January 24, 2008

Deutsche Bank Trust Company, Goldman Sachs Group, and Bank of America Corporation are Among the 21 Lenders Named in Cleveland, Ohio Lawsuit

The city of Cleveland, Ohio is suing 21 financial institutions for hundreds of millions of dollars in damages caused by subprime lending and securitization. The defendants named in the lawsuit are:

• Deutsche Bank Trust Company
• Ameriquest Mortgage Company
• Bank of America Corporation
• The Bear Stearns Companies
• Citigroup, Inc.
• Countrywide Financial Corp.
• Credit Suisse (USA)
• Fremont General Corporation
• GMAC-RFC
• Goldman Sachs Group
• Greenwich Capital Markets, Inc.
• HSBC Holdings, PLC
• Indymac Bancorp., Inc.
• J.P. Morgan Chase Co.
• Lehman Brothers Holdings, Inc.
• Merrill Lynch & Co., Inc.
• Morgan Stanley
• Novastar Financial Inc.
• Option One Mortgage Corporation
• Washington Mutual Inc.
• Wells Fargo & Co.

The city of Cleveland says that the defendants issued loans to people who would never have been able to pay them back and that the foreclosures were inevitable. The lawsuit says that not only did the financial institutions issue loans to ill-qualified borrowers, but they securitized the loans and used the profits to fund more subprime mortgages, make more money, and secure more borrowers.

In the past two years, Cleveland has experienced over 7,000 foreclosures. Entire city blocks have been vacated and violent crime and arson incidents have increased. 1,000 abandoned homes have been torn down. Cleveland is calling the “propagation of subprime mortgages… and the corresponding foreclosures... a public nuisance as defined by Ohio common law.

As a result, the city of Cleveland’s population was 444,000 last year—way down from its nearly one million residents in 1950. The decrease in population size has negatively affected the city’s budget.

The stockbroker law firm of Shepherd Smith and Edwards represents investors who have lost money due to the misconduct or negligent actions of broker-dealers and other financial institutions. Contact Shepherd Smith and Edwards today and one of our stockbroker fraud lawyers will be happy to offer you a free consultation.

Related Web Resources:

Cleveland Sues 21 Lenders Over Subprime Mortgages, Herald-Tribune, January 12, 2008

Read the Complaint (PDF)

Posted by Shepherd Smith & Edwards | | Email This Post

Posted In: Ameriprise - Securities America , Bank of America , Credit Suisse , Deutsche Bank , Financial Firms , J P Morgan - Chase , Lehman Brothers , Merrill Lynch , Morgan Stanley , Wells Fargo

Bookmark: Bookmark Deutsche%20Bank%20Trust%20Company%2C%20Goldman%20Sachs%20Group%2C%20and%20Bank%20of%20America%20Corporation%20are%20Among%20the%2021%20Lenders%20Named%20in%20Cleveland%2C%20Ohio%20Lawsuit at Google.com Bookmark Deutsche%20Bank%20Trust%20Company%2C%20Goldman%20Sachs%20Group%2C%20and%20Bank%20of%20America%20Corporation%20are%20Among%20the%2021%20Lenders%20Named%20in%20Cleveland%2C%20Ohio%20Lawsuit at del.icio.us Digg Deutsche%20Bank%20Trust%20Company%2C%20Goldman%20Sachs%20Group%2C%20and%20Bank%20of%20America%20Corporation%20are%20Among%20the%2021%20Lenders%20Named%20in%20Cleveland%2C%20Ohio%20Lawsuit at Digg.com Bookmark Deutsche%20Bank%20Trust%20Company%2C%20Goldman%20Sachs%20Group%2C%20and%20Bank%20of%20America%20Corporation%20are%20Among%20the%2021%20Lenders%20Named%20in%20Cleveland%2C%20Ohio%20Lawsuit at Spurl.net Bookmark Deutsche%20Bank%20Trust%20Company%2C%20Goldman%20Sachs%20Group%2C%20and%20Bank%20of%20America%20Corporation%20are%20Among%20the%2021%20Lenders%20Named%20in%20Cleveland%2C%20Ohio%20Lawsuit at Simpy.com Bookmark Deutsche%20Bank%20Trust%20Company%2C%20Goldman%20Sachs%20Group%2C%20and%20Bank%20of%20America%20Corporation%20are%20Among%20the%2021%20Lenders%20Named%20in%20Cleveland%2C%20Ohio%20Lawsuit at NewsVine Blink this Deutsche%20Bank%20Trust%20Company%2C%20Goldman%20Sachs%20Group%2C%20and%20Bank%20of%20America%20Corporation%20are%20Among%20the%2021%20Lenders%20Named%20in%20Cleveland%2C%20Ohio%20Lawsuit at blinklist.com Bookmark Deutsche%20Bank%20Trust%20Company%2C%20Goldman%20Sachs%20Group%2C%20and%20Bank%20of%20America%20Corporation%20are%20Among%20the%2021%20Lenders%20Named%20in%20Cleveland%2C%20Ohio%20Lawsuit at Furl.net Bookmark Deutsche%20Bank%20Trust%20Company%2C%20Goldman%20Sachs%20Group%2C%20and%20Bank%20of%20America%20Corporation%20are%20Among%20the%2021%20Lenders%20Named%20in%20Cleveland%2C%20Ohio%20Lawsuit at reddit.com Fark Deutsche%20Bank%20Trust%20Company%2C%20Goldman%20Sachs%20Group%2C%20and%20Bank%20of%20America%20Corporation%20are%20Among%20the%2021%20Lenders%20Named%20in%20Cleveland%2C%20Ohio%20Lawsuit at Fark.com Bookmark Deutsche%20Bank%20Trust%20Company%2C%20Goldman%20Sachs%20Group%2C%20and%20Bank%20of%20America%20Corporation%20are%20Among%20the%2021%20Lenders%20Named%20in%20Cleveland%2C%20Ohio%20Lawsuit at Yahoo! MyWeb

