December 25, 2011

Former-Chicago Bears Wide Receiver Willie Gault Sued by SEC for Securities Scam Involving the Alleged Inflation of Stock Prices

The US Securities and Exchange Commission is suing former NFL football player Will Gault for securities fraud. According to US regulators, he and several others participated in a fraud scam that involved inflating the stock price of Heart Tronics, which is a heart-monitoring device company. Other defendants in the Commission’s case include lawyer Mitchell Stein, Heart Tronics Co-CEO J. Rowland Perkins, and Stein’s driver Martin B. Carter. Investors were bilked of nearly $8 million.

Per the SEC’s complaint, between 2006 and 2008 Heart Tronics repeatedly announced that millions of dollars in (bogus) sales orders for its heart-monitoring devices had been placed. To garner investor confidence, Gault was appointed company president and Co-CEO.

Meantime, Stein, who hired promoters to promote the company’s stock online, allegedly made secret trades. The Commission says he used investors’ money to pay for private jets, a number of homes, and exotic motor vehicles.

Stein is also a defendant in a parallel criminal case filed by the US justice department. In the indictment against him, prosecutors charged him with putting out press releases promoting the fake sales, conspiring to obstruct the SEC probe, and taking part in a financial scam to artificially increase Heart Tronic’s stock price through bogus orders from nonexistent clients.

The Commission says that Perkins and Gault hardly ever asked Stein about his actions, as well as failed to fulfill their fiduciary duties. Gault and Stein are accused of defrauding one investor, in particular, who made a substantial investment in the heart-monitoring device company. That investor's money ended up in Gault’s personal brokerage account.

The SEC is accusing Carter and Stein of generating false documents to support false disclosures that were made to the public. This included sending a letter from a fictitious client in order to deceive auditors, management, and disclosure counsel, as well as sending products to a friend of Carter’s to make it seem as if an actual device was delivered.

The SEC is seeking a permanent bar against Stein, Gault, and Perkins that would prevent them from serving as corporate officers. They also want them to pay financial penalties and give back ill-gotten gains.

Gault was a former University of Tennessee football player who played for the Chicago Bears for 11 seasons. He also belonged to the US Olympic team that boycotted the Summer Games in Moscow in 1980.

Securities Fraud
If you are an investor that was defrauded by people who took advantage of you and took the money for their own personal use and gain, you may have grounds for a securities fraud case.

Ex-NFL Star Willie Gault Sued by SEC in Stock-Pumping Fraud, BusinessWeek, December 23, 2011

SEC Charges California Company, Co-CEOs, and Attorney in Series of Fraudulent Schemes Pumping Company Stock, SEC, December 20, 2011

Read the SEC Complaint (PDF)

More Blog Posts:
Three Investment Advisers Charged with Massachusetts Securities Fraud, Stockbroker Fraud Blog, December 16, 2011

Colorado Securities Fraud: Universal Consulting Resources LLC and Owner Richard Dalton to Pay $15.8M to Settle SEC Lawsuit Over Ponzi Scam, Stockbroker Fraud Blog, December 9, 2011

Former Fannie Mae and Freddie Mac Executives Face SEC Securities Fraud Charges, Institutional Investor Securities Blog, December 16, 2011

Continue reading "Former-Chicago Bears Wide Receiver Willie Gault Sued by SEC for Securities Scam Involving the Alleged Inflation of Stock Prices" »

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Posted In: Investor Fraud , Securities Fraud

September 16, 2010

Former DHB Industries CEO and COO Found Guilty of Nearly $200M Securities Fraud Scam

After two months of deliberation, a jury has found Ex-DHB Industries CEO David Brooks and Ex-DHB Industries COO Sandra Hatfield guilty of committing securities fraud, insider trading, and obstruction of justice. The two defendants allegedly made close to $200 million as a result of their scam. The jury also found Brooks guilty of lying to auditors.

Prosecutors claimed that Brooks and Hatfield manipulated financial records to increase company earnings and profit margins. This resulted in the inflation of stock prices. The defendants are also accused of committing insider trading from when they sold over $72 million of their DHB stock in November 2004 and then another (approximately) $118 million of their shares the following month. The sales occurred as DHB’s stock price went up to over $20/share. Hatfield made over $5 million while Brooks realized over $180 million from the scheme.

Also, Hatfield and Brooks allegedly took part in a scheme to cover up the related party status of Tactical Armor Products, which Brooks’ wife was supposed to be running separate from DHB. In fact, Brooks wholly controlled TAP. According to the Federal of Bureau of Investigation’s New York Division Web site, profits from related party transactions were used to pay for over $16 million in Brooks’ personal expenses. He reportedly doctored internal DHB documents and created fraudulent multi-million dollar transactions to cover up the scheme and fool investors and auditors. Personal expenditures included plastic surgery for his wife, luxury vehicles, pills for his 100 racing horses, his family’s use of the company jet, and other charges.

The two defendants are each facing up to 25 years in prison.

