May 24, 2013

Berthel Fisher, VSR Financial Services, & Cetera Financial Modify the Way They Sell Nontraded REITs and Other Alternative Instruments

Investment News is reporting that in the wake of pressure from regulators, Berthel Fisher & Co. Financial Services Inc., Cetera Financial Group Inc. and VSR Financial Services Inc., are modifying the way they sell specific alternative investments, including nontraded real estate investment trusts, by revising current policy or including no procedures and guidelines. According to executives at the three brokerage firms, they want add liquid alternative choices to their platforms while staying mindful of the issues that regulators recently addressed.

These types of financial instruments are in demand due to their higher yields, especially as traditional investment interest rates for retirees stay low due to the Federal Reserve’s policy. According to VSR chairman Don Beary, Following recent FINRA’s ‘senior sweep,’ his brokerage firm is now more careful about what senior citizens can invest in. VRS’s registered representatives have just been notified about the new illiquid alternative investment sale guidelines, which include a 35% of illiquid investment limit for older clients’ accounts—down from 40-50% previously. Also, for clients in the 70 to 75 age group, they will be allowed to possess no more than 25% of illiquid investments in their portfolio. Clients in the 75 to 84 age group have a 15% limit, while customers older than that will not be allowed to make own any illiquid investments.

Meantime, Centera hasn’t modified customer allocations percentages , but it has enhanced its representative training requirements for representatives that sell illiquid investments and brought in more employees to conduct product due diligence.

It is important that your financial representative only recommend investments that are suitable for you, your goals, and your financial needs. Failure to do so can be grounds for a securities fraud case if the customer loses money as a result.

Seniors are especially vulnerable to losing big from unsuitable trades. Many have ended up losing the savings they have spent a lifetime accumulating, which can drastically hurt their retirement that they have worked hard for.

You want to work with an experienced REIT lawyer who knows how to recoup your losses for you.

AIternative alterations, Investment News, May 19, 2013

Senior Investors, FINRA

REITs (PDF)


More Blog Posts:
FINRA Notifies Brokerage Firms About Non-traded REIT Information that Can Mislead Investors, Stockbroker Fraud Blog, May 6, 2013

FINRA Plan May Dramatically Change The Way Brokerage Firms Report On Nontraded REITS & Other Illiquid Investments on Client Statements, Institutional Investor Securities Blog, April 28, 2013

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Posted In: Financial Firms , Non-Traded REITs , REITs , Senior Investors , VSR Financial Services

March 14, 2013

New Hampshire Investment Adviser Focus Capital Wealth Management Accused of Elder Financial Fraud to Pay Exchange Traded Fund Victims $2.4M

Focus Capital Wealth Management and its owner Nicholas Rowe are now barred from having a license to serve as either an investment adviser or a broker-dealer in New Hampshire. Rowe and his financial firm are accused of elder financial fraud. Per the settlement with the state, they must pay $2.4 million in client restitution.

The Bureau of Securities Regulation acted against Rowe last year following complaints from clients claiming they’d lost significant amounts of money in risky investments of leveraged exchange-traded funds, which are also known as ETFs. According to the bureau, these investments are not for clients who have a low or medium tolerance for risk. Rowe also allegedly misrepresented his credentials and charged investors unreasonable fees, claiming that these were going to third parties with close Wall Street ties, when, actually, he was keeping part of that money.

Rowe eventually consented to FINRA arbitration over claims filed by a number of his former clients, who alleged civil fraud and negligence. One of the arbitrator’s panels ruled against him for $1.8M in restitution.

Following the ruling, Rowe and Focus Capital Wealth Management filed for Chapter 11 bankruptcy.

Inverse and Leveraged ETFs
Leveraged and inverse ETFs comprise about $28 billion of the $1.2 trillion US ETF market. These types of exchange-traded funds are meant to enhance short-term returns via the use of derivatives and debt. They tend to be more appropriate for professional traders, rather than long-term retail investors. In 2009, regulators began to issue warnings over concerns that brokers were selling these instruments to buy-and-hold investors—a strategy that is more than likely to end in serious losses for a customer.

Senior Financial Fraud
Unfortunately, seniors are a favorite target of those seeking to commit securities fraud. Many elderly investors are not investment savvy and/or due to health and/or aging issues may lack the ability to fully comprehend what they are agreeing to by investing. For seniors, becoming the victim of investment fraud can mean the loss of their retirement and life savings, which can adversely affect their life and care during their later years.

Questions to Ask About Financial Products (From the SEC)
Regardless of your age or whether you are a seasoned or novice investor, there are key questions you need to ask your financial representative, including:

• Is the investment product registered with state and federal regulators?
• Is this investment in line with your investment objectives? Is it suitable/appropriate?
• What makes this investment profitable?
• Are there any accompanying fees and what are they for?
• Is the investment liquid?
•
Make sure you document what is said to you. Also, you shouldn’t only base your decision to invest on the word of the financial adviser. Ask to see financial statements, the most current annual report, or the prospectus. You can even go online for information about a prospective investment.

N.H. Advisor Ordered To Pay $2.4M In Restitution For Client Losses, Insurance News, March 15, 2013

Questions You Should Ask About Your Investments ... and What To Do If You Run Into Problems, SEC

N. Hampshire investment adviser must pay $1.8 mln in ETF case, Reuters, December 3, 2012


More Blog Posts:
Financial Industry Representatives Settle FINRA Cases Over Securities Fraud, Stockbroker Fraud Blog, March 12, 2013

Financial Representatives Settle with FINRA Over Allegations Related to Excessive Commissions, Elder Financial Fraud, and Funneling Client Funds for Personal Gain, Stock, Stockbroker Fraud Blog, March 8, 2013

Two Oppenheimer Investment Advisers Settle for Over $2.8M SEC Fraud Charges Over Private Equity Fund, Institutional Investor Securities Blog, March 14, 2013

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Posted In: Broker-Dealers , Exchange Traded Funds , Investment Advisers , Senior Investors

March 12, 2013

Financial Industry Representatives Settle FINRA Cases Over Securities Fraud

These financial representatives have settled the Financial Industry Regulatory turned in their Letter of Acceptance, Waiver, and Consent in the securities cases made against them by the Financial Industry Regulatory Authority. By consenting to the sanctions described and the entry of findings, this does not mean they are denying or admitting to the allegations.

New York Registered Principal Accused of Making Misrepresentations and Missions
Neftali Mercedes must pay $97,000, in addition to interest as restitution to customers. He is accused of intentionally making material omissions and misrepresentations about the risks related to speculative securities and an issuer’s financial state.

Per the findings, Mercedes had no reason to make the statements and he made no effort to verify the information that he gave customers or discuss with them the investments’ negative financial performance and condition, which could have altered their purchase choices. FINRA contends that through his actions, which took place over a number of months, the New York registered principal was able to gain financially while investors lost money.

California Registered Principal Allegedly Took Part In Private Securities Transactions Outside His Employment Scope
James Michael O'Brien is now facing an 18-month suspension from associating with any FINRA member. However, because of his financial state, he doesn’t have to pay a financial sanction. The entry of findings accuses him of engaging in private securities transactions that were outside the scope of his employment and he failed to notify the member firm that he worked for of these transactions.

O’Brien allegedly referred investors to an entity that sold the securities as promissory notes. These investments totaled over $2.6M. He is said to have made $125,416 for making the referrals.

Colorado Registered Representative Settles FINRA Case Alleging Inappropriate Recommendations Made Related to REIT and Regulation D Offerings
According to FINRA, Michael Lee Romero recommended that customers buy $760,000 of non-publicly traded real estate investment trusts and non-publicly traded Regulation D offerings that were not in line with these investors’ financial needs and situation. Now, he must pay a $10,000 fine and cannot associate with any FINRA member for 45 days.

