, while the accounts sustained losses of about $399,000.

FINRA says that Khan recommended to clients the opening of certain options transactions even though there was no reason to think that these recommendations were appropriate for the customers. FINRA also says that Khan had no reasonable grounds to believe that these clients were capable of assessing for themselves the risks involved in these transactions or that they could financially handle the chances that he was having them take. The SRO claims says that Khan executed these options transactions in clients’ accounts even though none of them had given him or Bluechip Securities the written authorization to take such actions.

Churning involves excessive trading in an account with the goal of making commissions. To be able to churn, a broker has to be able to take charge of investment decisions in your account.

That said, churning is prohibited by the major self-regulatory organizations and it is an illegal activity. It also may be a violation of SEC Rule 15c1-7, FINRA Rules 2310-2(b)(2) and 2310, NYSE Rules 476(a)(6) and NYSE Rule 408(c), and other securities laws.

Our Houston securities fraud lawyers represent clients that have suffered financial losses because a broker engaged in churning. We know how to prove that a client’s account was subject to excessive trading whether for purposes of commission or otherwise. Possible ways of assessing whether you’ve been the victim of churning is calculating the yearly rate of return that would be required so that the commissions charged to you are covered, assessing how many times your account’s equity is turned over to buy securities, and determining how much sale and purchase trading activity occurs in your account.

It is not uncommon for a broker engaged in churning to claim the purpose of the buying and selling of securities in your account was so that you could make a quick profit.

Bluechip Securities, Inc. (CRD® #45726, Houston, Texas) and Muhammad Akram
Khan, (CRD #1400089, Registered Principal, Houston, Texas)

More Blog Posts:

Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions, Stockbroker Fraud Blog, August 22, 2011

CapWest Loses $940,000 Dallas Securities Case in FINRA Arbitration, Stockbroker Fraud Blog, August 15, 2011

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M, Stockbroker Fraud Blog, August 9, 2011

Continue reading "Texas Securities Fraud: FINRA Fines Bluechip Securities for Ex-Employee’s Alleged Churning of Public Customer Accounts" »

August 27, 2011

Raymond James Settles Auction-Rate Securities Case with Indiana Securities Division for $31M

Raymond James has agreed to return $31,240,000 to Indiana investors to settle allegations that it misled them about the risks involved in the auction-rate securities market. In addition to repurchasing ARS that have been frozen since the market failed in 2008, the financial firm will also pay a $63,000 civil penalty.

When the ARS market froze, investors that had thought their investments were liquid like cash were left in the lurch because they were not able to retrieve their funds. The Indiana Securities Division has been at the helm of the efforts to investigated Raymond James and work out a settlement for all state securities regulators. Over the last few years, the states have worked hard to get all of the financial firms accused of not fully apprising investors about the ARS risks to buy back the securities.

Auction-Rate Securities
ARS are long-term investments with dividends or interest rates paid that are frequently reset through auctions that take place at specific intervals. The auctions are supposed to give a source of liquidity to investors wanting to sell their ARS.

Unfortunately, when the ARS market collapsed in early 2008, many of the auctions started to fail and investors could not get rid of their ARS holdings. This proved a problem for those that managed their ARS as a way to get easy access to cash.

While some ARS issuers did say they would redeem shares—usually at par value—some could not redeem all of their investors’ shares, which left the latter with holdings that could not be liquidated.

ARS and Hoosier Investors
The state of Indiana has also reached ARS settlements with other securities firms that allegedly misled Hoosier investors. In April of last year, 12 financial firms agreed to buyback over $370 million in ARS from these investors, while also consenting to pay over $3.5 million in fines. Financial firms that reached settlements then include:

• Goldman Sachs
• Banc of America
• Credit Suisse
• Citigroup
• JP Morgan
• Deutsch Bank
• Morgan Stanley
• Merrill Lynch
• Stifel Nicolaus & Co.
• Wachovia

These financial firms have also reached settlements with other US states. However, millions of dollars in ARS remain frozen and there is still more to be done to help investors regain access to their frozen funds. Our stockbroker fraud law firm continues to work hard to help recoup our clients’ money from their ARS that turned illiquid.

Securities Fraud
Investors rely on brokers and investment advisers for advice on where they should place their money. When a financial adviser misleads a client, causing the latter to put their money in investments that are inappropriate, it is the investor who loses out and has to live with the consequences of a failed investment.

State Announces $31 Million Securities Settlement, Inside Indiana Business, August 24, 2011

State finalizes auction-rate securities settlements, Indianapolis Business Journal, April 29, 2010

Auction Rate Securities: What Happens When Auctions Fail, FINRA

More Blog Posts:

Auction-Rate Securities Investigations by SEC and NY Attorney General Are Ongoing, Stockbroker Fraud Blog, April 21, 2011

Class Auction-Rate Securities Lawsuit Against Raymond James Financial Survives Dismissal, Stockbroker Fraud Blog, September 27, 2010

Credit Suisse Ordered to Pay STMicroelectronics N.V. $404M Over Improper ARS Investment, Institutional Investor Securities Blog, June 15, 2011

Continue reading "Raymond James Settles Auction-Rate Securities Case with Indiana Securities Division for $31M" »

August 25, 2011

Financial Industry Regulatory Authority Alerts Investors About Gold Stock Scams

FINRA has put out an alert warning investors about financial scams touting gold stocks. The name of the investor alert is "Gold" Stocks—Some Investments Mine Your Pocketbook. The caution comes as the cost of bullion reaches level highs and the increase in the number of websites, blogs, Tweets, and YouTube videos about investing in gold.

How to Detect a “Gold” Stock Scam
Unfortunately, some of these “golden” opportunities and stocks that are being marketed don’t have a lot of value or may be scams. Gold-related investment scams usually involve exploration companies’ and/or gold mining companies’ stock with a value that is usually based on gold reserves are challenging to accurately assess. Some statements made by stock promoters are purposely misleading.