Related Web Resources:
David H. Brooks, Founder and Former Chief Executive Officer of DHB Industries, Inc. and Sandra Hatfield, Former Chief Operating Officer, Convicted of Insider Trading, Fraud, and Obstruction of Justice: Defendants Reaped Nearly $200 Million Through Their Schemes, FBI, September 14, 2010

Body armor chief guilty of $190 million fraud: jury, Reuters, September 14, 2010

Continue reading "Former DHB Industries CEO and COO Found Guilty of Nearly $200M Securities Fraud Scam" »

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Posted In: Investor Fraud , Securities Fraud

March 10, 2010

"America's Prophet" Psychic Accused of Multimillion-Dollar Investment Fraud

According to the US Securities and Exchange Commission, Sean David Morton has bilked more than 100 investors of over six million dollars as the mastermind of an alleged offering fraud scheme. The man who calls himself “America’s Prophet” never professed to have a financial background. However, he is accused of promising prospective investors that he would use his psychic gifts to predict the movements of the stock market and advise his investing team.

The SEC claims Morton told investors he would use their funds to trade in foreign currencies and that profits would be distributed pro rata among them. The federal agency says that Morton, who describes himself as an intuitive consultant and trained Remote Viewer, lied to these investors about having a successful track record for being able to predict when the market will rise and crash. He also allegedly lied about how their money would be used, fund liquidity, and that profits were audited and certified.

Morton allegedly invested only half of the investors’ money in foreign currency trading firms. He is accused of diverting the rest, including at least $240,000 into his Prophecy Research Institute, a nonprofit religious group. Morton also allegedly commingled investors’ funds among the different entity accounts. The SEC contends that the defendant did not seek accreditation status from Delphi Investment Group investors.

Morton, Vajra Productions LLC, Magic Eight Ball Distributing, Inc., 27 Investments LLC, and Delphi Investment Group are the defendants in the SEC’s investment fraud lawsuit. Morton’s wife, Melissa, and Prophecy Research Institute are named relief defendants. The Mortons controls the entity defendants.

Federal regulators continue to warn investors that they must make sure that anyone they entrust with investing their funds is properly licensed. Unfortunately, many people are misled into investing in securities scams that end up costing them their hard-earned money and financial security.

Related Web Resources:
Investment 'Psychic' Accused of Financial Fraud, ABC News, March 8, 2010

Read the SEC Complaint, SEC.gov

Continue reading ""America's Prophet" Psychic Accused of Multimillion-Dollar Investment Fraud " »

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Posted In: Investor Fraud , SEC Enforcement

November 3, 2009

CIT Group Bankruptcy Exposes Fraud Against Many Investors Who Were Sold Preferred Stocks And Bonds

Many investors were told that investing in CIT preferred stock and bonds was safe and appropriate for them. Some sales pitches were based on the $2.3 billion government bailout of CIT. This is just another example of material misrepresentations and omissions in the sale of fixed income products, which have become rampant on Wall Street.

There are some reports that misrepresentations were made to sell CIT securities to smaller institutions and individuals even as Wall Street and large institutions were unloading their own holdings of CIT. This is similar to claims made concerning the sales of auction-rate securities and recommendations prior to the Lehman, Fannie Mae, and Freddie Mac debacles.

This week, the 101-year-old commercial lender announced that it is filing for bankruptcy in an attempt to get rid of $10 billion in debt. Not only has CIT run out of funding, but also a US bailout and debt exchange offer faltered.

CIT says it will continue to stay in business and that bankruptcy will allow the commercial lender to keep providing funding to middle-market and small business clients.

With $64.9 billion in debt and assets valued at $71 billion, it is unlikely that the government will recover a lot of the $2.3 billion in taxpayer money that the commercial lender received under the Troubled Asset Relief Program.

CIT says bondholder support will allow it to get out of bankruptcy pretty quickly—two months is its current estimate. A prepackaged bankruptcy plan has been approved.

CIT’s prepackaged plan outline stated that majority of noteholders would get new notes at 70 cents on the dollar in addition to new common stock.

CIT is the country’s biggest lender to mid-sized and small businesses. CIT funds some 1 million businesses. It is the number one aircraft financier and the number three biggest US railcar-leasing firm. CIT finances trades in North America, Europe, and Asia.

Related Web Resources:
CIT Files Bankruptcy; U.S. Unlikely to Recoup Money, Bloomberg.com, Nov 1, 2009

Lender CIT files for bankruptcy, Portland Business Journal, November 2, 2009

Troubled Asset Relief Program, Federal Reserve

Chapter 11 Bankruptcy

Continue reading "CIT Group Bankruptcy Exposes Fraud Against Many Investors Who Were Sold Preferred Stocks And Bonds" »

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Posted In: CIT Group , Commercial Lenders , Investor Fraud

July 21, 2009

Carlyle Group Sued by Former Congressman Michael Huffington For Investment Loss of More than $20 Million

Former Congressman Michael Huffington is suing Carlyle Group, a private equity firm, and affiliated companies for more than $20 million in investment losses. Huffington, the ex-husband of columnist Arianna Huffington, says he was misled about the safety of a fund that contained mortgage-backed securities. The closed-end fund, Carlyle Capital, was supposed to be a low-risk investment fund. Huffington says he invested $20 million in the fund.