Per the new account application that customers signed, they believed they were investing in instruments that came with moderate risks to meet their goals of capital preservation, income, and long term growth. The REITs and Regulation D offerings comprised nearly all of the clients’ liquid net worth and about 46% of their total net worth.

California Registered Representative Ordered to Disgorge Ill-Gotten Gains of $5,000 Plus Interest to Customer
Sean Placido Rodriguez is accused of executing discretion in a client account without that customer’s written consent or his member firm’s written acceptance that the account was discretionary. He allegedly did not have reasonable grounds for recommending that this woman take part in short-term trading or that she have her account concentrated in equity purchases. Yet, per the FINRA findings, Rodriguez proceeded to make the recommendation that the client buy and sell equity securities in amounts that caused undue concentrations of these securities (25-50% of her account’s value when the transactions happened) in her account.

Now, Rodriguez must disgorge ill-gotten gains in partial restitution of $5,000 and interest to this customer.

If you believe you lost money in any of these (or any other) securities cases, contact our securities lawyers today.

FINRA Disciplinary Actions



More Blog Posts:
Financial Representatives Settle with FINRA Over Allegations Related to Excessive Commissions, Elder Financial Fraud, and Funneling Client Funds for Personal Gain, Stock, Stockbroker Fraud Blog, March 8, 2013


Court Upholds Ex-NBA Star Horace Grant $1.46M FINRA Arbitration Award from Morgan Keegan & Co. Over Mortgage-Backed Bond Losses, Stockbroker Fraud Blog, October 30, 2012

Financial Firms Settle with FINRA: ES Financial Services Resolves Solicitation of Non-US Investors Allegations and Lincoln Financial Securities Consents to Entry of Findings Alleging Inadequate Supervision, Institutional Investor Securities Blog, March 11, 2013

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Posted In: FINRA , Securities Fraud , Senior Investors

December 6, 2012

Decreased Ability to Process Risk and Danger Make the Elderly Easy Fraud Targets, Says Study

According to a study conducted by UCLA psychologist Shelley Taylor, one reason that older adults may be more easily prone to being deceived is that there appears to be less activity in the part of their brains that processes subtle danger and risk. She wanted to find out how well older people recognize visual clues indicating that someone may be scamming them.

Taylor brought in 119 seniors over the age of 55 and 24 people in their twenties. The two groups looked at 30 photographs that showed one of three faces: a neutral looking face, an untrustworthy one, or a trustworthy one. Taylor found that while the seniors and younger adults rated the neutral and trustworthy faces about the same, the elder adults had a more difficult time identifying the untrustworthy cues, rating them as more trustworthy than did their younger counterparts.

A follow-up study she then conducted using brain imaging showed the seniors exhibiting less activity in the risk processing area of the brain. She also said determined that people’s propensity to focus more on the positive as they grow older might too be causing them to miss deception cues (such as a smile that doesn’t include the eyes or someone who leans backward and/or looks away.)

Unfortunately, many elderly persons who are also investors continue to lose their life savings because investment fraudsters are targeting them. According to an AARP survey, last year that looked at the behavior of 723 fraud victims with an average age of 69 and compared them to the conduct of members of the general public, those that were successfully targeted were more likely to read junk mail, take calls from telemarketers and believe in promises that sound “too good to be true.” Women appeared most vulnerable to petty fraud while senior men who had investing experience were the ones that suffered the largest losses.

Other reasons why elderly citizens are a target of senior financial fraud, says the FBI, is that a lot of them:

• Have Great credit.
• Own a “nest egg.”
• Are from a polite, more trusting generation.
• Are less likely to report fraud.
• May have a harder time giving police detailed information about what happened because of memory problems.

That said, elder investors are not the only ones susceptible to financial fraud. “Studies have shown that highly educated and experienced investors are not immune to being cheated,” said Shepherd Smith Edwards and Kantas Founder and Elder Financial Fraud Attorney William Shepherd. “People who realize they do not understand an investment often shy away. Meanwhile, sophisticated investors may buy because they understand the sales pitch. Only later do they learn that what they were told was false or misleading.”

Contact our senior financial fraud law firm to schedule your free case evaluation.

Why It's Easier To Scam The Elderly, NPR, December 6, 2012

Fraud Target: Senior Citizens, Common Fraud Schemes, FBI

More Blog Posts:
JPMorgan Chase Must Pay Oil Heiress’s Trust $18M For Derivatives Investments, Account Mismanagement, and Unsuitable Investment Advice, Stockbroker Fraud Blog, October 12, 2012

Insurance Agent Convicted in Annuity Case Involving 83-Year-Old Dementia Patient, Stockbroker Fraud Blog, March 21, 2012

UBS ‘Rogue Trader’ Convicted of Fraud that Caused $2.3B Loss, Institutional Investor Securities Blog, November 22, 2012

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Posted In: Senior Investors

October 12, 2012

JPMorgan Chase Must Pay Oil Heiress’s Trust $18M For Derivatives Investments, Account Mismanagement, and Unsuitable Investment Advice

JPMorgan Chase (JPM) must pay the trust of oil heiress Carolyn S. Burford $18 million for the “grossly negligent and reckless” way that the financial firm handled the account. In Tulsa County District Court in Oklahoma, Judge Linda G. Morrissey said that beneficiary Ann Fletcher was persuaded to invest in derivatives that were unsuitable for the trust, causing it to sustain significant losses. The judge is also ordering punitive damages to be determined at a later date, as well as repayment of the trust’s legal expenses.

Fletcher, now 75, is the daughter of Burford, who passed away in 1996. The trust was set up in 1955 by Burford’s parents. Burford's dad is the founder of Kelly Oil and her mother had connections to another oil company.

Between 2000 and 2005, the trust and JPMorgan, which gained management over the trust after a number of bank mergers and oversaw it until 2006, got into a number of variable prepaid forward contracts. These derivatives were pitched to the trust as way for it to make more income. However, according to the court, Fletcher was cognitively impaired and experiencing medical problems when the bank recommended that the trust buy the derivatives. A year before, she even expressed in a written letter to the bank that she was scared about getting involved in “puts & calls.” She eventually chose to trust their recommendation that she buy them.

Judge Morrisey believes that the bank failed to properly explain the product to its client while neglecting to reveal that it stood to benefit from the transaction. She also says that when JPMorgan invested the contracts’ proceeds in its own investment products, which she described as “double dipping,” it was in breach of fiduciary duty. JPMorgan also billed the trust transaction investment fees and corporate trustee fees.

Morrisey said that because the bank gives employees incentives to make it revenue, this creates a conflict of interest for those that are advising and managing fiduciary accounts. She said that the financial misconduct that occurred in this securities case exhibits JPMorgan’s disregard of its clients, especially when it knew, or if it didn’t then was reckless in not knowing, that such conduct was occurring.

Investors that purchase variable prepaid contracts generally consent to give a number of the stock shares to the brokerage firm in the future. Such a deal can protect investors from certain losses and can be accompanied by tax benefits. However, they can also lead to additional fees. With Burford’s trust, however, the trustee is not allowed to sell its original stocks. The court said that JPMorgan failed to tell Fletcher that getting involved in the contracts could lead to the sale of that stock.
JPMorgan says it disagrees with the court’s ruling and it may appeal.