FINRA's warning signs of a possible “gold” stock scam:

• Predictions/price targets of rapid and exponential growth.
• Claims of being a “buyout target” for mining companies.
• Claims that stock performance is related to the rise in the price of gold.
• Warnings of an economic meltdown or inflation.
• A revision to the company’s trading symbol or name so that it is more closely linked with gold.
• Claims that making money by investing in gold is easy.
• Use of news headlines about gold.
• Use of the names of major investment institutions or major investors in order to appear more credible.
• Statements about how much easier for lower priced stocks, as opposed to their higher-priced counterparts, to rise in value.
• Pressure that you in invest right away.

FINRA also says to watch out for “free lunch” programs offering to give you information about investing in gold. It was just last year that the Securities and Exchange Commission charged six people with running a $300 million Ponzi scam involving “gold” investments that defrauded over 3,000 investors in the US and Canada. The fraudsters claimed they represented an independent financial education company that had found a way to make up to 36% yearly returns by getting involved in gold mining investments.

In fact, the financial scammers were investing in shell companies that were owned by two of the men. Investors’ money was moved through different accounts in Europe, Asia, and South America and then used to pay investors their “interest,” fund a few companies that were not profitable, and enrich the fraudsters. Merendon Mining Corp. Ltd. is the name of the supposedly successful gold mining and refining company that was supposed to give investors their profits.

Earlier this year, the Commodity Futures Trading Commission took three separate actions against precious metal companies accused of financial scams involving different precious metal investments. In one alleged financial scheme, a boiler room telemarketing company allegedly defrauded investors of over $23 million.

If you lost money from investing in “gold” opportunities, contact our stockbroker fraud law firm immediately.

"Gold" Stocks—Some Investments Mine Your Pocketbook, FINRA

SEC Charges Perpetrators of $300 Million Ponzi Scheme Involving Purported Gold Mining Investments, SEC, June 10, 2010

CFTC Charges Florida Firm, American Precious Metals, LLC, and Principals, Sammy J. Goldman and Harry Robert Tanner, Jr., with Fraud, CFTC, May 17, 2011

Precious Metal Financing Agreement Scams, Fraud Guides

More Blog Posts:

Commodity Options Fraud Charges by CFTC Prompts District Court to Freeze Assets and Records of 20/20 Trading Co. Inc. & 20/20 Precious Metals Inc., Stockbroker Fraud Blog, May 6, 2011

FBI Investigates Former HFI Securities Inc. Vice President After Gold and Silver Coins Worth Millions of Dollars Found in His Basement, Stockbroker Fraud Blog, September 29, 2008

SEC and FINRA Alerts Retail Investors About Structured Notes with Principal Protection, Stockbroker Fraud Blog, May 30, 2011

August 23, 2011

California Insider Trading Charges Filed by SEC Against Ex-Investment Fund Associate Accused of Making 3000% Profit on Marvel Call Options in Disney Acquisition

The Securities and Exchange Commission has filed insider trading charges against Toby G. Scammell, who is accused of making more than $192,000 from insider trading information he received from his girlfriend about Walt Disney Company’s impending acquisition of Marvel Entertainment. Scammell, a 26-year-old ex-investment fund associate, made a more than 3000% profit in less than a month after he bought highly speculative Marvel call options for under $5500 and then sold them after the announcement of the acquisition was made on August 31, 2009 and Marvel’s stock price went up by more than 25%.

According to the SEC, Scammell’s girlfriend, who worked on the Marvel deal as an extern with Disney, found out confidential information about the deal, including when it would be announced and that Disney would pay $50/Marvel share. The Commission, however, doesn’t believe that Scammell’s girlfriend ever intended to give him insider tips or that she knew what he was doing with the information. Although the couple would talk about the acquisition as a subject of her business school application, she did not give him specific details. He also allegedly obtained information from confidential documents that he read off her Blackberry and from conversations he overheard regarding Marvel.

Scammell bought Marvel call options at $45 and $50 strike prices even though the highest that Marvel had ever traded at was $41.74. The SEC says that the Marvel options that Scammell bought were scheduled to expire soon after the Disney deal was announced and that in many cases the purchase of options represented 100% of the market. Scammell used his brother’s money to buy most of the Marvel call options. He did not, however, tell him about the alleged insider trading activities. Scammell’s brother had given him authority over his finances before going with the US army to Iraq.

The SEC says that before making the trades, Scammell used his computer to search for the terms “material non-public information,” “insider trading”, and “Rule 10b-5.” The Commission claims that Scammell not only used the insider information to garner an “unfair and illegal” advantage over others in the markets but that he exploited his romantic relationship with his girlfriend. The SEC says that after dating her exclusively for two years, he owed her a fiduciary duty, which he breached. He also allegedly acted with Scienter when he made the trades while having knowledge of the material, nonpublic data. The SEC says that when questioned, Scammell was unable to provide a believable explanation for his Marvell call options purchases.

The SEC is accusing Scammell of violating the Securities Exchange Act of 1934 (Section 10(b)) and Rule 10b-5 thereunder. It is seeking disgorgement of ill-gotten gains, a permanent injunction, prejudgment interest, and civil penalties.


