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November 23, 2009

Fighting Senior Investment Fraud: Panel Calls for SEC, Labor Department, and Treasury Department to Work Together

Participants at an AARP/National Consumer League panel called on federal regulators from the US Labor Department, Treasury Department, and the Securities and Exchange Commission to work together when combating elder financial fraud.

North Carolina deputy securities administrator David Massey said not only must federal regulators from the different departments identify common interests and ways to work together, but also they must examine all regulatory gaps. He cited the fact that the 1996 National Securities Markets Improvement Act limits state regulatory authority over certain private offerings (Rule 506 offerings under Regulation D of the 1933 Securities Act).

Meantime, senior policy advisor Jeff Cruz encouraged the different federal arms to work together to combat fraud related to 401K retirement plans. He says that the recent change from benefit pension plans that were professionally managed to defined contribution plans is making retirees and seniors more vulnerable to financial fraud. He also recommended that the Department of Labor audit 401K plans.

Cruz and a number of senators have introduced two bills to protect older investors from fraud: S. 1661 and S. 906 have been called the 2009 Senior Investment Protection Act. The bills would require US states to adopt National Association of Insurance Commissioners and NASAA rules on senior certifications and professional designations use.

NASAA’s model rule has been adopted by 18 states. The NAIC rule has been adopted by 17 states.

Senior Financial Fraud
Protecting elderly investors from becoming the victim of financial fraud is extremely important. Our stockbroker fraud lawyers are committed to helping our senior investor clients recoup their losses.

Related Web Resources:
AARP

National Consumers League

State Securities Regulators Voice Strong Support For S. 906, the “Senior Investment Protection Act of 2009" target="_blank">/a>, NASAA, May 4, 2009

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November 9, 2009

SEC to Continue Fight Against Senior Investment Fraud in 2010

The Securities and Exchange Commission is stepping up its efforts to combat senior investment fraud. In 2010, the SEC plans to focus on issues related to retirement investments, including product development, disclosures, and marketing issues.

The need to better regulate the retirement products arena and actively take action against securities fraud that targets elderly people has increased now that some 55 million senior investors are involved in defined contribution plans. The SEC is currently taking a closer look at life settlements (also called viatical settlements) and target date funds.

Viatical settlements involve transactions made by chronically ill or older people who sell their life insurance policy benefits to investors. In turn, these investors pay the premiums and collect the payout upon the seller’s death. According to the Senate Special Committee on Aging, the life settlement industry has doubled in value in the last 3 years and will likely exceed $150 billion in a few decades.

At this time, the SEC has limited authority over life settlement securities, which fall under its purview when they are solid in capital markets but also are sold in private offerings. On October 22, SEC Chairperson Mary Shapiro spoke at an American Association of Retired Persons forum. She called the life settlement market one of “emerging interest” and said its products could become Wall Street’s “next big securitized products.” The SEC has established a task force to determine whether this area of the market is regulated enough.

Shapiro expressed concern that many seniors may not comprehend the consequences of selling their life insurance policies to investors. She noted that tax benefits and the ability to get life insurance later on can be lost.

Shapiro says the commission is looking at target date funds and a target date’s use in the fund’s name. Target date funds are vehicles for college savings and retirement plans that move toward more conservative holdings as a specific date approaches. The SEC is taking a closer look at marketing and advertising collaterals to figure out if investors are getting accurate information about these products. Shapiro noted that some target-date funds lost up to 40% of their value when the economy collapsed last year.

Related Web Resources:
Schapiro: Settlements Need Watching

AARP

SEC

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Posted In: SEC Enforcement , Senior Investors , Viaticals

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October 20, 2009

Elder Securities Fraud: FINRA Bars Former Broker From Industry

The Financial Industry Regulatory Authority has barred former broker Sergio M. Del Toro from the industry for allegedly defrauding an elderly investor, age 90, of over half a million dollars. Del Toro has agreed to the bar but is not admitting to or denying wrongdoing.