Huffington, who was a member of the California House from 1993 to 1995, filed his investment fraud lawsuit against Carlyle and Carlyle Capital executives in Massachusetts Superior Court. Huffington is accusing David M. Rubenstein, Carlyle managing director and co-founder, of misrepresenting the funds’ risks during conversations.

Huffington also contends that in March 2007, John Stomber, the head of Carlyle Capital, told investors that the fund wasn’t exposed to high-risk investments. Huffington says that in August 2007, Stomber told investors that the fund was performing on target. A report in 2008 stated that the fund’s returns were in line with near-term targets. Yet two weeks later, Huffington contends that the equity of the shareholders was gone. In March 2008, Rubenstein contacted Huffington to let him know that the fund had defaulted on its debts and lenders were selling the collateral.

Carlyle Capital was supposed to borrow money to purchase the securities and then make money on the difference between what was earned on the interest paid on the bonds and the firm’s borrowing costs. The fund collapsed after lenders made repeated margin calls. The private equity firm and its investors lost $700 million.

Related Web Resources:
High-Profile Investor Sues Carlyle Group, Forbes.com, July 13, 2009

Carlyle Sued Over Fund's Losses, Forbes.com, July 13, 2009

Continue reading "Carlyle Group Sued by Former Congressman Michael Huffington For Investment Loss of More than $20 Million" »

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Posted In: Investor Fraud , Mortgage Backed Securities

April 28, 2009

Hennessee Group Settles with SEC over Bayou Group Fraud

Hedge fund investment adviser Hennessee Group, LLC has reached an agreement with the Securities and Exchange Commission over its securities fraud probe into Bayou Group and hedge fund manage Samuel Goldberg. Investors lost some $400 million in the scam. Now, Hennessee Group and principal Charles J Gradante will pay over $814,000 to settle charges that Hennessee failed to do the correct due diligence before recommending Bayou Group to investors.

According to the SEC, investors placed over $65 million with Bayou Group between 2002 and 2005. Hennessee collected over $500,000 in advisory fees. However, the SEC charges that Hennessee failed to perform the type of due diligence they told investors that they engage in. The firm failed to check up on Bayou Group’s relationship with its auditor and did not follow up on emails sent by investors questioning the ties between the auditor and Bayou Group cofounder Daniel Marino. It would later come to light that Israel and Marino established a bogus accounting firm and Marino signed fake audits.

Israel was sentenced to 20-years in jail but pretended to kill himself and disappeared on the day he was supposed to go to jail. He later turned himself into authorities and is waiting to receive his sentence for fleeing. Marino is serving a 20-year prison term.

Also last week, Marino’s brother, Matthew Marino, was sentenced to 21-months in prison for his role in the investment fraud scam. He has been ordered to pay $60 million in restitution.

Prosecutors had accused Matthew of knowing that Bayou executives were committing investment fraud and that Richmond-Fairfield Associates was a bogus accounting firm. He was accused of helping conceal the fraud by taking part in the scheme, concealing documents, and making changes to a certain bogus document.

Related Web Resources:
Hennessee Group Settles SEC Charges In Bayou Hedge Fund Fraud; Agency Says Hennessee Skimped On Due Diligence, Ponzi News, April 22, 2009

Hennessee Settles SEC Case Over Bayou, Hedgefund.net, April 22, 2009

Ex-Bayou Exec's Brother Sentenced To 21 Months In Prison, Wall Street Journal, April 22, 2009

Continue reading "Hennessee Group Settles with SEC over Bayou Group Fraud" »

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Posted In: Financial Advisers , Investor Fraud

April 1, 2009

GM, Ford, Chrysler Retirees: Beware of Financial Advisors After Your Severance!

About 7,500 General Motors workers recently agreed to a buyout of early retirement incentives and leave the company. Chrysler, Ford and many suppliers of the industry have also made offers to entice workers to take early retirement. This follows tens of thousands of other industry workers who have been bought-out of pension and other benefits in recent years.

Many who retire have little if any experience in investing and are soon beseiged by droves of salespersons hawking financial plans. In the past, strict laws and regulations were enforced regarding investors’ funds, especially retirement funds. However, as we have recently witnessed, securities regulators appear to be overwhelmed or incompetent.

For decades, Wall Street has blamed any abuse of investors on a few “rogue” brokers. Yet, many now believe that Wall Street is actually rotten to the core. In fact, the majority of financial advisors sincerely and diligently seek to serve their clients, although many of the investment products they are told to sell are inappropriate, riddled with costs or just plain fraudulent. Sadly, too many of the worst advisors attract unwary investors with false promises.

Victims of financial abuse are often unaware that they can seek recovery of undue investment losses according to the law. But investors must understand that the regulators “police” the securities industry and write tickets when they catch the bad guys. In order to recover, victims must hire an attorney to represent them in court or in securities arbitration.