JPMorgan Must Pay $18 Million to Heiress Over Derivatives, Bloomberg, October 10, 2012

JP Morgan Ordered to Pay $18 Million to Oil Heiress's Trust, New York Times, October 10, 2012


More Blog Posts:
New York’s Attorney General Sues JP Morgan Chase & Co. Over Alleged MBS Financial Fraud by Its Bear Stearns Unit, Stockbroker Fraud Blog, October 4, 2012

Ex-Employee Accuses Bank of America of Securities Fraud Involving Complex Derivatives Products, Stockbroker Fraud Blog, October 29, 2010

Barclays LIBOR Manipulation Scam Places Citigroup, Credit Suisse, Deutsche Bank, JP Morgan Chase, and UBS Under The Investigation Microscope, Institutional Investor Securities Blog, July 16, 2012

Continue reading "JPMorgan Chase Must Pay Oil Heiress’s Trust $18M For Derivatives Investments, Account Mismanagement, and Unsuitable Investment Advice" »

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Posted In: Derivatives , Financial Firms , J P Morgan - Chase , Securities Fraud , Senior Investors

June 28, 2012

Securities Law Roundup: Merrill Lynch Pays Customers $32M For Allegedly Overcharging Them with Unwarranted Fees, Brookstone Securities is Accused of $1.6M in Fraudulent CMO Sales to Elderly Retirees, and Planner Loses CFP Designation Following After Maine

The Financial Industry Regulatory Authority says that it is fining Merrill Lynch, Pierce, Fenner & Smith, Inc. $2.8M in the wake of certain alleged supervisory failures that the SRO says led to the financial firm billing clients unwarranted fees. The financial firm paid back the $32M in remediation to affected clients, in addition to interest.

According to FINRA, from 4/03 to 12/11, Merrill Lynch lacked a satisfactory supervisory system that could ensure that certain investment advisory program clients were billed per the terms of their disclosure documents and contract. As a result, close to 95,000 client account fees were charged.

Also, due to programming mistakes, Merrill Lynch allegedly did not give certain clients timely trade confirmations. These errors caused them to not get confirmations for over 10.6 million trades in more than 230,000 customer accounts from 7/06 to 11/10. Additionally, FINRA contends that Merrill Lynch failed to properly identify when it played the role of principal or agent on account statements and trade confirmations involving at least 7.5 million mutual fund buy transactions. By settling, Merrill Lynch is not denying nor admitting to the charges. It is, however, agreeing to the entry of FINRA’s findings.

Also settling with FINRA are Brookstone Securities, firm CEO/owner Antony Turbeville, and firm broker Christopher Kline. They are accused of fraudulently selling collateralized mortgage obligations to unsophisticated retirees, who wanted to put their money in investments that were safer than equity investments. The financial firm must pay back affected clients $1.6M ($1,179,500 of this was imposed jointly and severally with Kline and the remaining balance was imposed jointly and severally with Turbeville). Brookstone also is responsible for paying a $1M fine over the alleged elder financial fraud.

According to a FINRA hearing panel, from 7/05 through 6/07, Turbeville and Kline purposely issued allegedly fraudulent misrepresentations and omissions to these elderly seniors about the risks involved in CMO investments. The two men are exploiting these clients “greatest fears,” including the worry that they would run out of money when they were older.

The panel found that even when interest rates were rising in 2005 and the two men could clearly see the negative impact this was having on CMOs, they still failed to explain this to clients and instead caused them to think that their investments were bonds that were guaranteed by the government, kept capital safe, and made returns of 10-15%. While clients lost over $1.6M,Brookstone earned $492,500 in commissions from the same CMO bond transactions.

In another securities case, this one a lawsuit that was settled of court, William B. Smith has lost his right to use the certified financial planner designation after he allegedly defrauded a client of $1.2M and took $25K from another client. This revocation, imposed by the CFP Board, is permanent.

Smith’s client, Catharine C. Lund of Maine, had accused him of committing financial fraud after working on a1031 exchange for her following the sale of two of her properties. She contends that Smith should not have advised her to invest $1.2M into the Grafton building where his office is situated.

Our securities lawyers at Shepherd Smith Edwards and Kantas, LTD, LLP represent individual and institutional investors.

Finra Fines Merrill Lynch $2.8 Million for Overcharging Customers, The Wall Street Journal, June 21, 2012

FINRA Hearing Panel Fines Brookstone Securities $1 Million for Fraudulent Sales of CMOs to Elderly, FINRA, June 4, 2012

CFP Board Disciplines Planner for Alleged Fraudulent Use of $1.2M, FInancial Planning, June 21, 2012


More Blog Posts:
Securities Law Roundup: Ex-Morgan Stanley’s SEC Settlement Over Alleged FCPA Violations Gets Court Approval, Corruption Probe Into Wal-Mart’s Mexico Activities Continue, and Sentry Global Securities Principal Gets 20-Years for Pump-and-Dump Scam, Stockbroker Fraud Blog, May 24, 2012

Securities Law Roundup: Ex-Sentinel Management Group Execs Indicted Over Alleged $500M Fraud, Egan-Jones Rating Wants Court to Hear Bias Claim Against SEC, and Oppenheimer Funds Pays $35M Over Alleged Mutual Fund Misstatements, Stockbroker Fraud Blog, June 13, 2012

Institutional Investor Securities Roundup: SEC Sues Investment Adviser Over $60M Ponzi Scam, Michigan Investment Club Manager Gets Prison Term for Defrauding Over 900 Investors, & IOSCO Seeks Comments on Report About Credit Raters’ Conflicts & Controls, Institutional Investor Securities Blog, June 7, 2012

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Posted In: Collateralized Mortgage Obligations , FINRA , Financial Firms , Merrill Lynch , Securities Fraud , Senior Investors

May 10, 2012

Shepherd Smith Edwards and Kantas LLP Pursue Securities Fraud Cases Against Merrill Lynch, Pierce, Fenner, & Smith, Purshe Kaplan Sterling Investments, and First Allied Securities, Inc.

Our securities fraud lawyers at Shepherd Smith Edwards and Kantas, LLP recently filed a number of securities fraud cases against three broker-dealers and their representatives on behalf of investors. If you are a client of Merrill Lynch, Pierce, Fenner, & Smith, First Allied Securities, Inc., or Purshe Kaplan Sterling Investments and you feel that you too may have suffered losses because of broker misconduct, please contact our stockbroker law firm right away and ask for your free case evaluation.

Our securities fraud lawsuit against Merrill Lynch, Pierce, Fenner, & Smith involve allegations of overconcentration against David Zeng. The broker allegedly over-concentrated client accounts to the point that they only held a few stocks that didn’t represent very many market sectors (precious metal mining, pharmaceuticals, casinos, and online media). Many were foreign stocks from Canada and China. Shares included Focus Media Holding Ltd. (FMCN), Goldcorp Inc. (GG), MGM Resorts International (MGM), Silver Wheaton Corp. (SLW), Delcath Systems, Inc. (DCTH), Teck Resources LTD (TCK), and Sina Corp. (SINA).

Our investment over-concentration lawyers believe that there are other Merrill Lynch investors that may have lost money on their investments because of Zeng.

Shepherd Smith Edwards and Kantas is also pursuing an elder financial fraud case against First Allied Securities, Inc. The investor, a 64-year-old retiree, lost his retirement, which he’d entrusted to the financial firm and investment advisor Sean Agahi. The client’s money was allegedly inappropriately invested in non-traditional securities that were way too risky for his age and the fact that he was retired.