FINRA says that between 2004 and 2006, Del Toro recommended that the elderly investor, who died in 2006, invest $511,000 in 3rd Dimensions Inc, a speculative, development-stage company. FINRA is accusing Del Toro of promising to buy back at $400,000 the securities that the senior investor had bought for $351,000 if the latter was dissatisfied. The elderly client bought additional stock at Del Toro's suggestion. The former broker received about $76,650 in commissions.

FINRA claims that not only did the client pay $3-$4 for 3rd Dimension stock, which was not appropriate given the investor’s financial situation and age, but also, Del Toro allegedly did not have any reasonable grounds for valuing the stock at those prices when he sold them to his client.

FINRA claims Del Toro knew 3rd Dimension was making little if no revenue at the time and did not notify the two broker-dealers that he was registered with about his activities.

Elder Financial Fraud
Unfortunately, elderly senior investors can be easy prey for brokers that are willing to take advantage of them. It can be devastating to have your life savings (that you worked so hard for and hoped could cover your retirement or be passed on to your children and grandchildren) stolen from you by a financial professional.

Elder investment fraud is a crime. It is also a form of elder abuse when the victim is an older senior investor.

Related Web Resources:
FINRA Bars Former New York Broker for Defrauding Elderly Investor of More Than $500,000, FINRA, October 8, 2009

Elder Financial Abuse, National Committee for the Prevention of Elder Abuse

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August 10, 2009

SEC Says Prime Capital Services, Inc. Defrauded Elderly Investors in Florida with “Free” Lunch Seminars and Unsuitable Variable Annuity Sales

The US Securities and Exchange Commission is accusing broker-dealer Prime Capital Services Inc., income tax preparation business Gilman Ciocia Inc., and seven individuals of defrauding senior investors in Florida. The agency claims that the two companies, as well as the individuals named, allegedly used “free” lunch seminars that resulted in the sales of unsuitable variable annuities and, on occasion, millions of dollars in commission.

Robert Khuzami, the SEC Enforcement Director, called the free lunches “bait” for the scam. Elderly investors who are persuaded to purchase unsuitable financial products frequently are never able to fully recover their financial losses, which can severely deplete their retirement savings.

In addition to cease and desist proceedings against the respondents, the SEC is seeking remedial action, including civil penalties and disgorgement. According to the attorney representing PCS, Gilman, PCS President Michael P. Ryan, CCO Rose M. Rudden, one of the registered representatives, and one of the supervisors, the conduct under question occurred in the late ‘90’s and 2000’s and has been remedied for some time. The respondents plan to defend themselves against the charges.

SEC investigators say the senior investment fraud scam occurred between November 1999 and February 2007 and that during appointments conducted with seminar participants, PCS representatives either left out important information or made misrepresentations about variable annuities. For example, PCS representatives are accused of telling investors they would have unrestricted access to the money they invested but did not tell them that there would be substantial charges if they withdrew their money early.

The SEC claims that representatives’ commissions when selling variable annuities was 6%. Their commission on other investment products was just 3%. The agency also claims that Ryan and a number of supervisors neglected to implement PCS’s supervisory procedure to identify when misconduct was occurring, as well as prevent broker misconduct from happening.

Related Web Resources:
Read the SEC's Order (PDF)

“Free-Lunch” Seminars Still Baiting Seniors, Retirement Income Journal, July 15, 2009

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Posted In: Broker Fraud , Financial Firms , Prime Capital Services, Inc. , Senior Investors , Variable Annuities

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June 15, 2009

Ex-Morgan Keegan Adviser Pleads Guilty to Stealing from Senior Investor

A former Morgan Keegan adviser has pleaded guilty to charges that he stole from an elderly investor. Charges included investment adviser fraud and making and subscribing a bogus tax return. Now, Harold “Hal” Blondeau could be facing up to eight years in prison. He also may have to pay restitution to his victim. Martha B. Capps is now 83.

Blondeau received power of attorney over the senior investor’s accounts as she was experiencing the beginning stages of Alzheimer’s. She wanted him to keep her inheritance away from her husband. Large sums were taken out of Capps’ accounts.