January 8, 2008

$600 Million Set Aside by State Street May Be Tip of Mortgage Litigation Iceburg

State Street Corp. announced it established a pre-tax reserve of $618 million billion "to address legal exposure and other costs associated with the under-performance of fixed-income strategies managed by the company's investment management arm," blaming exposure to subprime mortgages. The company referenced "customer concerns as to whether the execution of the strategies was consistent with the customers' investment intent" without identifying any specific litigation.

However, the New York Times published an article stating that State Street created the reserve "after five clients sued it, claiming they had lost tens of millions of dollars in State Street funds they were told would be invested in risk-free debt like Treasuries." The article added that State Street's reserve "highlight the legal challenges that lie ahead for financial firms."

The first of the five law suits referenced by the Times article was filed October 1, 2007, by Prudential Retirement Insurance and Annuity Co. The action "seeks, among other relief, restitution of certain losses attributable to certain investment funds" sold by State Street's investment management arm, and alleges State Street "failed to exercise prudent investment management," in violation of the Employee Retirement Income Security Act of 1974 (ERISA).

The complaint says the defendants "radically altered" the investment strategies of two bond funds, the Intermediate Bond Fund and the Government Credit Bond Fund and "took undisclosed, highly leveraged positions in mortgage-related financial derivatives" and thereby "exposed" the funds to "an inappropriate level of risk" that during the summer of 2007 "produced catastrophic results." The complaint further alleges that as these events unfolded the defendants provided "untimely, incomplete and misleading information" causing losses of "roughly $80 million" to assets held by about 165 retirement plans for which Prudential is responsible, affecting approximately 28,000 plan participants.

This and three other law suits against State Street which reportedly lead to the litigation reserve, allege ERISA violations were involved. One of these suits was filed October 17 by Unisystems and the trustee of the Unisystems Employees' Profit Sharing Plan. Another was brought on October 24 by the Composite Pension Trust of Nashua Corporation. The third was brought on October 31 by the plan administrator and the trustee of the Employees' Savings and Profit Sharing Plan of the Andover Companies.

A fifth lawsuit (not specifically iidentified by the New York Times article) alleging only state law claims, and not Federal ERISA violations, was filed on November 5 in a Harris County, Texas, District Court by Memorial Hermann Healthcare System. On December 3, the defendants removed the Memorial Hermann case to Federal Court in the Southern District of Texas. The petition alleges that the State Street defendants breached an "Agreement of Trust" to serve as trustee of nearly $91 million in the plaintiff's assets, claiming these assets were invested in the State Street Limited Duration Bond Fund which lost 37 percent of its value during three weeks in August 2007.

The State Street lawsuits are reported to be indicative of legal problems to be faced by various financial institutions over the “mortgage meltdown” which began last year, including not only originators and market-makers in mortgage instruments, but also those who purchased such investments for others and perhaps companies who issued strong ratings concerning those investments.

The law firm of Shepherd Smith and Edwards is dedicated to assisting investors who have sustained losses as a result of improper handling of their retirement or other assets. Please contact Shepherd Smith and Edwards to arrange a free confidential consultation with one of our attorneys do discuss whether you may have a viabile claim to recover your losses.