Read the SEC Complaint (PDF)

SEC Sues 26-Year Old On Charges He Made $200,000 Insider Trading Off Ex-Girlfriend's Work Project, Business Insider, August 15, 2011

More Blog Posts:

Janney Montgomery Scott LLC to Pay $850K to Settle Securities Charges Over Alleged Failure to Prevent Inside Trading, Stockbroker Fraud Blog, July 21, 2011

“Poohster” Consultant Found Guilty of Insider Trading, Stockbroker Fraud Blog, June 23, 2011

Insider Trading: Former FrontPoint Partners Hedge Fund Manager Pleads Guilty to Criminal Charges, Institutional Investor Securities Blog, August 20, 2011

Continue reading "California Insider Trading Charges Filed by SEC Against Ex-Investment Fund Associate Accused of Making 3000% Profit on Marvel Call Options in Disney Acquisition" »

August 22, 2011

Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions

Kurt Branham Barton, the former CEO, president, and founder of Triton Financial, has been convicted of running a $50 million Ponzi scam that bilked over 300 investors across the country, including former Heisman Trophy winners Ty Detmer, Chris Weinke, and Earl Campbell, NFL Kicker David Akers, and ex-NFL quarterback Jeff Blake. Barton could be sentenced to life in prison for the Texas securities fraud.

A jury convicted Barton on almost 39 criminal counts, including numerous counts of wire fraud, conspiracy to commit wire fraud, making false statements to financial institutions in order to get loans, money laundering, and one count of securities fraud. The Ponzi scam ran for four years through 2009.

According to prosecutors, Barton lied to investors, including relatives, business leaders, pro football players, and Church of Jesus Christ of Latter Day Saints members, when he said that his financial firm was using their money to invest in business, real estate, and short-term business loans. In fact, Barton was taking their funds to cover personal expenses, including luxury football tickets, expensive clothes, and sports cars. He deceived potential investors, commercial lenders, and financial institutions by presenting them with bogus monthly account statements.

Examples of those hit hard by Barton’s Texas securities scam is Detmer, who, during his testimony, admitted that he lost approximately $2 million—that’s the majority of his life savings—in the Ponzi scheme. The former NFL quarterback, who is now a coach in Austin, says he has been forced to liquidate accounts that were supposed to go to his daughters’ college education. He also had to put up his house for sale. Detmer thought Barton was his best friend. The two met at church. Detmer says that he even brought new investors to Barton. Another pro football player, David Akers, now of the San Francisco 49ers, lost over $3 million because of Barton's scam. There are also many investors that aren’t famous who sustained significant losses because of the Texas Ponzi scam, including Diane Gordon, who lost her husband’s entire life insurance payment of approximately $850,000.

In 2009, the Securities and Exchange Commission filed a securities fraud lawsuit against Barton and two of his businesses. The SEC accused Barton of using famous celebrity athletes, stockbrokers, and others to promote Triton securities to new investors. Without denying or admitting to the SEC's allegations, all defendants agreed to permanent injunctions from securities fraud violations in the future, appointment of a receiver, prohibition of the destruction of documents, and orders freezing assets.

Ty Detmer testifies at Ponzi fraud trial, UPI, August 9, 2011

Austin investment broker convicted of using NFL stars, churches to defraud clients, The Washington Post, August 17, 2011

The SEC's Complaint (PDF)

More Blog Posts:
Ex-Triton Financial CEO Accused of Using NFL Contacts to Commit $50M Texas Securities Fraud, Stockbroker Fraud Blog, February 17, 2011

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M, Stockbroker Fraud Blog, August 9, 2011

Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M, Stockbroker Fraud Blog, August 3, 2011

Continue reading "Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions" »

August 17, 2011

8/31/11 is Deadline for Opting Out of $100M Oppenheimer Mutual Funds Class Action Settlement

Our securities fraud lawyers would like to remind you that if you want to opt out of the $100M class action settlement with Oppenheimer Mutual Funds you have to do so by August 31, 2011. OppenheimerFunds Inc. agreed to pay that amount over accusations that it mismanaged its Oppenheimer Champion Fund (OCHBX, OPCHX and OCHCX) and its Oppenheimer Core Bond Fund (OPIGX). The class action was filed by investors accusing OppenheimerFunds of misrepresenting in its offering documents the degree of risk involved in complex securitized instruments, including mortgage-backed securities and credit default swaps.

Under the class action agreement, Champion Fund investors are to be paid $52.5 million. Core Bond investors are to receive $47.5 million. While this amount may seem like a lot, with thousands of class action claimants, Core Bund Fund investors will likely receive approximately 12 cents on the dollar, while Champion Fund investors will receive about 3 cents on the dollar.

This is not a lot of money for your losses, which is why you may want to seriously consider opting out of the class action and pursuing your own securities lawsuit or arbitration claim. Please contact our stockbroker fraud law firm today and ask for your free case evaluation.

You have until August 31, 2011 to send a written exclusion to the class counsel. Your letter cannot be postmarked after the deadline. Failure to opt out will prevent you from filing your own case at a later today. You should, however, get your share of the settlement.

OppenheimerFunds is a Massachusetts Mutual Life Insurance Company subsidiary. Defendants of the class action were charged with violating the Investment Company Act of 1940 and the Securities Act of 1933.

The Oppenheimer Core Bond Fund lost at least 33% of its value in 2008. During the first three months of 2009 it lost another 10%. The bond was promoted as appropriate for and offered by a number of 529 college savings plans, a number of annuities, and retirement plans. The Champion Fund lost about 80% of its value in 2008.

While staying part of a class action in a securities case may appear to be the easy way to recover your investment losses, this is truly not the case. Why should you get back so much left when you’ve lost so much?

By retaining the services of an experienced securities fraud law firm, you increase your chances of recovering the maximum amount possible. We know how devastating it can be to lose money that you have worked so hard for and saved.