The former Morgan Keegan adviser is accused of using some of the stolen funds to pay for personal expenses, including a beach house and $24,000 in wine. The beach house, purchased in Capps’ name, would have gone to Blondeau upon her death.

Almost $3 million was taken from the account of Martha B Capps. In 2007, attorneys for the elderly woman filed a lawsuit against Blondeau, his son Neal Knight, and Knight’s two daughters. The complaint contends that the group stole money from Capps. Blondeau and Knight are accused of establishing a non-profit foundation in the name of Capps’ father and donating the money to different organizations to enhance their own images. Capps’ money was also used for the college education of the two men’s children.

In 2007, Blondeau was let go from Morgan Keegan because he failed to disclose a loan that was obtained from a client. To date, Blondeau is the only one out of the four civil lawsuit defendants that is facing criminal charges in federal court.

Taking advantage of an elderly investor is a crime and can be grounds for an investor fraud lawsuit. Unfortunately, senior investors—especially those that have inherited money or have retirement savings—are easy targets of investor fraud.

Related Web Resources:
Raleigh investment adviser pleads guilty to fraud, Triangle Business Journal, June 11, 2009

Financial advisor admits to stealing from client, News & Observer, June 11, 2009

Elderly heir claims fraud by advisers, News & Observer, October 13, 2007

Fraud Target: Senior Citizens, FBI

Senior Investment Fraud News & Alerts, NASAA

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Posted In: Financial Advisers , Morgan Keegan , Senior Investors

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May 14, 2009

Fisher Investments Hit with $1.2 Million Arbitration Claim by Senior Investors Alleging Breach of Fiduciary Duty

A senior couple has filed a $1.2 million arbitration claim against Fisher Investments for allegedly neglecting to fulfill its fiduciary duty to them. According to Georgia residents Michelle and Brent Murphy, the investment advisory firm invested too much of their $2.5 million portfolio into stocks last year—nearly 100% in equities—even when it knew the market was failing.

Fisher Investments started handling the couple’s investments in 2007. The Murphy’s securities arbitration lawyer says that Fisher Investments neglected to properly diversify his clients’ portfolio, which should have been done considering that the two of them are retired and need fixed-income investments. He says that he will be filing more claims against Fisher Investments.

Responding to the claim, Fisher Investments chief executive Ken Fisher called it “nonsense,” says his firm acted appropriately, and he vowed to teach the couple’s attorney an unforgettable lesson.

Fisher Investments is one of the biggest US investment advisory firms. It has 37,648 accounts and $28 billion in client assets.

When hearing about Fisher’s response to the Murphys' arbitration claim, Shepherd Smith Edwards and Kantas, LLP founder and securities fraud lawyer William Shepherd responded, “The attitude of a claim as 'nonsense' is typical for financial firms. Sadly, regulators reinforce this attitude with inaction and occasional slaps on the wrist. The only route to justice for investors is to hire an experienced securities law firm and file an arbitration claim. Our firm has represented thousands of investors nationwide in arbitration including against the most powerful financial firms. It will be my pleasure to teach Mr. Fisher a lesson he will not forget!”

Related Web Resources:
Couple slaps a feisty Ken Fisher with $1.2M arbitration claim, Investment News, May 12, 2009

Senior Investment Fraud News & Alerts, North American Securities Administrators Association

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Posted In: Arbitration , Financial Firms , Senior Investors

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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.

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Posted In: Investor Fraud , Retirement Funds , Senior Investors

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March 27, 2009

GM, Ford, Chrysler Retirees: Beware of Financial Advisors Seeking to Invest Your Severance!

About 7,500 General Motors workers have agreed to a buyout of early retirement incentives and leave, the company reported today. Chrysler has also agreed to extend its offers bo buy-out workers beyond tomorrow. This follows tens of thousands of other autoworkers workers who were in recent years persuaded to retire and retire early and receive large sums of money.

Unfortunately, many retiring persons have little if any experience in investing. Enter droves of salespersons hawking financial plans. In the past, strict laws and regulations were enforced regarding investors’ funds, especially retirement funds. As we have recently witnessed, securities regulators are apparently overwhelmed or incompetent. This has resulted in tragic results recently as retirees have not only lost their careers but also their only safety net.