Posted by Shepherd Smith & Edwards | | Email This Post

Posted In: Financial Advisers , Financial Firms , Retirement Funds

Bookmark: Bookmark %24600%20Million%20Set%20Aside%20by%20State%20Street%20May%20Be%20Tip%20of%20Mortgage%20Litigation%20Iceburg%20 at Google.com Bookmark %24600%20Million%20Set%20Aside%20by%20State%20Street%20May%20Be%20Tip%20of%20Mortgage%20Litigation%20Iceburg%20 at del.icio.us Digg %24600%20Million%20Set%20Aside%20by%20State%20Street%20May%20Be%20Tip%20of%20Mortgage%20Litigation%20Iceburg%20 at Digg.com Bookmark %24600%20Million%20Set%20Aside%20by%20State%20Street%20May%20Be%20Tip%20of%20Mortgage%20Litigation%20Iceburg%20 at Spurl.net Bookmark %24600%20Million%20Set%20Aside%20by%20State%20Street%20May%20Be%20Tip%20of%20Mortgage%20Litigation%20Iceburg%20 at Simpy.com Bookmark %24600%20Million%20Set%20Aside%20by%20State%20Street%20May%20Be%20Tip%20of%20Mortgage%20Litigation%20Iceburg%20 at NewsVine Blink this %24600%20Million%20Set%20Aside%20by%20State%20Street%20May%20Be%20Tip%20of%20Mortgage%20Litigation%20Iceburg%20 at blinklist.com Bookmark %24600%20Million%20Set%20Aside%20by%20State%20Street%20May%20Be%20Tip%20of%20Mortgage%20Litigation%20Iceburg%20 at Furl.net Bookmark %24600%20Million%20Set%20Aside%20by%20State%20Street%20May%20Be%20Tip%20of%20Mortgage%20Litigation%20Iceburg%20 at reddit.com Fark %24600%20Million%20Set%20Aside%20by%20State%20Street%20May%20Be%20Tip%20of%20Mortgage%20Litigation%20Iceburg%20 at Fark.com Bookmark %24600%20Million%20Set%20Aside%20by%20State%20Street%20May%20Be%20Tip%20of%20Mortgage%20Litigation%20Iceburg%20 at Yahoo! MyWeb

April 5, 2007

Is the Arbitration System Stacked In Favor Of Brokerage Firms and Against Investors?

After the U.S. Supreme Court decided to let brokerage firms make customers sign arbitration agreements, a lot of people thought that this was a faster, less expensive alternative than letting investors take their claims to courts. Recently, however, what seemed like a good way to resolve disputes between brokers and investors has come under close scrutiny.

Certain regulators and lawmakers are now saying that the system needs to be reviewed. According to William Galvin, the Massachusetts Secretary of the Commonwealth of Massachusetts, the arbitration side of disputes need to be fairer and not “stacked against” investors.

These kinds of concerns are taking on a new importance in the wake of the upcoming consolidation of the NYSE Group Inc.’s New York Stock Exchange and the National Association of Securities Dealers.

In arbitration, no broad right of appeal exists, and a three-person panel (rather than a jury of peers) hears the case. One benefit, however, is that disputes can move a lot more quickly through the arbitration system then in a court of law.

Some critics say that the arbitration system has become a lot like the court system that it sought to replace. Others have questioned the system’s fairness, in light of the fact that an industry-affiliated arbitrator sits on each panel. Representatives for investors have voiced concerns that arbitrators that depend on brokerage houses for their salaries may find it difficult to remain impartial.

In addition, there is a falling win rate among investors involved in arbitration disputes. Just 42% of investors won cases in NASD arbitration last year. Also, winnings are often smaller than what an investor had initially claimed if the claim is made against a big firm—reports a new study. In a study that hasn’t been finalized yet, clients’ recovery rates against Morgan Stanley, Merrill Lynch & Co., and Smith & Barney was reportedly at just 10%. (However, indications are that clients who retain attorneys experienced in this area of the law recover at far higher rates.)

Many claims are not reviewed by an arbitration panel. Last year, 81% of customer claims were resolved by mediation or settlement. It is possible that the 19% of cases that do arrive in front of a panel are the ones that brokerage firms believe they stand a good chance at winning.

Shepherd Smith and Edwards is a law firm committed to representing investors who have incurred losses because of brokers and brokerage firms. We have helped thousands of investors recuperate investment losses. Our record against major brokerage firms, as well as smaller firms, is far greater than the reported averages Contact Shepherd Smith and Edwards online, and your first consultation is free.