OppenheimerFunds Settles Mismanagement Case for $100 Million, Bloomberg Businessweek, July 26, 2011

OppenheimerFunds to pay $100 million to settle mismanagement case, Denver Post, July 27, 2011

More Blog Posts:
Mortgage-Backed Securities Lawsuit Against Bank of America’s Merrill Lynch Now a Class Action Case, Stockbroker Fraud Blog, June 25, 2011

Class Members of Charles Schwab Corporation Securities Litigation Can Still Opt Out to File Individual Securities Claim, Stockbroker Fraud Blog, December 6, 2010

Wells Fargo Settles Mortgage-Backed Securities Class Action Case for $125M, Institutional Investor Securities Blog, July 19, 2011

Continue reading "8/31/11 is Deadline for Opting Out of $100M Oppenheimer Mutual Funds Class Action Settlement " »

August 16, 2011

Citigroup Global Markets Fined $500,000 by FINRA for Inadequate Supervision of Broker Accused of Bilking Sick and Elderly Investors

Two months after a federal grand jury indicted Tamara Lanz Moon for misappropriating more than $800,000 in clients’ money, the Financial Industry Regulatory Authority (FINRA) has fined Citigroup Global Markets $500,000 for failing to properly supervise her. Moon is charged with six counts of mail fraud. The acts of broker misconduct allegedly took place between 2001 and 2008, when the 43-year-old broker was employed by Citigroup Global Markets as a registered sales assistant with Series 7 and 63 licenses.

Court documents report that Moon targeted at least 22 Citigroup clients who were sick, elderly, or for some reason couldn’t properly monitor their accounts. Her alleged victims included an elderly client suffering from Parkinson’s disease. Moon also allegedly forged signatures, changed account documents, opened accounts with deceased clients’ social security numbers, created bogus letters of authorization, revised customer addresses, and made unauthorized trades. She was fired in 2008 after Citigroup finally discovered her alleged misconduct. FINRA would go on to permanently barred her from the industry. Moon, who was arrested by the FBI following recent indictment, is out on bail.

According to FINRA, Citigroup failed to investigate or detect a number of “red flags” that should have let the financial firm know that Moon was improperly handing client funds. The SRO is also accusing FINRA of failing to put into place reasonable controls and systems related to the supervisory review of client accounts, which allowed Moon to falsify records, and neglecting to identify suspicious activity related to disbursements and transfers in the accounts that she was using to misappropriate clients’ money.

FINRA says that Moon was able to use Citigroup’s “lax supervisory practices” to bilk the financial firm’s “most vulnerable” clients. The SRO says that Citigroup could have and should have stopped her.

Among the warning signs that Citigroup is accused of not responding to:
• Address discrepancies in exception reports regarding an elderly widow whom Moon bilked of almost $80,000. When Moon explained to Citigroup that the inaccuracy occurred because the client had moved to Arizona, Citigroup accepted the reason she provided, which allowed her to keep misappropriating client money.

• Even after Citigroup was told that one customer had died, Moon was still able to create an account in that person’s name and that dead client’s widow. She then transferred money from the deceased client’s bogus account to the widow’s fraudulent account, wrote checks from the widow’s account, and transferred several thousand dollars to her personal account.

• Even though Moon set up a fraudulent account in her dad’s name, transferred $150,000 of a customer’s account into the bogus account, and took $90,000 of that money that she moved into one of her accounts, Citigroup didn’t detect her misconduct. FINRA says that this because Citigroup’s review of customer account records was deficient.

By agreeing to settle, Citigroup is not denying or admitting to the securities charges.

FINRA Fines Citigroup $500,000 for Failing to Supervise Sales Assistant Who Misappropriated Customer Funds, FINRA, August 9, 2011

Citigroup Global Markets Fined $500,000 in FINRA Failure to Supervise Case, Forbes, August 10, 2011

Citigroup Aide Stole From Widows, Father, Finra Says, Bloomberg, August 25, 2009

More Blog Posts:

Citigroup Global Markets Sales Assistant Accused of Stealing from Clients is Banned by FINRA from the Securities Industry, Stockbroker Fraud Blog, September 4, 2009

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M, Stockbroker Fraud Blog, August 9, 2011

Citigroup Ordered by FINRA to Pay $54.1M to Two Investors Over Municipal Bond Fund Losses, Stockbroker Fraud Blog, April 13, 2011

Federal Judge to Approve Citigroup’s $75M Securities Settlement with SEC Over Bank’s Subprime Mortgage Debt Reporting to Investors, Stockbroker Fraud Blog, September 29, 2010

August 15, 2011

CapWest Loses $940,000 Dallas Securities Case in FINRA Arbitration

Financial Industry Regulatory Authority (FINRA) has ordered CapWest Securities Incorporated to pay nearly $940,000 in a Texas securities fraud case filed by a group of investors over the recommendation and sale of numerous illiquid, risky, convertible debentures. The claimants had accused CapWest of breach of fiduciary duty, breach of contract, state and federal securities law violations, fraud, gross negligence, negligence, and other actions.

Last month, the FINRA arbitration panel ordered CapWest to pay claimant Robert E. Lee, both as an individual and as a Robert Earl Lee Revocable Trust trustee, $137,000 in compensatory damages. CapWest was also ordered to pay $478,500 in compensatory damages to Beatrice M. McCrae and Buford E. McCrae, both as individuals and on behalf of B.E. McCrae Family Limited Partnership. Robert E. Lee was also to receive $37,330 in interest for the period of October 25, 2008 through July 15, 2011 at a 5% per annum rate. For Buford E. McCrae and Beatrice E. McCrae, the interest of 5% per annum was $95,180 for the period of October 16, 2006 through July 15, 2011. Under the Texas Deceptive Trade Practices Act, Robert E. Lee is to receive $17,450 in punitive damages. Buford E. McCrae and Beatrice M. McCrae are to get paid $57,370. Payment of the claimants’ costs, legal fees, and other fees were also granted.

Convertible Debentures
This kind of loan can lets its holder convert it into stock. In certain cases, the bond’s issuer may also do this. When employing the convertibility option, the issuer is allowed to pay a reduced interest rate on the loan. Companies use these financial instruments to get capital that they need to maintain or grow their operation.

This Dallas securities fraud case isn’t the only arbitration case that CapWest has recently lost. Also last month, a FINRA arbitration panel awarded CapWest clients and former broker Attila Toth $438,000 in damages and another $130,000 in legal fees and interest.