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

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

Our law firm has represented thousands of investors, most who lost retirement funds, and many who are former autoworkers. If you or someone you know has lost retirement funds you feel were invested improperly, contact us today for a free consultation.

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Posted In: Retirement Funds , Securities Fraud , Senior Investors

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December 19, 2008

Senior Investor’s Claim Against Wells Fargo is Remanded on Fraud in Execution by California Court of Appeal

The California Court of Appeal has remanded a lawsuit filed by an elderly woman accusing Wells Fargo of defrauding her and her husband. The case now goes back to the Los Angeles Superior Court, where a judge must determine whether Wells Fargo engaged in fraud when its employees executed its agreement with the couple.

Los Angeles Superior Court Judge Shook had previously concluded that the arbitration clause in the brokerage agreement between Ronnie and Ira Brown and Wells Fargo Bank, NA was unconscionable. However, he had decided that it was up to a jury to decide whether constructive fraud occurred. If Shook now decides that Wells Fargo did engage in the alleged fraud, the arbitration clause and any other portion of the agreement could then be determined unenforceable.

Sometime between 2003 and 2004, Wells Fargo assigned company vice president and trust administrator Lisa Jill Tepper to serve as Ira and Ronnie Brown's “relationship manager.” Ira Brown, who was 93 at the time and suffering from health issues (he has passed away since), founded the Save-On Drug chain. His wife, Ira, was 81.

Tepper, who is now a defendant in this case, visited the Browns regularly to assist with their financial paperwork. She eventually began providing the couple with investment advice. At one point, she recommended that they open a Wells Fargo brokerage account because she believed that their other investments were inappropriate due to their advanced age. Through Tepper, the couple began working with Wells Fargo stockbroker Jack Harold Keleshian, who is now also a defendant in the case.

With Tepper and Keleshian’s help, the couple opened up a number of investment accounts, including a “Brown Family Trust.” An arbitration clause was included among the documents.

In 2006, Ronnie sued Wells Fargo. She claimed that when she was under duress while caring for her ailing husband, the bank pressured her into selling nearly 75,000 stock shares at $24.71. She says Keleshian told her that if she didn’t sell, the stock’s value would drop dramatically.

Instead, the stocks increased in value while Ronnie experienced an increase in capital gains taxes. Ronnie claims her damages were over $1 million (including Wells Fargo’s commission from the stock sale). Wells Fargo wants to resolve the dispute through arbitration.

Related Web Resources:

C.A. Orders Hearing on Claim Bank Defrauded Drug Chain Founder, MetNews.com, November 26, 2008

Brown v. Wells Fargo Bank N.A., Cal. Ct. App., No. B196258 (PDF)

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Posted In: Broker Fraud , Financial Firms , Senior Investors , Wells Fargo

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October 28, 2008

NASAA and AARP Launch “Free Lunch Seminar Monitor Program” to Protect Seniors From Investment Fraud

The North American Securities Administrators Association and the AARP are inviting senior investors to take part in their “Free Lunch Seminar Monitor program.” Both organizations say the program will give investors a chance to report any unscrupulous promoters of inappropriate investments to security authorities in their state.

According to statistics, 80% of senior investors (age 60 and above) were invited to attend at least one free investment seminar over the last three years. Three out of five elderly investors received six or more invitations to these free seminars.

The free lunch seminar invitations usually indicate that seniors who attend will be fed a free, expensive lunch while they listen to information about how to invest and manage their money during retirement.The Financial Industry Regulatory Authority and federal and state securities regulators, however, say that these lunches are actually sales presentations, which consist of 50% “misleading” or “exaggerated” advertising claims and 25% unsuitable investment recommendations.

Last year, the SEC and securities regulators released their joint findings pertaining to “free lunch” seminars, including:

• The lunch seminars, while touted as “educational,” were actually held with the purpose of opening new investor accounts and (eventually) selling investment products.

• 59% of firms that oversaw the free seminars exhibited weak supervisory practices.