Continue reading "GM, Ford, Chrysler Retirees: Beware of Financial Advisors After Your Severance! " »

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Posted In: Investor Fraud , Retirement Funds , Senior Investors

February 19, 2009

Multibillion-Dollar Stanford Securities Fraud Scam Has Investors Contacting Houston Stockbroker Fraud Lawyers for Help

The Securities and Exchange Commission is charging Robert Allen Stanford and three of his companies for their alleged involvement in a multibillion dollar investment fraud scheme. His companies that are named in the complaint include Stanford International Bank (SIB), Stanford Group Company (SGC), which is a Houston-based investment adviser and broker dealer, and Stanford Capital Management, which is based in Antigua. The SEC is asking for emergency relief for the investors that have been victimized by the alleged scheme.

The SEC complaint, filed in Dallas, Texas accuses Stanford and friends and family that he works with of orchestrating the investor scam. The SEC claims that SIB used SGC financial advisers to sell some $8 billion worth of “certificates of deposit” to investors with the promise they would receive high interest rates that were, in fact, unsubstantiated and improbable. The SEC says the defendants misrepresented these CD’s when they told investors that they were safe.

The SEC complaint also contends that another scam involving $1.2 billion in sales of Stanford Allocation Strategy (SAS), which is a proprietary mutual fund wrap program, involved the use of materially bogus historical performance information that helped SGC to grow the SAS program from under $10 million in 2004 to over $1 billion. In 2007 and 2008 , SGC earned fees of about $25 million as a result. The program’s bogus performance was used to bring in registered investment advisers with substantial books of business. These advisers were then provided with substantial incentives to transfer client assets to SIB’s CD program.

Following the SEC's request for relief, a US district court judge frozen the assets of the defendants, issued a temporary restraining order, and named a receiver to take charge of the assets.

Robert Allen Stanford is from Texas. His businesses have attracted a wide range of investors, including young businessmen, middle-class Americans, and retirees wanting to place their money in short-term CD’s in exchange for higher returns.

In Houston, Stanford investors are reacting to news of the alleged investment scam and hundreds of them have been reaching out to Stanford investment advisers to find out how to get their money back. “Many people automatically thought Stanford CD’s were insured,” says Shepherd Smith Edwards & Kantas, LLP Founder and Stockbroker Fraud Attorney William Shepherd. Now, however, there are reports this may not have been the case. The Texas securities fraud lawyer and his partners are being contacted by many Stanford investors who are worried about their money.

Shepherd Smith Edwards & Kantas LTD LLP is one of the largest securities fraud law firms in the United States that represents investors who wish to recover their investment losses. Over the last two decades, we have handled over a thousand cases against financial firms for our investors. We are currently at “ground zero” with this case.

SSEK Investment Fraud Attorney Shepherd says, "Class action cases seeking losses in investments have historically resulted in recovery of less than 10% of what the investor's lost." Our securities fraud law firm will handle each Stanford investor’s claim individually.

Related Web Resources:
SEC Charges R. Allen Stanford, Stanford International Bank for Multi-Billion Dollar Investment Scheme, SEC.gov, February 17, 2009

Read the SEC Complaint (PDF)

Stanford International Bank

Stanford Group Company

Stanford Capital Management


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Posted In: Financial Firms , Investor Fraud , Stanford Group Co. , Texas Securities Fraud

June 19, 2008

Lincoln Funds International Inc. and Its Principals Issued Restraining Order Following Alleged $21 Million Biotech Scam

The U.S. District Court for the Central District of California has slapped Lincoln Funds International Inc with a temporary restraining order and told the advisory firm to temporarily freeze its assets. Judge Cormac J. Carney also appointed a temporary receiver over the assets, as well as the assets of three Lincoln Biotech Venture funds and Brookstone Capital, which is Lincoln Fund’s predecessor company.

Lincoln Funds, along with its three principals, are accused of engaging in a biotechnology investment fraud scam, raising over $21.8 million from hundreds of investors. According to the SEC, Robert L. Carver, his son Robert L. Carver II, and James L. DeMer sold securities in Lincoln Funds, the three biotech funds, and Brookstone Capital while making “baseless predictions” and promising that there would be initial public offerings at the two companies.

The Commission charges that the defendants took part in “sham transactions” to make it appear as if Lincoln Funds was not associated with Brookstone or Carver because both had been subject to state regulatory orders. It is also accusing the defendants of misappropriating and misusing at least $2.5 million in investor funds, defrauding the partnerships as a result.

The SEC has charged all defendants with fraud in the offer or sale of securities, unregistered offer and sale and securities, investment advisor fraud, and purchase/sale securities-related fraud. The three principals are also charged with failure to register as a broker dealer.

The SEC complaint seeks to enjoin the defendants from further federal securities law violations, as well as disgorgement, an asset freeze, and civil penalties.

The California Department of Corporations has also ordered Lincoln Funds and two of its principals to cease and desist from securities transactions involving misleading or bogus statements.

If you have are the victim of investment fraud, our stockbroker fraud law firm can help you explore your legal options for recovery. Contact Shepherd Smith Edwards & Kantas today.