CapWest sold two private placements--$22 million in Provident Royalties LLC-issued private placements and $30.6 million in Medical Capital Holdings Inc. notes that the SEC claims were fraudulent. Once a leading seller of private placements, CapWest is in financial trouble. Earlier this year, the broker-dealer reported that a drop in net capital, an increase of securities fraud lawsuits against it, and three years of losses in a row have raised concerns over whether the financial firm can stay in operation.

Texas Securities Fraud
If you are an investor who has sustained financial losses from working with a broker-dealer or an investment adviser, our Texas securities fraud law firm can advise you of your options. Securities claims and lawsuits can be complex cases and you do not want to go into arbitration or court without an experienced Houston securities fraud lawyer representing you.

To obtain your free case evaluation, contact our Dallas stockbroker fraud law firm today. Our Texas private placement attorneys have helped thousands of investors recoup their losses.

Will arbitration loss cap CapWest?, Investment News, August 15, 2011

More Blog Posts:

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M, Stockbroker Fraud Blog, August 9, 2010

Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M, Stockbroker Fraud Blog, August 3, 2011

Houston Securities Fraud: Ex-Citigroup Broker Accused of Stealing Millions from Wealthy Mexican Investors is Barred from FINRA, Stockbroker Fraud Blog, July 29, 2011

August 11, 2011

Investors Working with Incompetent Registered Investment Advisers Have Few Protections, Reports Bloomberg

According to, the registered investment adviser industry may offer little protection to investors who end up with an incompetent adviser. This, even though investment advisers, unlike brokers, are upheld to a fiduciary standard to make their clients’ interests a priority and charge fees rather than commissions.

With over 14,000 independent RIA firms controlling about $1.5 trillion of assets (says Aite Group), this is important for investors to know. Problems they could face include too high fees, inappropriate investments, and a hard time collecting on legal awards. Unfortunately, many investors would rather deal with their losses rather than spend the time and money to take legal action against a negligent registered investment adviser.

Currently, advisers who manage at least $25 million have to register with the SEC. If the amount under management is less than that then they must register with the states where they do business. On June 28, 2012, however, the threshold will go up to $100 million, which means that approximately 3,200 advisers will be subject to state rather than SEC oversight.

It was just this January that the U.S. Securities and Exchange Commission recommended that traditional brokers also be upheld to the fiduciary standard that RIAs must meet. Currently, the nation’s approximately 632,000 brokers have to fulfill a suitability standard requiring them to offer advice that meets a client’s needs at the time that the sale of the product is made.

Yet even with the fiduciary standard, advisers don’t have to disclose their performance history to prospective clients. Because SEC-registered advisers don’t have to deal with net capital requirements, some of those that are ordered to pay an investor award cannot afford to and don’t. Unlike brokers, who may face suspension of their registration suspended if they don’t pay, advisers must only disclose that they have unpaid judgment.

The nonprofit firm Sunlight Foundation says that more than 1 in 10 RIAs is subject disciplinary actions, including convictions for felony crimes. Last year, the SEC took 113 enforcement actions against investment firms and investment advisers. That said, legal settlements and arbitration awards have to be disclosed on an adviser’s ADV form, which an RIA must register with the states or the SEC. Customer disputes involving investment adviser representatives can also be found on the SEC Web site.

Advisers will usually include arbitration clauses in agreements requiring clients to work through disputes through JAMS private arbitration of the American Arbitration Association. However, standard initial filing fees can start in the high hundreds and go into the thousands of dollars. Additional fees that may follow run into the tens of thousands of dollars.

Consumer Federation of America investor protection director Barbara Ropers says that because the majority of advisers don’t accept commissions, they may have less conflicts of interests than brokers. However, where there can be a conflict interest is in the charging of adviser fees (usually range from under 1% to 2%) of assets under management, which can compel an adviser to plays clients in higher-fee or –risk investments.

The SEC reports that most federally registered investment advisers charge client fees based on the percentage of assets under management (just 9% of them get commissions). Some advisers, however, may be charging fees that are too high.

Our securities fraud lawyers represent clients who have suffered losses because an investment adviser or a broker dealer was negligent.

Related Web Resources:

Safeguards Scant for U.S. Investors as Registered Advisers Increase by 39, Bloomberg, July 6, 2011

Investment Advisers Could Arbitrate Through Finra Under New Plan, The Wall Street Journal, April 11, 2011

Protect Your Money: Check Out Brokers and Investment Advisers, SEC

More Blog Posts:

SEC Extends Temporary Rule Allowing Principal Trades by Investment Advisers Registered as Broker-Dealers, Institutional Investor Securities Blog, January 13, 2011
Financial Services Institute Wants FINRA to Serve as SRO for RIAs, Stockbroker Fraud Blog, January 3, 2011

Most Investors Want Fiduciary Standard for Investment Advisers and Broker-Dealers, Say Trade Groups to SEC, Stockbroker Fraud Blog, October 12, 2010

Continue reading "Investors Working with Incompetent Registered Investment Advisers Have Few Protections, Reports Bloomberg" »

August 10, 2011

Stifel, Nicolaus & Co. and Former Executive Faces SEC Charges Over Sale of CDOs to Five Wisconsin School Districts

The SEC is charging Stifel, Nicolaus & Co. and its former Senior Vice President David W. Noack with securities fraud over the sale of unsuitable, high-risk complex investments to 5 Wisconsin school districts. Stifel and Noack allegedly misrepresented the risks involved in investing $200 million in synthetic collateralized debt obligations (CDOs) and did not disclose certain material facts. The investments proved a “complete failure.”