“Free Lunch Seminar Monitor Program”
Investors who would like to be part of the Free Lunch Seminar Monitor Program can bring a checklist (see below) to the lunch seminar with questions about the presenters and the products being promoted. The information from these forms will allow state securities regulators to determine whether the promoters and the information they are presenting are in compliance with securities laws and regulations.

The program gives investors an opportunity "fight back" against the promoters of these "free seminars" and gives securities regulators another way to protect seniors from investment fraud.

AARP and NASAA Launch “Free Lunch Seminar Monitor” Program, AARP.org

Become a Free Lunch Seminar Monitor, AARP

"Free Lunch" Investment Seminar Examinations Uncover Widespread Problems, Perils for Older Investors, SEC.gov, September 10, 2007

Related Web Resources:
What to Listen for Checklist, AARP.org (PDF)

North American Securities Administrators Association

"Free Lunch" Investment Seminars—Avoiding the Heartburn of a Hard Sell, FINRA

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Posted In: NASAA , Senior Investors

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August 28, 2008

2nd Circuit Reinstates TIAA-CREF Enterprises Inc. Faces Negligence and Breach of Fiduciary Duty Claims

TIAA-CREF Enterprises Inc. is once more facing claims of negligent misrepresentation and breach of fiduciary duty following the US Court of Appeals for the Second Circuit's reinstatement of the claims. The appeals court, however, did affirm the District Court’s decision to dismiss the 1934 Securities Exchange Act Section 10(b) and New York fraud claims.

Per the court’s account, plaintiff Vera Muller-Paisner filed the lawsuit against TIAA-CREF Enterprises Inc. and other entities. Mueller-Paisner was the executrix of the estate belonging to a woman named Mary Engel, who had purchased a fixed annuity from the defendants for about $1.2 million. The annuity was to pay Engel $8,000 each month until her death.

Engel would have recovered the purchase price in 12 years, but she
died six months after buying the annuity and had only collected $48,000. Muller-Paisner discovered that most of Engel’s assets had been used to buy the annuity. This made it impossible for the executrix to dispose of the decedent’s estate, per Engel's will.

While the district court had dismissed the entire lawsuit, this month, the appeals court affirmed part of that ruling and reversed it in part.

The 2nd circuit says it dismissed common law fraud and federal securities claims because the plaintiff did not sufficiently allege both a scienter and that there had been a materially misleading misstatement or omission. The appeals court, however, also ruled that Muller-Paisner's allegations were enough to withstand any motions to dismiss the negligence and breach of fiduciary duty claims. It noted, among the plaintiff’s allegations, claims by the defendants that they have the resources and system in place to help customers buy the best options available to them that will maximize their income and allow them to support their post-retirement lives.

Related Web Resources:

TIAA-CREF Brokerage Services

Charitable Planning

US Court of Appeals for the Second Circuit

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July 15, 2008

Senators’ Bill Calls for Added $50,000 Fine For Defrauding Elderly Investors

US Senators Herbert Kohl (Wisc) and Robert Casey (Pa) have introduced the Senior Investor Protections Enhancement Act, a bill that would add a $50,000 fine to any penalties that came with defrauding investors over 62 years of age. The legislation defines a senior as anyone 62 years of age or older. This is the age group that the majority of retirement savings can now be accessed for investments.

The two men emphasized that while seniors over 65 control about $15 trillion, over 50% of complaints made to state securities regulators come from this age group.

The bill proposes the additional penalty for every securities law violation that directly targets or is committed against a senior investor. However, it won’t intervene with situations involving legitimate investment advisors that make appropriate investment recommendations to their elderly clients.

Examples of actions that could result in the $50,000 penalty include failure to disclose fees, selling investment products that are unsuitable for seniors, switching investments sold with the investment that was marketed, and “locking-up” cash or penalty charges.

Senator Kohl is the head of the Senate Special Committee on Aging. The group is reporting that many seniors have lost their life savings because they were targeted by salespersons for investment schemes.