Per the allegations, Agahi primarily chose to invest this retiree’s money primarily in placement Real Estate Investment Trusts (“REITs”) and limited partnerships that were not suitable for this client. (REITs pay higher commissions than bonds, stocks, and mutual funds)

Unfortunately, there are retirees and other elderly seniors in this country who continue to suffer losses on their investments because a broker allegedly decided not to make the investor’s best interests the priority. Our elder financial fraud lawyers would be happy to help you explore your legal options against First Allied Securities, Agahi, or another broker.

Our REIT fraud lawyers are also seeking financial recovery for more than 20 clients of Purshe Kaplan Sterling Investments and two of their brokers. The investors blame the defendants’ for the huge losses sustained by their retirement savings.

Per their securities fraud allegations, longtime clients of an investment advisory company were persuaded by William Leitch and Corey Casilio to go with them after they decided to leave the financial firm in 2011. The investors contend that misrepresentation occurred because they did not realize that this meant they would no longer be working with financial firm. Rather than availing of their original investment advisory company’s recommendations, the investors allegedly sustained huge losses because of the many unsuitable investment recommendations made by Casilio and Leitch.

For example, some of their money was placed in private placements in REITs,” which they claim were misrepresented as bond or fixed income equivalents. Many of these REITs failed to meet the clients’ investment goals, risk tolerance levels, or time horizons.

If you believe that your broker or investment advisor failed to meet their legal obligations to you—the investor—and that this may have caused you to sustain financial losses, please contact one of our securities fraud lawyers at Shepherd Smith Edwards and Kantas, LTD, LLP today.


More Blog Posts:
David Lerner & Associates Ignored Suitability of REITs When Recommending to Investors, Claims FINRA, Stockbroker Fraud Blog, June 8, 2011

KBS Cap Markets Non-Traded REITs May Be Too Risky for Some Retail Investors, Stockbroker Fraud Blog, January 29, 2012

SEC Changes to Enforcement Have Led to Enhanced Results, Says Khuzami, Institutional Investor Securities Blog, May 4, 2012

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Posted In: Financial Firms , First Allied Securities , Merrill Lynch , Purshe Kaplan Sterling Investments , REITs , Senior Investors

Tags: Overconcentration

April 26, 2012

FINRA Bars Former Wells Fargo Advisors Broker that Bilked Child with Cerebral Palsy

Ralph Edward Thomas Jr., a former broker has been permanently barred from the Financial Industry Regulatory Authority. Thomas, who misappropriated money from three clients, including a child suffering from cerebral palsy, has been sentenced to a prison term of four years. He also must pay $836,000 in restitution.

According to prosecutors, the former broker stole the money over several years. More than $750,000 came from the child’s trust fund, which held the proceeds from a medical malpractice settlement he received for $3 million. During this time, he worked for Invest Financial Corporation, Harbor Financial Services, and Wells Fargo Advisors, which terminated him as their broker in 2010.

This case of securities fraud started after the child’s mom moved the trust to the bank in 2001. This gave Thomas control over the money. He would give out up to $1,500 of the child’s almost $6,300 in monthly annuity payments. He would then use withdrawal slips with the mother’s signature already written on it to buy cashier’s checks and take out money. He would deposit the checks in his personal accounts at other banks. In addition to the over $750,000 that he converted from the child’s account, Thomas converted $12,500 of the mother’s money.

Also, between February 2004 and July 2010, he defrauded an elderly client of over $42,000. He took out the money from her annuity account without telling her. He used the money to buy cashier’s check payable to cash or credit card companies where he had accounts.

In bilking these investors, Thomas violated FINRA rules 2010 and 2150 and NASD Rules 2110 and 2330. As part of the permanent bar, he can no longer associate with a FINRA member in any capacity.

Elderly seniors are among the most vulnerable members of society when it comes to being targets of financial fraud. The fraudster may be a financial professional, another professional with access to their funds, a relative, a caregiver, or a friend. Unfortunately, in the securities industry, there are brokers, insurance firms, investment advisers, brokerage firms, and other financial scam artists who will not hesitate to take advantage of an elderly person’s lack of investment knowledge, debilitating mental state, or isolation to take their money. In regards to children with disabilities, defrauding their trusts that have been set up as a result of their special needs or serious injuries can deprive them of the support and care they need to maintain their quality of living and pay for medical bills and other related expenses.

At Shepherd Smith Edwards and Kantas, LTD, LLP, our FINRA securities fraud law firm has the experience to help elderly seniors, children and their families, and other individuals to pursue their financial losses. We have helped thousands of investors get their money back. One of our elder financial abuse lawyers would be happy to offer you a free case evaluation.

Finra bars broker who stole from sick child, Investment News, April 12, 2012

FINRA Letter of Acceptance, Waiver, and Consent (PDF)


More Blog Posts:
Insurance Agent Convicted in Annuity Case Involving 83-Year-Old Dementia Patient, Stockbroker Fraud Blog, March 21, 2012

US Army Staff Sergeant Held in Afghan Civilian Massacre Was Once Accused of Securities Fraud, Stockbroker Fraud Blog, March 20, 2012

SEC Seeks to Impose Tougher Penalties for Securities Fraud, Institutional Investor Securities Fraud, December 29, 2011


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Posted In: Senior Investors , Wells Fargo

March 21, 2012

Insurance Agent Convicted in Annuity Case Involving 83-Year-Old Dementia Patient

Independent insurance agent Glenn A. Neasham has been convicted for felony theft for selling a complex annuity to an elderly woman who was suffering from dementia. Neasham, who maintains that the woman seemed fine when the transaction was made in 2008, contends and that he acted appropriately. Now, other insurance agents say they are having second thoughts about offering this financial product.

“Indexed” annuities are savings products that pay interest tied to how the stock- and bond-market indexes perform. An insurance agent gives the buyer a guarantee that the latter won’t lose any principal as long as the investor doesn’t withdraw his/her money early when steep penalties would otherwise ensue.

A lot of insurance agents like annuities because they can earn high commissions (12% or greater of the amount invested).from insurance companies. Annuity sales have increased by over four times in the last 10 years as a volatile stock market and low interest rates attracted buyers.

The Wall Street Journal says that in the mid-2000’s, state attorneys and private plaintiffs sued insurers for making allegedly unsuitable product sales to elderly persons, who ended up losing money due to withdrawal penalties. The insurance companies settled the cases by agreeing to make a number of changes, including employing better efforts to make sure that the products sold to investors were suitable for them.

Neasham claims that the elderly client, Fran Schuber, came to his office with her boyfriend, Louis Jochim, who is also an octogenarian. Jochim said Schuber wanted an annuity like the one he had purchased from Neasham. Jochim told Neasham that the girlfriend was “mentally competent, and the insurance agent said that no one told him, not even Schuber’s son, that she was suffering from dementia.

Yet according to a local bank manager’s complaint, when Jochim and Schuber went to the bank to withdraw $175,000 to buy the annuity, she seemed confused and Jochim appeared to be influencing her. The manager notified Adult Protective Services about her concerns regarding Jochim and the Lake County District Attorney’s Office became involved.

Neasham wasn’t charged with the crime until 2010. Prosecutors contended that Neasham knew at the time of that firs transaction that Schuber lacked the capacity to agree, to it and Lake County Senior Deputy District Attorney Rachel Abelson said the 8% commission that was in it for the insurance agent was the incentive for his “criminal intent.”

At Shepherd Smith Edwards and Kantas, our elder financial fraud lawyers represent senior investors that have been the victims of all types of securities fraud. Unfortunately, there are loved ones and financial professionals that will take advantage of an elderly person’s lack of knowledge, dependence, or diminished mental capacity to defraud them.