The Five Wisconsin School Districts:
• Kimberly Area School District
• Kenosha Unified School District No. 1
• School District of Waukesha
• School District of Whitefish Bay
• West Allis-West Milwaukee School District

All five school districts are suing Stifel and Royal Bank of Canada in civil court. Robert Kantas, partner of Shepherd Smith Edwards & Kantas LTD LLP, is one of the attorneys representing the school districts in their civil case against Stifel and RBC. Attorneys for the school districts issued the following statement:

“We believe that Stifel, Royal Bank of Canada and the other defendants defrauded the five Wisconsin school districts, along with trusts set up to make these investments. In 2006, these defendants devised, solicited and sold $200 million 'synthetic collateralized debt obligations' (CDOs), which were both volatile and complex, to these districts and trusts. While represented as safe investments, these were in fact very high risk securities, which were wholly unsuitable for the districts and trusts. In an attempt to protect taxpayers and residents, the districts hired attorneys and other professionals to investigate the investments and the potential for fraud. Then, with a goal of seeking full recovery of the monies lost in this scheme, a lawsuit was filed in Milwaukee County Circuit Court in 2008 to seek fully recovery of the losses and maintain and protect valuable credit ratings of these districts. To date, more than 3 million pages of documents have been obtained and examined by the attorneys for the districts. The districts also properly reported to the SEC the nature and extent of the wrongdoing uncovered. Over the past year, they have provided the SEC with volumes of documents and information to facilitate its investigation.”

In its complaint filed in federal court today, the SEC says that Stifel and Noack set up a proprietary program to assist the school districts in funding retiree benefits through the investments of notes linked to the performance of CDOs. The school districts invested $200 million with trusts they set up in 2006. $162.7 million was paid for with borrowed funds.

The SEC contends that Stifel and Noack, who both earned substantial fees even though the investments failed completely, took advantage of their relationships with the school districts and acted fraudulently when they sold financial products that were inappropriate for the latter. The brokerage firm and its executive also likely were aware that the school districts weren’t experienced or sophisticated enough to be able to evaluate the risks associated with investing in the CDOs. Both also likely knew that the school districts could not afford to suffer such catastrophic losses if their investments were to fail. Despite this, says the SEC, Noack and Stifel assured the school districts that for the investments to collapse there would have to be “15 Enrons.” They also allegedly failed to reveal certain material facts to the school districts, including that:

• The first transaction in the portfolio did poorly from the beginning.
• Within 36 days of closing, credit rating agencies had placed 10% of the portfolio on negative watch.
• There were CDO providers who said they wouldn’t participate in Stifel’s proprietary program because they were worried about the risks involved.

The SEC claims that Stifel and Noack violated the:

• Securities Exchange Act of 1934 (Section (10b))
• The Securities Act of 1933 (Section 17(a))
• The Securities Act of 1934 (Section 15(c)(1)(A))

The Commission is seeking, permanent injunctions, disgorgement of ill-gotten gains, financial penalties, and prejudgment interest.

Related Web Resources:
SEC Charges Stifel, Nicolaus & Co. and Executive with Fraud in Sale of Investments to Wisconsin School District,, August 10, 2011

SEC Sues Stifel Over Wisconsin School Losses Tied to $200 Million of CDOs, Bloomberg, August 10, 2011

Read the SEC Complaint (PDF)

School Lawsuit Facts

More Blog Posts:

Wisconsin School Districts Sue Royal Bank of Canada and Stifel Nicolaus and Co. in Lawsuit Over Credit Default Swaps, Stockbroker Fraud Blog, October 7, 2008

SEC Inquiring About Wisconsin School Districts Failed $200 Million CDO Investments Made Through Stifel Nicolaus and Royal Bank of Canada Subsidiaries, Stockbroker Fraud Blog, June 11, 2010

Continue reading "Stifel, Nicolaus & Co. and Former Executive Faces SEC Charges Over Sale of CDOs to Five Wisconsin School Districts" »

August 9, 2011

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M

A 76-year-old Amarillo insurance agent has pleaded guilty to 15 counts of Texas securities fraud over the sale of bogus investments and unregistered securities that resulted in over $5 million in losses for primarily elderly investors. The Texas State Securities Board won’t sentence John F. Langford until next month, but he faces up to 100 years in prison for running this Ponzi scam.

Meantime, Langford’s business partner, Jimmy Don King, has been indicted on 10 criminal counts, including selling securities despite not having a license, selling unregistered securities, and acting as an agent/dealer but without the appropriate registration. King was the voice and face of Langford & Associates’ commercials on TV and commercials guaranteeing “not to make you poor.” (Langford also did business as Langford Funding and Langford Investments.)

The two men came under suspicion after an elderly woman sued them for securities fraud. She said that they persuaded her to invest $941,756 in private annuities. Later, a court found that the woman who suffered from dementia had been incompetent and therefore wasn't fit to make a decision about whether investing in bogus annuities that weren’t going to be due until her 90’s—a decade from when she signed on—was a good decision to make.

Many investors gave Langford their life savings in exchange for the promise of windfalls over several years. While private annuities were supposed to pay out up to 8%, promissory notes were supposed to pay out 9%. Langford paid King 5% of the investments. Investors’ money were used to pay for principal payments to prior investors, interest, as well as Langford’s personal expenses.

According to state documents that were confiscated from his office, the insurance firm had a negative cash flow. Between 2005 and 2007 Langford's property business never made over $10,000. Documents showed that he owed investors over $1 million.

Because Langford filed for Chapter 7 bankruptcy protection two years ago, many investors have had to file their claims in bankruptcy court. Claims there have totaled approximately $7 million.

Investment Fraud Against Seniors

Unfortunately there are professionals out there determined to bilk investors of their life savings. Elderly seniors, who may not be as alert or as informed as younger investors, are a prime target of financial scammers wishing to make a quick buck without regard to how victims are impacted.