Related Web Resource:

Arbitration and Mediation, NASD

Posted by Shepherd Smith & Edwards | | Email This Post

Posted In: Arbitration , Financial Firms

Bookmark: Bookmark Is%20the%20Arbitration%20System%20Stacked%20In%20Favor%20Of%20Brokerage%20Firms%20and%20Against%20Investors%3F at Google.com Bookmark Is%20the%20Arbitration%20System%20Stacked%20In%20Favor%20Of%20Brokerage%20Firms%20and%20Against%20Investors%3F at del.icio.us Digg Is%20the%20Arbitration%20System%20Stacked%20In%20Favor%20Of%20Brokerage%20Firms%20and%20Against%20Investors%3F at Digg.com Bookmark Is%20the%20Arbitration%20System%20Stacked%20In%20Favor%20Of%20Brokerage%20Firms%20and%20Against%20Investors%3F at Spurl.net Bookmark Is%20the%20Arbitration%20System%20Stacked%20In%20Favor%20Of%20Brokerage%20Firms%20and%20Against%20Investors%3F at Simpy.com Bookmark Is%20the%20Arbitration%20System%20Stacked%20In%20Favor%20Of%20Brokerage%20Firms%20and%20Against%20Investors%3F at NewsVine Blink this Is%20the%20Arbitration%20System%20Stacked%20In%20Favor%20Of%20Brokerage%20Firms%20and%20Against%20Investors%3F at blinklist.com Bookmark Is%20the%20Arbitration%20System%20Stacked%20In%20Favor%20Of%20Brokerage%20Firms%20and%20Against%20Investors%3F at Furl.net Bookmark Is%20the%20Arbitration%20System%20Stacked%20In%20Favor%20Of%20Brokerage%20Firms%20and%20Against%20Investors%3F at reddit.com Fark Is%20the%20Arbitration%20System%20Stacked%20In%20Favor%20Of%20Brokerage%20Firms%20and%20Against%20Investors%3F at Fark.com Bookmark Is%20the%20Arbitration%20System%20Stacked%20In%20Favor%20Of%20Brokerage%20Firms%20and%20Against%20Investors%3F at Yahoo! MyWeb

March 27, 2007

Goldman Sachs Affiliate Agrees To Pay $2 Million in Fines and Penalties Over Short-Sale Scheme Charges by NYSER and the SEC

NYSE Regulation Inc. and the Securities and Exchange Commission say that a clearing affiliate and prime broker of Goldman Sachs Group will pay $2 million in fines and penalties over its alleged role in an illegal short-sale trading scheme that was executed by Goldman Sachs customers through their accounts with the brokerage. Goldman Sachs Execution and Clearing, LP has not admitted to or denied any wrongdoing by agreeing to the censure. They are, however, agreeing to cease and desist from future violations.

The SEC charges that firm customers unlawfully sold securities short right before public offerings of the companies’ securities. It is accusing Goldman of violating the rules that mandate that brokers must mark sales short or long, while restricting stock loans on long sales. Both NYSER and SEC say that if Goldman had proper procedures in place, it would have discovered via its own records this illegal activity by its customers. Two Goldman customers have already settled SEC charges connected to their alleged participation in these activities.

SEC Chairman Christopher Cox told the U.S. Chamber of Commerce on the day of this announcement that the commission and its senior staff members are very concerned about abusive naked short-selling. He admitted that Regulation SHO had not properly addressed these issues and that the commission will now eliminate the regulation’s grandfather provision. Cox said that naked short-selling was connected to settlement and clearance systems and that the SEC would use technology to further deal with this issue. He said the action against Goldman was important.

The SEC says that customers used the firm’s REDI System (the automated trading system for broker dealers and their direct market-access) to make sell orders, which Goldman then executed as long sales. Customers, however, had sold the securities short and did not have the securities upon the settlement date. Goldman then delivered borrowed and proprietary securities to brokers so that the buyers could settle the customers “long sales.” Both NYSER and the SEC are in agreement that Goldman was unreasonable to rely on the customers’ representations that the offered securities belonged to them.

SEC Enforcement Director Linda Chatman Thomsen says that brokers are not allowed to ignore obvious discrepancies of illegal trading by its customers even though the latter now has direct market access platforms that let brokers execute bigger volumes of trade more efficiently and rapidly for customers. The SEC says that brokers are mandated to investigate a customer’s trading activities if significant disparities indicate that a customer may be lying to a broker about its representations.

NYSER Executive Vice President of Enforcement Susan Merrill says that blind reliance on customer representations that a sale is long when securities are being sold is not appropriate if a firm sees evidence of short selling.