Related Web Resources:

SEC Halts a $21 Million Fraud Involving Biotech Investment Funds, SEC.gov

The California Department of Corporations Cease-and-Desist Order (PDF)


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Posted In: Investor Fraud

May 9, 2008

Wachovia Securities LLC Sued For Alleged Fraud Involving the Sale of Le Nature's Senior Subordinated Notes

In Los Angeles Superior Court, a number of life insurance companies, mutual funds, retirement systems, and other investors are suing Wachovia Securities LLC for alleged fraud related to the sale of senior subordinated notes for beverage maker Le Nature's Inc. The Pennsylvania-based company filed for bankruptcy in 2006.

Causes of action include fraud, negligent misrepresentation, aiding and abetting fraud, and fraudulent inducement. California Public Employees' Retirement System (CalPERS) and the Nature Conservancy are among the scores of plaintiffs.

The plaintiffs are accusing Wachovia of knowing about the fraud and financial problems at Le Nature’s but keeping this information from investors so that the beverage company would keep paying the firm substantial fees. They say the lack of disclosure also helped Wachovia’s high-yield debt business.

Also named in the lawsuit are BDO Seidman and Ernst & Young. The companies had worked for Le Nature’s as auditors on different occasions. The plaintiffs say that the “clean” audit reports aided in the fraud. BDO Seidman denies the accusation and vows to vigorously defend itself against the charges.

Wachovia claims that it too was the victim of fraud by the drink company. One Le Nature's accounting director that pled guilty to fraud acknowledged that the company had issued false information to Wachovia.

About 75 plaintiffs claim they suffered aggregate losses worth over $70 million. The plaintiffs are accusing Wachovia Securities of minimizing its own losses by purposely reducing its own exposure to Le Nature’s notes.

The complaint says that the drink company massively inflated its profits and revenue for years even though it was failing badly. Yet Wachovia market analysis gave Le Nature’s an “outperform” rating despite the fact that it was struggling to survive.

The stockbroker fraud law firm of Shepherd Smith and Edwards represents investor fraud victims in cities across the United States.

Related Web Resources:

Lawsuit alleges fraud in LeNature's dealings, Pittsburgh-Tribune Review, May 1, 2008

Former Le-Nature's employee pleads guilty in fraud scheme, Forbes.com, April 24, 2008

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Posted In: Investor Fraud , Wachovia

May 5, 2008

Ex-WFG Investment Stockbroker Accused of Allegedly Defrauding Over 500 Senior Investors Agrees To Disgorge Ill-Gotten Earnings

Sidney Mondschein, a former WFG Investment stockbroker, must disgorge $53,000 in ill-gotten gains he allegedly obtained when he defrauded over 500 senior investors by selling their confidential data to insurance brokers. Last month, Mondschein settled Securities and Exchange Commission charges before the U.S. District Court for the Northern District of California.

By settling, the SEC says that the former broker is not admitting to or denying the charges. As part of his agreement, Mondschein agreed to a bar preventing him from associating with any dealers or brokers for five years. He is also permanently enjoined from violating the 1934 Securities Exchange Act’s Section 10(b) and Rule 10b-5, as well as Regulation S-P. He must also pay a $45,000 penalty.

The SEC complaint has alleged that Mondschein illegally sold for profit the confidential data of over 500 clients, almost all of them senior citizens, to six insurance agents. Information included contact information and, sometimes, the dollar figure that an investor had spent on the last annuity. This sale allowed the insurance brokers to sell the investors more annuity products, even though the majority of them already had purchased equity-indexed or fixed annuities.

The insurers reportedly paid the stockbroker anywhere from $50 to $150 for the information. Mondschein also allegedly received customer commissions from the investors that employed his services to sell securities so they could buy the new annuities.

Mondschein allegedly created UNCI Inc. so that he could carry out his investment scam. He did not tell the Financial Industry Regulatory Authority or WFG Investment that UNCI Inc. existed.

Elderly investor fraud is a problem that must be stopped. Our stockbroker fraud attorneys at Shepherd Smith and Edwards have helped many senior investor fraud victims recover their losses. Contact Shepherd Smith and Edwards today.


Related Web Resources:
SEC Makes Broker Pay for Selling Client Info, CCH Wall Street, April 29, 2008

Broker Allegedly Sold Customers' Personal and Confidential Information to Insurance Agents as Sales "Leads" for Annuity Products, SEC.gov, December 6, 2007

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Posted In: Investor Fraud , Senior Investors

April 8, 2008

Rogue Fidelity Investment Adviser’s Prison Sentence is Vacated Due to Improper Application of “Identity Theft Enhancement”

The U.S. Court of Appeals for the Third Circuit says that a district court improperly applied an “identity theft enhancement” when calculating the prison sentence of Bryan Hawes, a rogue investment adviser who had pled guilty to two counts of mail fraud. As a result, Judge Marjorie Rendell vacated Hawes’s 6 ½ year prison sentence and remanded for sentencing.

Hawes is the owner and president of Financial Management Advisory Services (FMAS) and Financial Management Services (FMS) Inc. He is also a registered investment adviser. He became an authorized representative for Fidelity Investment Advisors Group in 1997.

According to the court, Hawes defrauded his investment adviser clients. Rather than fulfill the agreements he made to buy annuities for them, he would either keep the money or buy annuities but later liquidate them for his personal use.