According to the American Association of Retired Persons, persons over the age of 50 are easy targets for financial abuse because they:

• Expect that they will be dealt with honestly
• Are less likely to act when defrauded
• Are not as familiar with their rights in regard to the marketplace
• May have certain health issues, such as Alzheimer’s and Dementia that can allow them to be more easily duped than other people

Our Texas stockbroker fraud lawyers have seen the devastation that can be wreaked on the lives of elderly investors who’ve watched their retirement money disappear because they trusted people who purposely scammed them. There may be a way to recoup your investment losses.

Related Web Resources:

Insurance agent to face 99 years in prison for selling phony annuities, Investment News, July 29, 2011

Langford signs confessions in fraud cases, Amarillo Globe-News, July 26, 2011

Elder Abuse: Financial Scams Against Seniors, Nolo

Fraud Target: Senior Citizens, FBI

For Seniors, SEC

American Association of Retired Persons (AARP)

More Blog Posts:

Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M, Stockbroker Fraud Blog, August 3, 2011

Basketball Benefactor Accused of Texas Securities Fraud and Ponzi Scam that Targeted High-Profile Coaches Found Dead, Stockbroker Fraud Blog, July 19, 2011

Madoff Trustee Files Securities Lawsuit Against Safra National Bank of New York Seeking to Recover Almost $111.7M for Ponzi Scam Investors, Institutional Investors Securities Fraud, May 12, 2011

August 5, 2011

SEC’s Proxy Access Rule is Rejected by Appeals Court

The U.S. Court of Appeals for the District of Columbia Circuit has struck down a Securities and Exchange Commission rule that would have let company shareholders nominate one or two director nominees to their boards. The proxy access rule would have allowed groups with possession of a minimum 3% voting power of a company’s stock for a minimum of three years to nominate board candidates. Companies would have had to include information about these shareholder-nominated director candidates in their proxy materials.

The SEC had approved the regulation last year. It would have gone into effect in November, but the Commission stayed it after the US Chamber of Commerce and the Business Roundtable filed their legal challenge asking for the stay. The Business groups had said the rule was in violation of the Administrative Procedure Act and would “handcuff directors and boards,” exclude the majority of retail shareholders, and worsen the “short-term focus” considered among the main causes of the economic crisis. There were also concerns that the proxy access rule would let hedge funds, union-connected pension funds, corporate raiders, and hedge funds elect directors who would do as they directed.

The Chamber of Commerce and Business Roundtable also accused the SEC of disregarding studies and evidence that revealed the” adverse consequences of proxy access,” attempting to restrict the ability of shareholders to stop special interest groups from starting up expensive election contests, and not giving full consideration to state laws about access to principles about and related to proxy that already exist.

In its July 22 ruling the appeals court agreed with the two parties’ claim that the SEC behaved “arbitrarily and capriciously” when it failed to “adequately consider” how the rule would impact “efficiency, competition, and capital formation.” The court also said that the SEC did not “supported its predictive judgments,” failed to address the problems brought up by commenters, and “contradicted itself.”

Following the court’s decision, US Chamber of Commerce CEO and president Tom Donahue said: praised the court’s ruling, which refused to let “special interest politics” to be infused “into the boardroom.” Shepherd Smith Edwards & Kantas LTD LLP and stockbroker fraud lawyer William Shepherd, however, had this to say about Donahue’s statement: “This is an outrageous statement for the Kings of special interest politics to make! In fact, this story is really about special interest politics in the courtroom.”

While businesses that opposed the proxy access rule feared it would give environmental and labor union groups more power at corporations and that shareholder value would suffer, its supporters had argued that giving shareholders a bigger hand in who got to sit on corporate boards could have prevented the financial crisis.

According to Investment News, there is evidence that unions could use any additional voting influence to advance their interests. It was just several years ago that the California Public Employees’ Retirement System used its shareholder power in Safeway Inc. to try to vote out chief executive Steven Burd. It also pressured the company to resolve a strike under conditions that favored unions. CalPERS's efforts failed both times.

Our securities fraud lawyers are dedicated to protecting investors and helping their recover their losses sustained because of broker misconduct. Contact our stockbroker fraud law firm to request your free consultation.

Related Web Resources:
Striking a blow to SEC, court voids investor rule,, July 22, 2011

U.S. Chamber Joins Business Roundtable in Lawsuit Challenging Securities and Exchange Commission, US Chamber of Commerce, September 29, 2010

Read the legal challenge filed by the Business Roundtable and the US Chamber of Commerce (PDF)

Read SEC's Proxy Access Rule (PDF)

More Blog Posts:

SEC to Propose Rule Banning “Felons and Bad Actors” From Involvement in Private Offerings, Institutional Investors Securities Blog, May 29, 2011

SEC Examines Proxy Advisory Firms, Institutional Investors Securities Blog, October 14, 2010

SEC Proposes New Rule to Verify Swap Transactions, Institutional Investors Securities Blog, January 27, 2011

August 4, 2011

SEC’s Retroactive Approach to Its Proposed Reg D ‘Bad Actor’ Rule Draws Criticism From Law Firms

In comment letters sent to the Securities and Exchange Commission, numerous law firms wrote that the retroactive approach taken in a proposed rule to bar “bad actors” from Regulation D private offerings under the 1933 Securities Act sets up a number of fairness issues. The law firms also cautioned that the Dodd-Frank Wall Street Reform and Consumer Protection Act, which calls for the rulemaking, doesn’t require retroactivity.

The proposed rule would keep recidivist violators and felons from taking part in private offerings under Rule 506 of Reg D. Determining who is barred would be based on disqualifying events, including ones that occurred before the Dodd-Frank statute was passed. Some law firms have even said that a retroactive application would disrupt already negotiated administrative and civil settlements while chancing the “unwarranted disruption to private capital formation.” However, not all lawyers disapprove of applying the proposed Reg D ‘Bad Actor’ Rule retroactively. Shepherd Smith Edwards & Kantas LTD LLP founder and securities fraud lawyer William Shepherd said, “What kind of attorney thinks it is inherently unfair to ‘bar felons and recidivist violators from participating in private offerings’ of securities sold to the public? Stand in front of a mirror and say that to yourself out loud.”