Last month, Financial Industry Regulatory Authority CEO Mary Schapiro says that FINRA is worried that senior investors that are facing financial or economic difficulties may become victims of investment schemes if they opt for high-stake investments to recover their losses. She stated that risks could be especially high for senior investors that may not have the luxury of time needed to recover if such losses do result.

If you are a senior investor that is a victim of investment fraud or because your broker-dealer made inappropriate product recommendations to you, contact Shepherd Smith Edwards and Kantas, LLP today.

Related Web Resources:

The Senior Investor Protections Enhancement Act of 2008, Washingtonwatch.com (Read the Bill)

United States Special Committee on Aging

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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

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February 27, 2008

FINRA Says Ex-Morgan Stanley Stockbroker Misappropriated Nearly $400,000 From 97-Year-Old Widow

The Financial Industry Regulatory Authority is charging stockbroker John Mullins with misappropriating nearly $400,000 from an elderly widow and her charitable foundation. Esther Weil, a 97-year-old widow, died earlier this month. She was living in a nursing home. Mullins was her stockbroker for over 20 years.

Mullins allegedly tried to conceal his status with his elderly client’s charitable foundation. John and his wife Kathleen were the trustees of Weil’s nonprofit foundation—a relationship that is prohibited by Morgan Stanley’s firm policies. Morgan Stanley employed the Mullins from 2002-2006. The company fired them after it was discovered that they were violating company policies.

John is accused of allegedly misappropriating funds from his employer for improper expenses, making misstatements on his firm’s yearly compliance questionnaires and Form U4, and accepting an unauthorized $100,000 loan from a client.

Mullins’ wife Kathleen also accepted a loan from the elderly woman and made misstatements on Form U4 and compliance questionnaires. The couple has been charged with failure to adhere to high standards of commercial honor and just and equitable principles of trade.

According to New Jersey Regulators, John Mullins converted $375,000 of Weil’s assets for his personal use when she became seriously ill in 2006. He also allegedly withdrew $14,000 from her Morgan Stanley account.

John also allegedly used Esther’s debit card to buy a $3,700 50-inch plasma television, bought $11,000 in Four Seasons Hotel and Resort Gift Certificates, and spent $4,000 to pay for a London vacation. He also may have charged the charitable foundation thousands of dollars for personal expenses.

The New Jersey Securities Bureau has charged the couple them with alleged misconduct. They are barred from working in New Jersey’s securities industry.

Shepherd Smith and Edwards has helped many stockbroker fraud victims throughout the U.S. recover their losses caused by the misconduct of brokers or advisers. One of our stockbroker fraud lawyers can speak with you today.

Related Web Resources:

Read the FINRA complaint, FINRA (PDF)

Margate couple sanctioned by state, Press of Atlantic City.com, February 15, 2008

Investors' Watchdog

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February 19, 2008

Allianz Life Insurance Settles Inappropriate Fixed Annuity Sales Allegations for $10 Million

Allianz Life Insurance Co. of North America and California’s insurance department have reached a settlement agreement over allegations that Allianz engaged in inappropriate fixed annuity sales.

Allianz Life will pay $10 million: $3.3 million to the California insurance department, $3 million to investments in the California Organized Investment Network, and $3.75 million, over a five-year period, to California’s Life and Annuity Consumer Protection Fund.

The agreement was reached after the California department of insurance’s market conduct examination results showed that Allianz Life had acted deceptively when it replaced 126 annuities for 84- and 85-year old senior investors.

Over 97% of the annuities sold to these investors from January 2004 through 2005 were considered “financially unsuitable” for their age group. The study also showed that Allianz had used deceptive marketing collaterals that promoted “up-front” and “immediate” bonuses.

In fact, no bonuses were pending unless the annuities were owned for five years. At that time, payments for life or over a 10-year-period would be made.

As part of the agreement, Allianz promised to conduct a suitability review program to improve procedures for dealing with elderly investors.

Allianz is now required to perform an elevated review of applicants older than 64, make a follow-up call to investors older than 75 who live in assisted living facilities, and ensure that all customers have a thorough understanding of any contracts made with Allianz.