Hawes covered up his theft by generating false statements, making it appear as if the accounts contained larger balances, and submitting these reports to clients.

In 1998, Hawes convinced a number of clients to transfer their assets into products that were offered by Fidelity. From 1998 to until 2002, clients regularly received account statements from Fidelity and Hawes. The statements that Hawes provided through FMAS matched the account balances on statements provided by Fidelity.

In 2002, however, Hawes reportedly went into his clients’ accounts without their consent and changed the addresses to which Fidelity was supposed mail their account statements—in many instances, he provided his own office address.

He then told clients that Fidelity was not issuing paper account statements anymore and that his company, FMAS, would be responsible for generating these statements for them.

Hawes then started transferring client funds into his own account. He also transferred funds from one client to another so the thefts would go undetected. FMAS continued to issue account statements that falsely overstated the value of clients’ Fidelity accounts.

In 2003, Hawes’s mother discovered that he had been stealing money from her and her husband, who had just died. She threatened to report him unless he paid her back. He took $125,000 from other clients to repay her.

Hawes’s fraud scheme was discovered later that year. He pleaded guilty two counts of mail fraud in 2004 and was sentenced to 78 months in prison and a 3-year supervised release. He was ordered to pay invest clients $2,276,565.31 in restitution.

Hawes appealed his sentence on the grounds that the district court made a mistake when it applied a two-level identity theft enhancement to his base level offense because he had changed his clients' addresses. On March 27, the appeals court agreed that Hawes’s conduct did not merit this enhancement.

Shepherd Smith and Edwards represents victims of investor fraud in arbitration and litigation.


Related Web Resources:

Final Passage of H.R. 1731, the Identity Theft Penalty Enhancement Act, SSA.gov, June 29, 2004

Read the SEC Complaint

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Posted In: Investor Fraud

April 3, 2008

Two Brazilian Nationals Indicted For Alleged Involvement In $50 Million Telemarketing Scheme

Two Brazilian nationals have been indicted on money laundering and other charges related to an alleged $50 million international penny stock scam that took money from many international investors.

The two defendants, Marcos Macchione and Rodrigo Molina, face charges of money laundering, conspiracy, and participating in illegal financial transactions. The two men reside in Florida and are being charged in connection with their involvement with the US part of the securities scam. A Florida jury handed out the indictment in the U.S. District Court for the Southern District of Florida.

Doron Mukamal, the alleged leader of the telemarketing securities scam, was also arrested. He lives in Brazil, as do his 17 partners, employees, associates, and money launderers that were also arrested.

Asian and European investors were the primary victims of the scam. Mukamal and his team offered them the opportunity to buy nearly worthless stocks in U.S. micro-cap companies for much more than the penny stocks’ actual value.

The investors were told to pay an advance fee to cover escrow costs, taxes, and other services. This fee is not normally required for transactions that are legal.

Once the advance fee was received, the bogus broker-dealer would disappear. When investors contacted these fictitious brokers to find out what happened to their money, they were notified that warrants (that did not actually exist) or the rights to buy more shares held by the victims had been found. The bogus brokers would then try to persuade their targets to shell out even more money.

Mukamal and his team constructed Web sites that made it appear as if they were legitimate securities brokers. They also made up names of fictitious broker dealers, stole the identities of real U.S. brokers, fabricated false government entities that could confirm their broker-dealer’s legitimacy, and used U.S. phone numbers so that investors would think that the broker-dealers were located in the United States.

Our stockbroker fraud lawyers at Shepherd Smith and Edwards have helped thousands of investors recover their financial losses. Contact Shepherd Smith and Edwards to schedule your free consultation.


Related Web Resources:

U.S., Brazilian Law Enforcement Dismantle $50 Million Securities Fraud Organization, PRNewswire.com, March 20, 2008

What Is Penny Stock Fraud?

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Posted In: Broker Fraud , Investor Fraud

March 10, 2008

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

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

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

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

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

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

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


Related Web Resources:

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

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

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

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Posted In: Investor Fraud

January 28, 2008

Commodity Futures Trading Commission Charges Argentine Investment Adviser With Defrauding Investors in $43.8 Million International Scam

The Commodity Futures Trading Commission (CFTC) is charging Diego Mariano Rolando, an Argentine investment adviser, for his role in a $43.8 scheme that defrauded some 400 investors in the United States, South America, and Europe. Earlier this month, the U.S. District Court for the District of Connecticut issued a restraining order to freeze his assets.

According to the CFTC, Rolando allegedly engaged in the following activities:

• Fraudulent trading of customer funds in options contracts and commodity futures.
• Provided investors with fraudulent account statements.
• Gave a U.S. clearing firm false customer contact information to prevent investors from discovering the scam.

The CFTC says that Rolando went online to solicit clients through Roclerman.com and IATrading.com. He told those he contacted that he could trade securities for them. The CFTC is charging Rolando with providing clients with materials about their investments that contained "misrepresentations and omissions of fact."