SEC has been divided about the proposed application of the rule and
Commissioners Troy Paredes and Kathleen Casey, who are both Republicans, strongly oppose it. SEC Chairman Mary Schapiro, however, has said that the retroactive approach should help protect investors, which is part of Dodd-Frank’s intent.

Meantime, the New York City Bar Association's securities regulation committee has said that “inherent fairness” requires a “prospective application” of any rule that would penalize a party on the basis of a past settlement or adjudication. The committee also cautioned that should the SEC move forward with its proposal, so many “waiver requests” might come in that this could place a further strain on the Commission’s already taxed staff resources.

Rule 506 of Regulation D under the 1933 Securities Act
Per the proposed Rule 506 of Regulation D under the 1933 Securities Act, recidivist violators that are subject to specific sanctions and proceedings and parties with felonies or misdemeanors involving the buying or selling of a securities would be barred from the sales and offerings of securities. They also wouldn't be allowed to seek the benefits of the safe harbor act’s Rule 506. The rule, which allows issuers to get around the 1933 Act’s reporting requirements, also comprises some 93% of private securities offered under Reg. D.

The proposal also wouldn’t allow a private placement to avail of the rule if the person or issuer covered by the rule had a disqualifying event (restraining order, criminal conviction, court injunction, USPS false representation order, certain commission disciplinary orders, commission “stop orders” to suspend exemptions, expulsion or suspension from belonging to an SRO or associating with an SRO member, and/or final orders of insurance, credit union regulators, or state securities banking.)

Related Web Resources:

Attorneys Decry Retroactive Approach Of SEC's Reg D 'Bad Actor' Rule Proposal, BNA Securities Law Daily, July 21, 2011

Comments on Disqualification of Felons and Other "Bad Actors" From Rule 506 Offerings,

More Blog Posts:
SEC to Propose Rule Banning “Felons and Bad Actors” From Involvement in Private Offerings, Institutional Investor Securities Blog, May 29, 2011

SEC to Up Dollar Thresholds for When an Investment Adviser Can Charge Investors Performance Fees, Stockbroker Fraud Blog, May 24, 2011

FINRA Wants Brokers Selling Regulation D Private Placements to Take Part in Tougher Due Diligence Process, Stockbroker Fraud Blog, June 7, 2011

Continue reading "SEC’s Retroactive Approach to Its Proposed Reg D ‘Bad Actor’ Rule Draws Criticism From Law Firms " »

August 3, 2011

Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M

An El Paso man accused of running a Texas Ponzi scheme may in fact be a man who was convicted of fraud in Maryland more than 10 years ago. Scott Lindemann is now charged with wire fraud for allegedly defrauding at least 25 investors of $2 million.

Prosecutors say that Lindemann’s real name may actually be Scott Yermish, who left Maryland after serving time in jail. He left the state without finishing his probated time for a theft conviction.

It is in El Paso that Lindemann is accused of using his hedge fund to set up his Texas securities fraud scam. Per court records, he gained the trust of one person, who then assisted him in bringing in more investors. Lindemann allegedly gave some of the investors money so they would think they’d earned a profit. He also generated bogus documents that caused them to believe that their investments had grown substantially.

According to the San Antonio Express-News, one victim of the alleged Texas securities fraud says that she and her husband lost over $250,000. She also claims that other investors took out mortgages on their houses to invest with Lindemann.

The FBI is calling this a “quick investigation.” Lindemann was arrested a week after the complaint was made.

Ponzi Scam
This type of investment fraud generally involves investors receiving purported returns except that the money they are "making" is actually from new investors who think that these funds are being invested. To keep the scheme going, new investors must keep joining up so that scammers can use their money to pay the earlier-stage investors. Ponzi scams can collapse when too many investors ask to cash out or bringing in new investors starts to prove challenging.

Every year, there are investors that lose money because they placed their money in a Ponzi scam. Fortunately, there may be a way to recoup your losses. It is important that you speak with a Texas securities fraud law firm about your case.

Warning Signs that You May Be Investing in a Texas Ponzi Scheme:
• Watch out for “guaranteed” investment opportunities or the promise of high investment returns with little or no risk.
• Returns are too consistent. It is natural for investment returns to go up and down—especially if there is the hope of high returns.
• The investment that isn’t registered with the state or the SEC.
• The investment professional you are working with isn’t registered or licensed.
• The investment strategy involved is too complex for you to understand or you can’t get complete information about it.
• There isn't enough information about your investment that can be found in writing.
• Account statement errors.
• You aren’t getting promised payments.
• Cashing out on your investment is proving to be a challenge.
• Your financial adviser tries to get you to “roll over” payments that are owed to you with the promise of even higher returns.

Many Ponzi scam victims have lost their life savings, retirement, and/or kids’ college fund because they placed their trust and their money in the hands of the wrong people.

Related Web Resources:

Man arrested by FBI may have scammed millions, San Antonio Express-News, August 2, 2011

Accused Texas Ponzi Schemer May Be Fugitive Md. Fraudster, FinAlternatives, August 3, 2011

Ponzi Scams, SEC

Ponzi Scams, FBI

More Blog Posts:

Houston Securities Fraud: Ex-Citigroup Broker Accused of Stealing Millions from Wealthy Mexican Investors is Barred from FINRA, Stockbroker Fraud Blog, July 29, 2011

Basketball Benefactor Accused of Texas Securities Fraud and Ponzi Scam that Targeted High-Profile Coaches Found Dead, Stockbroker Fraud Blog, July 19, 2011

Venezuelan Workers Fall Victim to Francisco Illarramendi's Ponzi Scam, Stockbroker Fraud Blog, March 30, 2011

Continue reading "Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M" »