Annuity Case Chills Insurance Agents, The Wall Street Journal, March 18, 2012

Insurance Agent Gets Jail Time for Selling Annuity to Elderly Woman; He Denies Recognizing Dementia, ABA Journal, March 20, 2012


More Blog Posts:
Texas Securities Fraud Over Sale of Allegedly Bogus Annuities to Elderly Seniors, Stockbroker Fraud Blog, December 14, 2011


AG Edwards & Sons (Wells Fargo Advisors) to Settle Securities Charges it Sold Variable Annuities that Lacked Proper Documentation to Elderly Clients, Stockbroker Fraud Blog, May 4, 2011

SIFMA Wants FINRA to Take Tougher Actions Against Brokers that Don’t Repay Promissory Notes, Institutional Investor Securities Blog, January 17, 2012

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Posted In: Annuities , Senior Investors

March 20, 2012

US Army Staff Sergeant Held in Afghan Civilian Massacre Was Once Accused of Securities Fraud

Before US Army Staff Sergeant Robert Bales joined the military, he had a career as a stock trader. Now, media sources, who have been digging into his background to find out more about the man accused of massacring 16 villagers in Afghanistan, are reporting that the 38-year-old’s stockbroker career ended after he was accused of defrauding an elderly couple and bilking them of their life savings.

According to The Washington Post, prior to joining the military, Bales and MPI, the financial firm that he worked for, were ordered by the Financial Industry Regulatory Authority to pay a $1.4 million securities settlement (compensation and punitive damages), for allegedly engaging in unauthorized trading, fraud, unsuitable investments, churning, and breach of fiduciary duty. Bales allegedly sold valuable stocks off while favoring penny stocks in order to up his commission.

The claimant, 74-year-old Gary Liebschner, said that he was never paid a cent of the arbitration award. In his securities complaint against Bales, which he filed in 2000, Liebschner said that $825,000 in AT & T stock lost all value because of trades that this former stock trader had made for him. ABC News says that when Liebschner was asked if he thought of Bales was a con man, the elderly senior replied in the affirmative.

“A question one may ask is, what do the actions of this man as a soldier have in common with his actions as a former stockbroker?” asked Shepherd Smith Edwards and Kantas, LTD LLP Founder and Stockbroker Fraud Lawyer William Shepherd. “In either case, it is apparent that he was and is a very disturbed person. Having represented thousands of investors to recover investment losses I have found that most of the harm is caused by either the large percentage of ruthless financial firms or the small percentage of disturbed brokers. Most financial advisors are honest and care very much about their clients, but a few of them range from gambling addicts to complete sociopaths.”

US officials have said that early on the morning of March 11, Bales walked to two villages and started shooting families in their homes. He initially reported shooting a number of Afghan men outside a US combat post and reports of the staff sergeant’s initial account imply that he may have asserted that his actions had a legitimate military goal even though he entered the villages without authorization. What he didn’t mention, however, was that he had also killed over a dozen women and children. Bales’ defense lawyer, who says that his client doesn’t remember the shootings, plans to mount an insanity defense.

Afghan Murder Suspect Bales 'Took My Life Savings,' Says Retiree, ABC News, March 19, 2012

Staff Sgt. Robert Bales' arrest as suspect in civilian shootings renews questions about mission in Afghanistan: A Closer Look, Cleveland.com, March 18, 2012


More Blog Posts:
AmeriFirst Funding Corp. Owner Convicted of Texas Securities Fraud, Stockbroker Fraud Blog, February 3, 2012

Well Fargo Advisers to Pay $2 Million to Settle Claims that Broker Sold Unsuitable Reverse Convertible Securities to Seniors, Stockbroker Fraud Blog, December 17, 2011

Wells Fargo & Co. May Have to Pay Another $15M to Minnesota Nonprofits For Securities Fraud, Institutional Investor Securities Fraud, December 24, 2010

Continue reading "US Army Staff Sergeant Held in Afghan Civilian Massacre Was Once Accused of Securities Fraud " »

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

Posted In: Securities Fraud , Senior Investors

Tags: Penny stock fraud

February 3, 2012

AmeriFirst Funding Corp. Owner Convicted of Texas Securities Fraud

The former COO of AmeriFirst Acceptance Corp. and AmeriFirst Funding Corp. was recently convicted of multiple counts of Texas securities fraud and mail fraud for his involvement in bilking over 500 investors of over $50 million. A lot of the victims of Dennis Woods Bowden were retirees.

Per evidence that was given at trial, the 58-year-old executive and Jeffrey Charles Bruteyn, who was AmeriFirst’s managing director, made available Secured Debt Obligations (SDOs) as promissory note offerings to raise millions of dollars from investors in Florida and Texas. A lot of these clients, who were no longer employed, had hoped to place their money in investments that were safe.

While Bruteyn, who was convicted of nine counts of Texas securities fraud, directed brokers to sell the securities, it was Bowden who deceived and misled and defrauded them by signing the documents that were given to investors and misrepresenting/not disclosing material facts about the securities and the risks involved. For example, he falsely represented to investors that:

• A commercial bank was guaranteeing investors’ investments Interest in certain kinds of collateral was secured by the investors’ principal
• Insurance had been bought to protect investors’ money
• The SDO’s issuers were also acting as the fiduciary of investors.

In fact, all of these “facts” were untrue. Instead, Bowden served as “fiduciary” and spent investors’ money on things they had not approved or even known about.

Senior Financial Fraud
Unfortunately, senior financial fraud continues to be a huge problem in Texas and elsewhere in the US. The state of Texas even recently started running public service announcements to warn investors to be wary of “free lunch” seminars that promise free meals but were, in fact, an excuse to “hard sell” attendees into making investments that may not be appropriate for them. The PSAs also are reminding seniors to check the background of anyone they decide to go into an investment opportunity with—even if the other person is a friend, a fellow community member, or a co-worker.

Unfortunately, retirees continue to be the favorite targets for many seeking to bilk investors. With many of these elderly seniors no longer having a regular source of income, becoming the victim of Texas securities fraud can have devastating consequences, making it difficult for the victims to afford the care they may need or maintain the quality of life they have worked so hard to give themselves.

Contact our Texas securities fraud law firm today. At Shepherd Smith Edwards and Kantas, LTD, LLP we are dedicated to helping our clients recoup their losses. Your first consultation with one of our Dallas securities fraud lawyers is free. Contact us online or call (800) 259-9010.

CEO of Dallas-based AmeriFirst found guilty of securities fraud for swindling $50 million from retirees, The Dallas Morning News, December 22, 2011

Defendant Deceived Investors About Supposed Fraud Scheme That Involved More Than 500 Victims and More Than $50 Million, Justice.gov, December 21, 2011


More Blog Posts:
Texas Securities Fraud: BNY Mellon Capital Markets LLC Settles Allegations of Rigged Bond Bidding for $1.3M, Stockbroker Fraud Blog, January 24, 2012

TD Bank Ordered to Pay Texas-Based Coquina Investments $67M Over $1.2 Billion Ponzi Scheme, Stockbroker Fraud Blog, January 19, 2012

Texas Securities Fraud: SEC Charges Life Partners Holdings Inc. in Life Settlement Scam, Stockbroker Fraud Blog, January 4, 2012

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

Posted In: Senior Investors , Texas Securities Fraud

December 22, 2011

Wells Fargo-Sponsored Survey Finds that Sense of Security About Retiring Doesn't Necessarily Come with Affluence

According to a recent Wells Fargo & Co-sponsored survey, 23% of the 800 Americans with at $100,000 in investable assets who participated reported that they don’t feel confident that they will have enough money saved by the time they retire. 75% said they felt sure that they would have enough. The ones most likely to feel confident are the ones with a written a financial plan, trust that the stock market will take care of their investments, are married, have at least $250,000 in investable assets, and/or are male. Those who felt unsure about their finances for when they retire included those who are single, female, belong to the 40-59 age group, and/or have under $250,000 in investable assets.