The CFTC says that Rolando solicited about $48.8 million through the scam. The commission is seeking a number of sanctions, including a permanent injunction, disgorgement of ill-gotten gains, restitution to investors, and a civil financial penalty.

If you are an investor that wishes to obtain financial restitution because of losses you incurred due to the fraudulent misconduct of a broker or an investment adviser, you should speak with a stockbroker fraud lawyer immediately. Shepherd Smith and Edwards dedicates its legal practice to helping professionals like you recover your financial losses. We represent stockbroker fraud clients in the U.S., as well as internationally. Contact Shepherd Smith and Edwards for your free consultation today.


Related Web Resources:

CFTC Charges Argentine Trader With Fraud, FIN Alternatives, January 17, 2008

Read the Court Order in the Case (PDF)

U.S. Commodity Futures Trading Commission

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

Posted In: Financial Advisers , Investor Fraud

January 3, 2008

Senior Vice President of Questar Capital (now Allianz Insurance) Claims He's a Victim of Ponzi Scheme

Questar Capital Corp’s senior vice president of mergers and acquisitions claims he too was victim of a $250 million alleged Ponzi scheme that affected up to 1,200 investors—many senior citizens residing in Michigan, California, Illinois, New York, Florida, New Jersey, and Ohio.

The Securities and Exchange Commission charged Edward May and E-M Management Co. LLC with selling bogus investments which involved shares in fake Las Vegas casino and resort telecom transactions. “Investment seminars” were held to persuade investors to buy shares. The investors were told they would receive monthly returns for the next 12-14 years.

It turns out that there were never any telecom contracts with any Las Vegas resorts, hotels, and casinos. Some of the hotels and casinos that supposedly had contracts were Motel 6, Hilton, Tropicana, MGM Grand, and Sheraton.

Broker/manager Frank Bluestein, formerly with Questar, sold a substantial amount of the fake units before leaving that firm in 2005. A former director of marketing and partner in Questar reportedly bought two units of ATL Project One LLC for $57,000 in 2006. Allianz Life Insurance Company of North America acquired Questar in 2005 and the two companies merged in 2006. Bluestein continued to sell the fake investments after he left to join another firm in 2005, but there is no word of whether his former boss bought through him.

Investment fraud--especially fraud scams targeting elderly seniors is a growing problem in the United States. It is wrong to take advantage of someone's lack of knowledge, inexperience, or age and fraud victims can take action to recoup their lost investments. Yet, many victims fail to seek recovery because they are ashamed of being fooled. Take heart! If a senior VP of an investment firm can be a victim of a Ponzi scheme is anyone immune from investment fraud?

If you lost money because you purchased shares sold by Edward May and E-M Management, or if you were the victim of any other investor fraud scam, contact the stockbroker fraud law firm of Shepherd Smith and Edwards immediately. We have helped thousands of investors in the U.S. and abroad get their money back.


Related Web Resources:

B-D exec bought 'bogus' shares from May, Investment News, December 14, 2007

SEC v. Edward P. May and E-M Management Co. LLC, Civil Action No. 2-07-CV-14954, SEC, November 20, 2007

Senior Investment Fraud Increases as Population Ages, Consumer Affairs, July 18, 2006


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

Posted In: Investor Fraud , Senior Investors

October 5, 2007

Former InterSecurities Brokers Investigated for Fraud

The Florida Office of Financial Regulation and the Florida Department of Law Enforcement are investigating Michael O. Traynor and his son, Matthew O. Traynor, former brokers at InterSecurities, Inc. Complaints from at least a dozen investors allege that the Traynors defrauded clients out of approximately $8 million.

In addition to an affiliation with InterSecurities, Inc., the Traynors are reported to have been affiliated with or operated under the firm names of Mariner Financial Services, Western Reserve Life, Association of Professional College Advisors, Inc., College Advisors Group, Inc., LifeTime Advisors, Inc. and LifeTime Advisors Group, Inc. Michael Traynor was licensed in securities and insurance and represented himself as a financial planner and certified college planning specialist.

According to reports, many of the investors were first in contact with the Traynors through their church and were lured to invested funds into accounts entitled “Freedom Bond Account,” “7 Day Freedom Money Market,” as well as “CGU Broker Services” and “Allianz Broker Services”. Apparently, statements on these accounts were falsified to indicate assets, income and profits which did not exist.

Michael Traynor served not only as a registered representative of InterSecurities, Inc., but also as the branch manager of that firm until he was terminated. According to alleged victims, they were not contacted by InterSecurities regarding the reason for his termination.

Shepherd Smith and Edwards represents investors nationwide in claims against securities firms and brokers industry. We have represented investors in more than 1,000 securities cases, including concerning mortgage backed securities. To learn whether we might assist you with a claim contact us to arrange a free consultation with one of our attorneys.

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

Posted In: Broker Fraud , InterSecurities, Inc. , Investor Fraud

September 13, 2007

Highly Touted Whistleblower Protection Law Is Lost in the Wind

Only a tiny fraction of whistleblower claims against companies have been successful since the passage of the Sarbanes-Oxley law five years ago, raising questions about the ability of employees to raise the alarm about corporate malfeasance, a study claims.