By agreeing to settle, Allianz is not admitting that it violated any California laws.

Unfortunately, senior investors are easy targets of broker misconduct and deception. The stockbroker fraud law firm of Shepherd Smith and Edwards has helped many elderly investors and their families recover their losses.

Related Web Resources:

Allianz to Pay $10 Mln in Calif. Annuities Case, Reuters, February 14, 2008

Allianz Life Insurance Co. of North America

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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

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Posted In: Investor Fraud , Senior Investors

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November 20, 2007

SEC Enforcement Director Highlights Agency's Efforts To Eliminate Fraud Targeting Senior Investors

The Securities and Exchange Commission says that it has brought about over 45 enforcement actions involving scams targeting senior investors in the past two years. At the ALI-ABA Life Insurance Company Products Conference earlier this month, SEC Enforcement Director Linda Thomsen talked about the agency’s efforts to fight fraud against the elderly. She expressed concern over the fact that there are so many investment schemes out there focused on defrauding the elderly.

Thomsen said that the SEC has targeted a number of cases involving supervisory deficiencies. In one case, a Georgia broker convinced the Fulton County Sheriff’s Office that it was investing with a MetLife affiliate, when, in fact, the affiliate was actually affiliated to the broker.

Thomsen says MetLife knew their broker had compliance issues yet failed to supervise him properly and let him work in a “detached location.” The broker also convinced the sheriff’s office that an investment was permissible when it was not.

Variable insurance products sometimes sold by representatives primarily in the insurance sales business also raised red flags for the SEC. Thomsen raised concerns that these representatives may not be committed to obeying federal securities laws.

Sales practices and suitability issues were among other concerns that Thomsen cited for making variable insurance products an area with opportunities for defrauding investors. She cited the high level of exchange activity involving complex variable insurance products and the high commission payouts that representatives received for the sales.

Many “free lunches” for seniors are actually “hard sell” sessions that, once again, create opportunities for the sale of variable insurance products. Thomsen also mentioned conflicts of interest involving fiduciaries as a common problem.

Trying to recover your lost investment without the help of an experienced stockbroker fraud lawyer on your site can be difficult. At Shepherd Smith and Edwards we have helped thousands of investors recover their losses caused by broker misconduct. We have represented our clients in arbitration and in state and federal courts. Contact Shepherd Smith and Edwards today.

Related Web Resources:

Remarks Before the 2007 ALI-ABA Life Insurance Company Products Conference, SEC.gov, November 8, 2007

Senior Investment Fraud News and Alerts, NASAA.org

For Seniors, SEC.gov

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Posted In: SEC Enforcement , Senior Investors

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September 16, 2007

SEC and FINRA Say “Free Lunch” Seminars are Investment Scams Targeting Seniors

FINRA, SEC, and state regulators are saying that the “free lunch” investment seminars for senior citizens are actually high-pressure sales pitches, involving fraud and misleading claims about financial products that are not suitable for its elderly audience. A report of these findings will be issued to the public this week.

Alabama, California, North Carolina, Florida, Texas, Arizona and South Carolina are the U.S. states with the largest numbers of retirees. All seven states were included in the probe. The investigation took place from April 2006 to 2007 and concentrated on 110 investment firms and branch offices that held “free lunch” seminars for seniors.
The report blames investment firms for failing to properly supervise the employees that conducted the senior seminars.

The law states that sales pitches and materials at the seminars have to be approved by investment firm supervisors or brokerages. SEC Chairman Christopher Cox affirmed his agency’s commitment to stop anyone attempting to take advantage of senior investors.

Findings from the year long investigation included the following:

• “Free lunch” seminars were promoted as workshops or sessions where no products would be sold. However, sales presentations too place, and attendees were pressured to make investments or open accounts. Follow up sales calls were then conducted. The seminars took place at upscale locations, such as restaurants, hotels, and golf courses.

• More than half of the 110 firms and offices investigated seemed to provide weak supervision to the employees that were overseeing the seminars. Seminar materials were not reviewed properly.