Some of the Other Findings from the Survey:
• 48% of those in the 25 to 49 age range want to keep working during their retirement years.
• More men (42%) than women (34%) wanted to keep working even after hitting retirement age.
• Approximately three-quarters of those that are currently working believe that having a specific amount of money matters more than what age they are when they retire.
• Women without a written financial plan and/or with investable assets of over $100,000 but under $250,000 are more likely to believe that they won’t have enough money when they retire regardless of what they do now.
• Nearly 2 in 5 Affluent Americans feel like they should significantly reduce their spending now to save up for retirement
• One-third of those surveyed worry that they won’t be able to leave their children an inheritance because their savings will have to go toward their retirement
• Four in 10 prefer to enjoy life now rather than worry: These people are usually already retired (54%), seniors belonging to 60-75 age group (51%), Democrats (47%), and parents with kids that are already legal adults (44%)
• Parents with kids under 18 (71%), adults belonging to the 40-49 age group (62%), women (65%), and seniors age 50-59 (64%) are the ones most likely to worry about what will happen when they retire.

Unfortunately, there appears to a nationwide rise in investment fraud targeting baby boomers, many who are just (or on the verge of) retiring. The Wall Street Journal reports that many of these older investors found themselves placing their money in high-risk bets to compensate for the losses they suffered during the recently financial crisis.

There are approximately 77 million baby boomers currently live in the US. Of the 3,475 enforcement actions involving fraud in 2010, 1,241 affected investors were 50 years of age or older. According to securities regulators, this number is expected to hit a record figure this year. Enforcement actions involved free-lunch seminars, variable annuities, or the misuse of professional credentials. Common types of senior investment fraud included Ponzi scams, self-directed IRA’s containing bogus investments in gold, real estate, and oil wells, and promissory notes.

Our elder financial fraud lawyers at Shepherd Smith Edwards and Kantas, LLP represent seniors throughout the US. We know the toll that losing your savings can take on you and your family.
Retirement Fears Jump the Wealth Gap to Strike Many Affluent Americans, Wells Fargo Retirement Study Finds, Wells Fargo, December 14, 2011

Boomers Wearing Bull's-Eyes, Wall Street Journal, December 14, 2011


More Blog Posts:
Well Fargo Advisers to Pay $2 Million to Settle Claims that Broker Sold Unsuitable Reverse Convertible Securities to Seniors, Stockbroker Fraud Blog, December 17, 2011

Texas Securities Fraud Over Sale of Allegedly Bogus Annuities to Elderly Seniors, Stockbroker Fraud Blog, December 14, 2011

LPL Financial Ordered to Pay $100K for Lack of Adequate Oversight that Resulted in Unsuitable Investments for Clients, Stockbroker Fraud Blog, November 29, 2011

Continue reading "Wells Fargo-Sponsored Survey Finds that Sense of Security About Retiring Doesn't Necessarily Come with Affluence" »

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Posted In: Financial Firms , Senior Investors , Wells Fargo

December 17, 2011

Well Fargo Advisers to Pay $2 Million to Settle Claims that Broker Sold Unsuitable Reverse Convertible Securities to Seniors

To settle Financial Industry Regulatory Authority securities fraud allegations against one of its brokers, Wells Fargo Advisers will pay a $2M fine, as well as repay an unspecified amount to elderly clients that were defrauded. Over 21 senior investors were reportedly targeted by Alfred Chi Chen, who sold them reverse convertible notes even though the majority of them were retired and/or had never invested in this type of complex instrument. A number of investors were in their 80’s and 90’s.

FINRA says that Chen made over $1M in commissions even as the investors sustained losses. He also is accused of not giving discounts on Unit Investment Trust (UIT) transactions even when clients were eligible. As part of its settlement, Wells Fargo will pay restitution to those that should have but did not get the discounts and those that were sold unsuitable investments.

FINRA Executive Vice President and Chief of Enforcement Brad Bennett said that Wells Fargo did not review the reverse convertible transactions to make sure that they were suitable and that investors were harmed as a result. The SRO also determined that Wells Fargo did not give certain clients that were eligible breakpoint and rollover and exchange discounts when they bought UITs because the financial firm’s procedures and systems were not sufficient to properly monitor unsuitable reverse convertibles and ensure that clients got the discounts for which they were eligible. (Discounts should be offered on UIT sales when purchases go beyond certain thresholds or involve termination or redemption proceeds from another UIT during the initial offering period.)

By agreeing to settle, Wells Fargo is not admitting to or denying FINRA’s allegations.

The SRO has filed a separate complaint against Chen, who allegedly exposed clients to risks that were not in line with their investment profiles. As of June 2008, 172 of the accounts he worked with held reverse convertibles. 148 accounts had concentrations over the 50% of their total holdings. 46 accounts had concentrations of over 90%.

Reverse Convertibles
These interest-bearing notes involve repayment of principal connected to an underlying asset’s performance. The specific terms of reverse convertibles may vary. An investor risks loss if the underlying asset’s value drops under a certain maturity level or during the reverse convertible’s term.

It is important for many elderly investors that their investments not expose them to too much risk. For an elderly senior to lose his/her life savings because a financial firm or broker behaved irresponsibly, committed securities fraud, or made an avoidable mistake is unacceptable.

Wells to pay $2M to settle claims broker sold unsuitable investments to seniors, Investment News, December 15, 2011

Wells Fargo Fined by Finra Selling Structured Notes to Aged, Bloomberg, December 15, 2011


More Blog Posts:
Broker-Dealers are Making Reverse Convertible Sales That are Harming Investors, Says SEC, Stockbroker Fraud Blog, July 28, 2011

RBC Wealth Management Unit Ferris Baker Watts to Pay Investors Restitution Over Reverse Convertible Notes Allegations, Says FINRA, Stockbroker Fraud Blog, October 23, 2010

Wells Fargo Settles for $148M Municipal Bond Bid-Rigging Charges Against Wachovia Bank, Institutional Investors Securities Blog, December 8, 2011

Continue reading "Well Fargo Advisers to Pay $2 Million to Settle Claims that Broker Sold Unsuitable Reverse Convertible Securities to Seniors" »

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Posted In: FINRA , Financial Firms , Reverse Convertibles , Senior Investors , Wells Fargo

December 14, 2011

Texas Securities Fraud Over Sale of Allegedly Bogus Annuities to Elderly Seniors

Two men are accused of Texas securities fraud involving the sale of bogus annuities to the elderly. The authorities arrested Leon Randy Sinclair III, a 53-year-old Houston man, on charges of theft by deception, misapplication of fiduciary property, and money laundering. Sinclair and his San Antonio-based business partner, Luther Pierce Hendon, allegedly transferred money from the investment policies into their own bank accounts.

Dozens of elderly persons were reportedly bilked out of their life savings while the two men allegedly stole millions of dollars. The elderly clients were sold charitable gift annuities that they thought would go toward their savings for the future. Unfortunately, per the criminal complaints filed against Hendon and Sinclair, the money they were investing actually went to the two men.

Annuities
An annuity is a contract with an insurance company that allows the participant to fulfill his/her long-term goals and retirement objectives. In exchange for either a number of payments or a lump-sum amount, the insurer starts paying you periodically either right away or sometime in the future.

Usually, an annuity offers tax-deferred earnings growth and a death benefit that will pay a designated beneficiary a specific minimum figure. Three kinds of annuities are:

Indexed Annuities: The insurer credits you with a return determined by changes in an index.