While corporate America whines almost daily about "burdens" placed by it by the so-called "Sorbox" legislation, the truth is that companies continue to defraud investors almost with impunity, while abusing any employee who might dare point a finger at them.

Sarbanes-Oxley contained new pro-whistleblower provisions when it was passed in 2002 in the wake of the Enron and WorldCom scandals. Touted by some as a "revolution in corporate freedom of speech", it was intended to strengthen the protections available to employees who bring to light cases of fraud by including strong "anti-retaliation" provisions.

Yet, a study by the University of Nebraska College of Law of 700 cases brought in the three years after Sarbox confirmed that only 3.6 per cent of cases were found in favor of employees and only 6.5 per cent were successful on appeal. Richard Moberly, author of the study, stated: "It's an incredibly low win-rate that ought to be cause for concern."

Employees rarely won claims. A major problem is that Government agencies, such as the Department of Labor, that adjudicate such cases interpret the whistleblowing provisions in the law as narrowly as possible. Most cases did not qualify to be heard, he said. (Strange that a governmental administration charged with enforcing a law would work so hard to gut its effect - unless you remenber who is in charge of this administration.)

Moral: Whether shareholder or employee, the rights of the rest of us hardly exist in a government dedicated to protecting corporate criminals. Welcome to the "New America": Home of rich and powerful crooks who own its government.

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 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.

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

Posted In: Crime , Investor Fraud

September 5, 2007

Pump and Dump Scheme Involving Prime Time Stores Inc. Sends Global Spam Levels Up 30%

In one of the largest online stock manipulation campaigns in history, spammers sent out some 500 million e-mails last month advising recipients to invest in Prime Time Stores Inc.

This prime example of “pump and dump” scamming involved spammers purchasing shares in a company, promoting it, and then waiting for share prices to rise before selling their stocks and making a profit. This particular pump and dump scheme caused the amount of spam sent around the globe to increase by 30% over a 24-hour period.

Prime Time Stores owns the exclusive licenses for 7-Eleven stores in the Caribbean and Puerto Rico. The company is also involved in automotive, gas, and oil activities. The spam e-mails promoting the company announced the opening of Prime Time Stores in Puerto Rico and said that a huge change in the stock would occur on August 8, 2007.

In the days leading up to the spam campaign’s discovery, the stock did go up.

Pump and dump spam perpetrators can reportedly be very difficult to catch. This type of scam can be effective—especially when small stocks are involved and only a small gain is necessary to make a profit.

The spam e-mail promoting Prime Time Stores came with a PDF attachment. The PDF was what allowed it to get past the spam filters. The perpetrators of this scam have not been identified.

According to SophosLabs, stock scams via e-mail make up about 25% of all spam. At the start of 2005, e-mail stock scams only made up less than 1% of all spam emails.

Earlier this year, the SEC temporarily suspended trading in 35 Pink Sheet-listed companies that were involved in ongoing spam e-mail campaigns involving the companies’ securities. The suspension was part of SEC’s "Operation Spamalot” crackdown.

If you have been the victim of investor fraud, call Shepherd Smith and Edwards today. We have helped thousands of investors nationwide recoup their losses. We have represented clients in Federal and state courts and before the NASD, the NYSE, and the AAA.


Related Web Resources:

Inbox hell: Half a billion stock spam e-mails, Reportonbusiness.com, August 9, 2007

Prime Time Stores, Inc.

Sophoslabs


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

Posted In: Investor Fraud

August 5, 2007

Business Optimism over SEC 'Reforms' - That is, to Dismantle Securities Regulations!

Washington lawyer Peggy Blake, who recently joined Winston & Strawn as a corporate partner, reports her foreign financial services clients are "very optimistic" about the movement afoot at the Securities and Exchange Commission to adopt a mutual recognition regime.

Yet, during recent trips to London and Geneva, she found a number of her foreign bank clients have some reservations about "how the whole thing will play out." Blake advises clietns on application of U.S. securities laws to non-U.S. financial service providers. As part of her practice, she works with clients to design their compliance programs.

Her goal, along with those on Wall Street, in the White Houst and at the SEC, is to dismantle U.S. securities regulations governing corporations, their executives, securities firms, accounting firms and others.

U.S. securities regulations began 75 years ago, after the crash of 1929 and during the Great Depression. Since then, the U.S. securities markets have flourished and become the envy of others around the world. Conventional wisdom has been that our framework of securities regulations gives comfort to investors that they have protection to deter fraud and other unfair practices.

Blake was an attorney-adviser in the Office of Risk Management and Control in the SEC's Division of Market Regulation during the 1990s. She later served as special counsel in the Office of Market Supervision. She was with the SEC back when it thought of itself as the "thin blue line" between investors and those who seek to victimize them. Her new job --- well, it likely pays better.

Shepherd Smith and Edwards represents investors nationwide in claims for losses against those in the securities industry. If you, your firm or your pension fund has sustained losses as a result of fraud, negligence or other wrongdoing contact us to arrange a free consultation with one of our attorneys.

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

Posted In: Investor Fraud , SEC

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