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October 12, 2007

Oppenheimer, Morgan Stanley, Nomura Securities, and A.G. Edwards Traders Face SEC Charges of Stealing Stock Loan Kickbacks Worth $12 Million Plus

38 stock loan traders from A.G. Edwards, Morgan Stanley, Oppenheimer, and Nomura Securities are accused of stealing over $12 Million in stock loan kickbacks from their Wall Street firms. The Securities and Exchange Commission has charged the employees with the more than $12 million theft.

The SEC says that from 1998-2006, the traders worked with fake stock loan finders to skim profits from their employers through finder fees as well as cash kickbacks from finders. The stock loan traders conducted actual, legal stock loans but logged that the transactions involved finders, so there would be finder’s fees.

The finders were usually friends or relatives of the traders who were in charge of illegitimate “shell companies” that were not even a part of the stock loan business. The “finder” would then pay traders with kickbacks. The more sophisticated scams involved traders using their kickbacks to pay the other traders who had pushed through the loan transactions.

21 stock shell companies/stock loan finders (including a perfume salesman, a mailman, a dental receptionist, and a pharmacist) and 17 former and current stock loan traders now face SEC charges. The SEC says a few of these illegal operations took place in bars and restaurants throughout New York City where participants passed around payments worth thousands of dollars. The money was wrapped in newspapers or in envelopes.

In one case, two stock loan traders from Morgan Stanley are accused of stealing $1 million in undisclosed kickbacks from a shell company run by one of the trader’s relatives.

Federal prosecutors have filed charges of criminal fraud and conspiracy against 5 of the stock loan traders. 10 people have pled guilty in the case.

If you are an investor that has lost money because a member of the securities industry engaged in illegal activities, you should contact Shepherd Smith and Edwards today. We have helped thousands of people recover their financial losses. One of our experienced securities litigation attorneys would be happy to speak with you.

Related Web Resources:

US SEC charges 38 traders in stock loan scheme, Reuters, September 20, 2007

SEC Charges 38 Defendants in Multi-Million Dollar Stock Loan Scams, SEC.gov, September 20, 2007

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Posted In: AIG SunAmerica , Morgan Stanley , Nomura Securities , Oppenheimer , SEC Enforcement

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July 26, 2007

FSC Securities Unit of AIG – A ‘Cozy’ Place for Fraud?

FSC created "an extremely cozy environment for a man bent on defrauding his customers," said three NASD Securities Arbitrators, “management ineptness was broad" and the firm ignored red flags that the broker had "selling away" issues (using one's status at a firm to aid in the sale of investments not approved by the firm).

FSC Securities of Atlanta, part of the AIG Financial Group, had warning when it hired broker Scott Hollenbeck that he had problems during his past employment, said a panel of three arbitrators in their award to several investors. During his past employment, they say, he even embezzled money from a church organization.

Hollenbeck was based in Kernersville, N.C. where he was employed by FSC for over 5 years, ending in 2002, not counting a 20 month hiatus. Not named in the arbitration claim, Hollenbeck faces charges over an alleged Ponzi investment scheme which reportedly took place after he left FSC and included the use of billboards.

Securities arbitration is a private process, without records available to the public, and the decisions made ("awards") generally do not include much discussion about the case. However, these arbitrators saw fit to blast FSC while awarding victims almost $700,000, including legal fees and expenses. FSC claims the award includes payment to non-parties to the arbitration, a problem for all the victims if true and the award is challenged.

Shepherd Smith and Edwards represents investors nationwide in claims against members of the securities industry. We have represented investors in more than 1,000 securities arbitration cases. To learn whether we are able to assist you with a claim contact us to arrange a free consultation with one of our attorneys.

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Posted In: AIG SunAmerica , Arbitration

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May 27, 2007

SEC says AIG and Other Insurance Companys' Products Used for Earnings Fraud

The Securities and Exchange Commission for the first time proved a company used insurance to hide its losses.

The agency accused an executive of cellphone distributor Brightpoint Inc. of overstating the company’s earnings through improper use of an insurance policy. A New York jury found the company’s director liable for assisting in Brightpoint’s fraud and other violations of securities law said the SEC

In November, the American International Group(AIG) paid $126 million to settle claims by the Department of Justice and SEC that it assisted companies, including Brightpoint and the PNC Financial Services Group, inflate earnings through AIG’s insurance products.

To raise capital, rather than turn to a bank for a traditional loan or sell corporate debt, a company would borrow money from its insurer. The loan would be repaid in the form of increased premiums for traditional insurance, falling into an accounting category of “finite risk insurance”.

“Cracking down on the abuse of so-called finite insurance and reinsurance to cook the books of public companies has been a priority for us,” said SEC Regional Director Mark Schonfeld “This verdict makes clear that such conduct is fraud, plain and simple.”

Several other insurers including Ace, the Chubb Corporation and the Travelers Companies have received inquiries about such practices.

Shepherd Smith and Edwards is a law firm dedicated to representing institutional and individual investors to recover damages. We seek recovery for investment fraud, including damages sustained in life insurance and annuity contracts. If you or your firm has sustained significant losses in securities or insurance products contact us to arrange a free confidential consultation with one of our attorneys.

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Posted In: AIG SunAmerica , Crime , SEC

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