The SEC says that since March 2000, patterns of trading by the customers and Goldman’s own records indicated that the customers were selling securities short and violating the 1934 Securities Exchange Act Rule 105 and Rule 10a-1(a). Goldman’s records, according to the SEC, also indicate that customers covered their short positions with securities they bought in follow-on and secondary offerings after the sales. The SEC says that Goldman could have noticed these trading disparities if they had the proper procedures in place to do so. NYSER says Goldman neglected to reasonably supervise its business activities.

Over the years, Shepherd Smith and Edwards has represented thousands of investors who have lost investments because of the inappropriate actions of stockbrokers and their firms. Contact Shepherd, Smith, and Edwards for your free consultation.

Related Web Resources:
SEC Administrative Order (PDF)

Goldman Sachs Execution and Clearing

Securities Exchange Act of 1934

Posted by Shepherd Smith & Edwards | | Email This Post

Posted In: Financial Firms , Goldman Sachs , SEC Enforcement , Securities Fraud

Bookmark: Bookmark Goldman%20Sachs%20Affiliate%20Agrees%20To%20Pay%20%242%20Million%20in%20Fines%20and%20Penalties%20Over%20Short-Sale%20Scheme%20Charges%20by%20NYSER%20and%20the%20SEC%20 at Google.com Bookmark Goldman%20Sachs%20Affiliate%20Agrees%20To%20Pay%20%242%20Million%20in%20Fines%20and%20Penalties%20Over%20Short-Sale%20Scheme%20Charges%20by%20NYSER%20and%20the%20SEC%20 at del.icio.us Digg Goldman%20Sachs%20Affiliate%20Agrees%20To%20Pay%20%242%20Million%20in%20Fines%20and%20Penalties%20Over%20Short-Sale%20Scheme%20Charges%20by%20NYSER%20and%20the%20SEC%20 at Digg.com Bookmark Goldman%20Sachs%20Affiliate%20Agrees%20To%20Pay%20%242%20Million%20in%20Fines%20and%20Penalties%20Over%20Short-Sale%20Scheme%20Charges%20by%20NYSER%20and%20the%20SEC%20 at Spurl.net Bookmark Goldman%20Sachs%20Affiliate%20Agrees%20To%20Pay%20%242%20Million%20in%20Fines%20and%20Penalties%20Over%20Short-Sale%20Scheme%20Charges%20by%20NYSER%20and%20the%20SEC%20 at Simpy.com Bookmark Goldman%20Sachs%20Affiliate%20Agrees%20To%20Pay%20%242%20Million%20in%20Fines%20and%20Penalties%20Over%20Short-Sale%20Scheme%20Charges%20by%20NYSER%20and%20the%20SEC%20 at NewsVine Blink this Goldman%20Sachs%20Affiliate%20Agrees%20To%20Pay%20%242%20Million%20in%20Fines%20and%20Penalties%20Over%20Short-Sale%20Scheme%20Charges%20by%20NYSER%20and%20the%20SEC%20 at blinklist.com Bookmark Goldman%20Sachs%20Affiliate%20Agrees%20To%20Pay%20%242%20Million%20in%20Fines%20and%20Penalties%20Over%20Short-Sale%20Scheme%20Charges%20by%20NYSER%20and%20the%20SEC%20 at Furl.net Bookmark Goldman%20Sachs%20Affiliate%20Agrees%20To%20Pay%20%242%20Million%20in%20Fines%20and%20Penalties%20Over%20Short-Sale%20Scheme%20Charges%20by%20NYSER%20and%20the%20SEC%20 at reddit.com Fark Goldman%20Sachs%20Affiliate%20Agrees%20To%20Pay%20%242%20Million%20in%20Fines%20and%20Penalties%20Over%20Short-Sale%20Scheme%20Charges%20by%20NYSER%20and%20the%20SEC%20 at Fark.com Bookmark Goldman%20Sachs%20Affiliate%20Agrees%20To%20Pay%20%242%20Million%20in%20Fines%20and%20Penalties%20Over%20Short-Sale%20Scheme%20Charges%20by%20NYSER%20and%20the%20SEC%20 at Yahoo! MyWeb

Call for a Free Consultation
(800) 259-9010

Contact Us

The CAPTCHA image

Phonetic spelling (mp3)
The code above is for the protection of your information.

Browse

  • Topics
  • By Date
  • Search
Topics
By Date
Search

Subscribe

  • By RSS
  • By Email
By RSS
Subscribe to the blogs's ATOM feed Subscribe to the RSS feed
Add to your Google Home Page or Google Reader Add to your My Yahoo!
Add to your My MSN Add to your My AOL
Add to your My Feedster Add to your NewsGator
Add to your Bloglines Add to your News Burst
Add to your Rojo Add to your Pluck
By Email


Recent Entries

Legal Blogs