Fixed Annuities: The insurer agrees to pay you a minimum interest rate while your account grows. The insurance company also is to pay specific, periodic payments into your account.

Variable Annuities: You can opt to invest your payments in different kinds of investments. The Securities and Exchange Commission regulates this type of annuity.

Annuity Fraud
Annuity fraud occurs when the agent that is selling misrepresents/fails to disclose key facts about the investment.

Unfortunately, the elderly are among the favorite targets for many of those intentionally seeking to commit annuities fraud. This type of investment is very appealing to people wanting to retire early or who are in search of a fixed income. It is easy for an elderly investor to mistakenly think that this type of investment is safe when, in fact, certain kinds of annuities are incredibly risky.

According to MetLife Inc. in June, older Americans are bilked of $2.9 billion annually by relatives, businesses, and strangers. At Shepherd Smith Edwards and Kantas, LTD, LLP, our Houston stockbroker fraud lawyers work hard to help our clients that have been the victim of elder financial abuse recoup their losses.

We know how hard you’ve worked to save for your future, as well as provide some financial security for your family. Losing your retirement and/or life savings can take a devastating toll on a bilked investor. Serious emotional and health complications can result, in addition to the financial troubles that can arise. There may be a way to recoup your losses.

Houstonian accused of selling bogus annuities to elderly, Chron.com, December 14, 2011

Annuities, SEC.gov


More Blog Posts:
Texas Securities Fraud: Unregistered Adviser Confesses to Selling Almost $400K in Promissory Notes and Investments Despite Cease and Desist Order, Stockbroker Fraud Blog, December 5, 2011

Texas Securities Fraud: Raymond James Financial Services Pays Elderly Senior Investor About $1.8M Following Loss of Appeal, Stockbroker Fraud Blog, December 2, 2011

Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme, Stockbroker Fraud Blog, November 11, 2011

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

Posted In: Annuities , Annuities and Insurance , Senior Investors , Texas Securities Fraud , Variable Annuities

November 29, 2011

LPL Financial Ordered to Pay $100K for Lack of Adequate Oversight that Resulted in Unsuitable Investments for Clients

LPL Financial must pay $100K for its improper supervision of a broker. The Oregon Division of Financial and Corporate Securities, which fined the financial firm, reports that LPL Financial has put in place better oversight procedures since the violation was discovered. LPL Financial is a LPL Investment Holdings Inc. division.

According to the state’s securities division, Jack Kleck, an LPL Financial branch manager, sold risky gas and oil partnership-related investments to almost 36 residents. A lot of these clients were elderly seniors for whom these investments were unsuitable (considering their investment goals and age). Some even lacked the mental capacity to make such investment choices.

LPL Financial is accused of committing securities law violations, including not making sure that company procedures and policy were enforced and inadequately supervising Kleck, whose securities license was taken away in 2007. He was ordered to pay a $30,000 fine.

Among the steps that LPL has taken to set up better supervisory and compliance practices are having more employees focus on these responsibilities, improving branch office exams, and increasing the pre-sale evaluation of transactions.

Our securities fraud lawyers are talking to people who sustained losses because of Kleck or another LPL Financial representative. Contact Shepherd Smith Edwards and Kantas LLP today.

Unfortunately, elderly seniors and persons who are mentally impaired are easy targets for securities fraud. These investors may not fully understand what they are getting into and they can place their trust in the wrong registered representative. Often, the risks resulting from stockbroker fraud are too much for these clients, who may want to be conservative about their investment goals in order to ensure that they have enough money to support themselves. At this point in their lives, they cannot afford any huge losses.

It is the responsibility of financial firms to properly supervise their employees so that securities fraud doesn’t take place. They must also have the proper supervisory and compliance procedures in place so that employees can execute them.

Our senior investor fraud lawyers know how devastating it can be to find out the nest egg you’ve spent your whole life growing is now gone because someone made investments on your behalf that were inappropriate.

Examples of Financial Scams that Commonly Target Seniors:
• Investment scams
• Reverse mortgage schemes
• Ponzi scams
• Internet fraud

Ways to Avoid Financial Fraud:
• Don’t sign up right way. Take the time to think about the investment and whether it would benefit you.
• Do research on the broker and the financial firm to make they are legitimate. Have they been accused of securities fraud before?
• Consult with a family member or a friend about the investment.
• Make sure you know what you are getting involved in. If you don't understand any details, ask and make sure you get answers.

Oregon fines LPL Financial $100,000 for failing to properly supervise rural broker-dealer, Oregon Live, November 22, 2011

Shepherd Smith Edwards & Kantas Investigates Claims Against LPL Financial in Light of $100k Fine for Supervisory Oversight, Globe Newswire, November 30, 2011


More Blog Posts:
LPL Financial Management and Private Equity Backers TPG and Hellman & Friedman Could Make Over $450M from IPO, Stockbroker Fraud Blog, November 19, 2010

Linsco Private Ledger Clients File FINRA Arbitration Claims Accusing Former Financial Adviser Raymond Londo of Running Multi-Million Dollar Ponzi Scam, Stockbroker Fraud Blog, April 13, 2011

Wells Investment Securities Agrees to $300,000 Fine by FINRA for Alleged Use of Misleading Marketing Materials for REIT Offerings, Institutional Investor Securities Blog, November 23, 2011


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

Posted In: Financial Firms , Inadequate Supervision , LPL Financial , Securities Fraud , Senior Investors

November 15, 2011

AARP Offers Older Investors 5 Warning Signs for Avoiding the Next Major Ponzi Scam

The AARP has issued a fraud protection bulletin warning investors how to avoid becoming the victim of whoever happens to be peddling the next Ponzi scheme. Unfortunately, older investors are among the favorite prey of financial fraudsters. According Investor Protection Trusts CEO Don Blandin, one in five people in the 65 and over age group have already been exploited. Millions more are at risk.

To help investors, AARP has put out a description of five red flags warning of a possible financial scam:

1) The broker-adviser tells you that you wouldn’t be able to access your money during a “lock-up” period.

2) You feel pressure to invest now due to limited space or for some other reason. Give yourself time to do your own due diligence, make sure that the investment is legitimate, or seek the advice of others.

3) Sales pitches with a news hook. The North American Securities Administrators Association reports that in the last year alone, the leading financial frauds involved precious metal investments and distressed real estate, both involved topics that made headlines.

4) Investors that are being targeted belong to a group whose members may be possibly cognitively impaired, including elderly seniors that live alone (in particular, women).

5) Questionable marketing tactics, such as direct mail, telemarketing, and affinity pitches.

In the AARP’s bulletin, Louis Straney, a securities fraud expert who wrote the Investor’s Guide to Loss Recovery, says that it always a good idea to talk to a third party when considering an investment proposal. He also warns that just because the party making the proposal has a fancy office doesn’t mean that the investment is a legitimate one. He also recommends inquiring about an investment adviser’s qualifications and background.

According to a Special Report from InvestorProtection.org, financial abuse fraud is the 21st century crime. Sometimes the victims are part of a fraud scam targeting multiple seniors. On other occasions, incidents of financial abuse involve one particular target. One need only look at the case of socialite Brooke Astor. While she suffered from Alzheimer’s her son sought to steal her $187 million fortune. That said, one doesn’t have to be as rich as Astor to be targeted. Elderly seniors are defrauded of almost $3 billion a year and this doesn’t include the cases that go unreported.

Throughout the US, our stockbroker fraud lawyers represent elderly investors that have lost money because of broker or investment adviser misconduct. For many elderly people, the loss of their investments is the depletion of their live savings and the end to the security they sought to provide for themselves. Financial fraud of the elderly is a crime and it is also elder abuse.

There may be a way to recover your losses. Contact our stockbroker fraud law firm. Our AARP securities lawyers are dedicated to helping investors get their money back.

Fraud Protection: Avoid the Next Madoff, AARP, November 8, 2011

The Crime of the 21st Century, Investor Protection

Seniors, FBI


More Blog Posts:
Two Texas Men Sentenced For $100 Million Life Settlement Scam that Bilked Over 800 Investors, Stockbroker Fraud Blog, October 4, 2011

Elder Investors Suffering From Alzheimer’s Make Perfect Targets for Securities Fraud, Stockbroker Fraud Blog, September 8, 2011

Wedbush Securities Ordered by FINRA to Pay $2.8M in Senior Financial Fraud Case Over Variable Annuities, Stockbroker Fraud Blog, August 31, 2011

SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investors Securities Blog, October 13, 2011

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

Posted In: Securities Fraud , Senior Investors

October 4, 2011

Two Texas Men Sentenced For $100 Million Life Settlement Scam that Bilked Over 800 Investors

Adley Abdulwahab and Christian Allmendinger, both principals of A&O Resource Management Ltd., must now serve decades prison for their involvement in a $100M life settlement scheme. Both defendants are from Houston, Texas. The Texas State Securities Board, the SEC, the IRS, the U.S. Postal Inspection Service, the FBI, and the Virginia Corporation Commission all investigated this life settlement scam. Over 800 investors in the US and Canada were defrauded

Allmendinger, who is vice-president and co-founder of A & O, was orderd to serve 45 years in prison, while Abdulwahab, who is part owner of A & O and a hedge fund manager is to serve 60 years. Both men were indicted on 18 counts. Also pleading guilty to the life settlement scheme was ex-A & O president David White and four others.

According to the US Justice Department, investors, who wanted conservative investments, were misled into thinking that investing in A & O was a no-risk, safe bet when in fact, it was a “sham.” Among the victims were hundreds of retirees who lost their savings because they invested in A & O. Almendinger and Abdulwahab used investors’ money to pay for expensive cars, luxury homes, and extravagant jewelry.

Abdulwahab and Allmendinger both marketed A & O life settlement investment products to investors. Per the court, the principals misrepresented A & O’s prior success to investors, while also exaggerating its size as a business. Abdulwahab also not only lied about his credentials but also did not disclose that he had pleaded guilty to a Texas felony charge of forgery of a commercial instrument.

When state regulators started looking into A & O’s financial instruments, the fraudsters made up a bogus sales transaction to “sell” the company to shell corporate entity Blue Dymond and Physician’s Trust, also a shell corporate entity. While the sale ended Allmendinger’s ties with the life settlement scam, Abdullah and his co-fraudsters still secretly controlled and continued the financial scheme until September 2009. The majority of the investors were seniors and most of them lost everything they’d invested. For many, this was their entire retirement.

It is unfortunate when an investor loses money because he/she was the victim of financial fraud. Recently, the North American Securities Administrators Association added securitized life settlement contracts on its list of practices and products that are a threat to investors. In many instances, schemes involve “worthless paper” that doesn’t keep up enough assets so that there is a guaranteed fixed return in a fixed time period.

Texas Fund Managers Sentenced Over Life-Settlement Scheme, The Wall Street Journal, September 28, 2011

Life settlements just one more potential scam in recent troubled times, San Diego Source, September 6, 2011

Principals Of A&O Entities Sentenced In Virginia For $100 Million Fraud Scheme, Justice.gov, September 28, 2011


Financial Scammers Are Now Using YouTube, Facebook, LinkedIn, Twitter, and Other Websites to Target Investors, Warns Texas Securities Commissioner, Stockbroker Fraud Blog, September 22, 2011

Ex-UBS Financial Adviser Pleads Guilty to Defrauding Private Fund Investors, Stockbroker Fraud Blog, July 13, 2011

AIG Trying to Get More Investors to Buy Life Settlements, Institutional Investors Securities Blog, April 26, 2011


Continue reading "Two Texas Men Sentenced For $100 Million Life Settlement Scam that Bilked Over 800 Investors" »

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

Posted In: Life Settlements , Senior Investors , Texas Securities Fraud

September 8, 2011

Elder Investors Suffering From Alzheimer’s Make Perfect Targets for Securities Fraud

According to MetLife Mature Market Institute, some 1 million seniors are victims of financial exploitation each year—that’s 1 out of every 5 elderly persons. Because the number of seniors in the 65 and over age group growing, the number of elder fraud victims is also expected to rise. Elderly persons suffering from Alzheimer’s are especially vulnerable to financial fraud.

Already, approximately 5.4 million people who have this mental disease. By 2050, that number is expected to hit 16 million. Alzheimer’s patients tend to experience memory loss, confusion, difficulty working with numbers or making plans, disorientation, problems with comprehension and processing, cognitive difficulties, forgetfulness, and loss of judgment---all symptoms that can make it easy for someone to take advantage of them. It doesn’t help that Alzheimer’s patients may have lost the ability to understand the risks that they are taking or how this may impact their financial future.

Financial advisors, caregivers, family, friends, and strangers are among those that have been known to commit elder financial fraud. Trusted professionals (financial professionals, lawyers, and fiduciary agents) are considered the largest perpetrator group. It is also important to note though that there are those financial advisers with no intention of taking advantage of an elderly investor that may not even realize that their client is suffering from Alzheimer’s and may not be able to make his/her decisions.

This, however, doesn’t mean that all financial advisers shouldn’t take the necessary precautions to make sure that a client is understands the types of investments he/she is making, this risks involved, and how this may impact his/her future. As a matter of fact, the Financial Industry Regulatory Authority and the Alzheimer’s Association have started working together to make sure that members of the financial industry know how deal investors who may be suffering from this disease.

More Key Findings from MMI and its study with the National Committee for the Prevention of Elder Abuse (NCPEA):

• Elder financial fraud results in more than $2.6 billion in losses year.
• “Typical” elder fraud victims are usually between the ages of 70-99, female, Caucasian, cognitively impaired, frail, and/or isolated/lonely.
• In addition to financial losses, elder fraud victims are prone to health problems, loss of independence, credit issues, and depression.
• Retirement funds and life savings make elderly seniors ideal targets for financial scammers.

Earlier this year, Rep. Joe Baca, D-Calif. introduced the Preventing Affinity Scams for Seniors Act of 2011. Under the new bill, financial institutions would have to train employees, offer special services for older clients, and report signs of possible elder financial fraud.

Related Web Resources:
$2.6 Billion in Financial Abuse of the Elderly, Alzheimer's Weekly

Met Life Study (PDF)

Broken Trust: Elders, Family & Finances, MetLife

Preventing Affinity Scams for Seniors Act of 2011


More Blog Posts:
Wedbush Securities Ordered by FINRA to Pay $2.8M in Senior Financial Fraud Case Over Variable Annuities, Stockbroker Fraud Blog, August 31, 2011

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

Citigroup Global Markets Fined $500,000 by FINRA for Inadequate Supervision of Broker Accused of Bilking Sick and Elderly Investors, Stockbroker Fraud Blog, August 16, 2011

Continue reading "Elder Investors Suffering From Alzheimer’s Make Perfect Targets for Securities Fraud" »

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

Posted In: Senior Investors

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, OnWallStreet.com, 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 " »

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

Posted In: FINRA , Financial Firms , Senior Investors , Wedbush Securities

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" »

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

Posted In: Ponzi Scams , Securities Fraud , Senior Investors

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