• Misleading and exaggerated claims were heard at many of the seminars.
• Unsuitable recommendations were found at 23 of the inspections.

Senior investors make up 30% of fraud victims. Since 2005, the SEC has brought more than 40 cases involving senior fraud schemes. FINRA has also filed cases against employees and brokerage firms involved in senior investment scams.

FINRA is also investigating a number of other senior-related areas, including pitches persuading seniors to retire early and cash out their 401(K)’s, high-risk mortgage securities investments, collateralized mortgage obligations sales, and life settlements.

If you are a senior investor—or any kind of investor—that has lost money because you were the victim of an investment scam, contact Shepherd Smith and Edwards. You did not work your entire life to have your retirement pulled from under you. We have helped many investors get their money back.

Your first consultation with us is free. Contact Shepherd Smith and Edwards today.

Probe of Seminar for Seniors Finds Fraud, ABC News, September 10, 2007

Seniors — Beware of Investment Seminars No Free Lunches, SEC.gov

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Posted In: FINRA , SEC , Senior Investors

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September 13, 2007

Fraud is Cause of Financial Loss! Say One in Five Older Americans

"Mr. Chairman, there is no doubt financial fraud aimed at older Americans is real."

This astounding statement was made at the SEC's Senior Summit by Mary L. Schapiro, the Chief Executive Officer of the Financial Industry Regulatory Authority (FINRA), the regulatory body formed by the merger of the National Association of Securities Dealers and the regulatory arm of the New York Stock Exchange.

Ms. Schapiro backed her statement with the results of a recent FINRA survey which found that, of the 55 percent of respondents who said they lost money on an investment, 19 percent—almost one in five—attribute that loss to being misled or defrauded. While this is cause for concern, she added, it's also an opportunity for creative collaboration by regulators.

With the financial well-being of millions of seniors at stake, she added, FINRA is dedicated to tackling this issue on multiple fronts. As I speak to you today, FINRA, in addition to participating in the "free lunch seminar" sweep, is conducting sweeps in four separate issue areas.

However, Ms. Schapiro and the other regulators must recognize their limitations. There are simply not enough "securities police" to oversee trillions in investments being sold to millions of investors by hundreds of thousands of salespersons at thousands of firms. Only a fraction of violations are found resulting in almost meaningless fines compared to profits being made. In short: Investment crime pays!

Thus, millions of retirees have collectively lost billions of dollars because of investment fraud. And, despite tough talk by regulators, the problem grows worse on a daily basis. Yet, rather than rely on their government to protect them, seniors must take action themselves! The best solution is to contact an attorney who specializes in investment fraud to go after those who have defrauded them and seek recovery of their losses.

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.

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Posted In: FINRA , SEC , Senior Investors

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September 10, 2007

SEC Files Charges in $428 Million Securities Fraud Case Over Exploitation of Senior Investors

The Securities and Exchange Commission filed charges against 26 defendants for their alleged involvement in a $428 million securities fraud scheme targeting thousands of senior citizens and other investors in the United States.

According to the SEC action, filed in Chicago’s federal district court, the defendants participated in selling “Universal Lease” securities that were structured as timeshares in hotels located in Cancun, Mexico. A pre-arranged rental agreement promising investors a high, fixed return rate was also included. The fraudulent scheme fell apart and investors have reportedly lost more than $300 million from the scam.

The SEC says that Michael E. Kelly and others scammed thousands of U.S. investors by persuading them to spend their retirement savings on the purchase of Universal Leases. Kelly and his team falsely promised returns that were secure and guaranteed. The SEC claims that Kelly and his group raised at least $428 million from investors, with IRA accounts as the source of over $136 million.

The SEC also claims that Kelly and a number of other people ran the scam from Cancun through several foreign entities in Panama and Mexico. Supposed “rental income” payments that were actually new investors funds were issued to investors.

The SEC also alleges that a number of unregistered representatives in the US collected undisclosed commissions of over $72 million. The fact that more than $72 million in investor funds were used to pay commissions of up to 27% to brokers was also allegedly not mentioned to investors.

SEC Division of Enforcement Director Linda Chatman Thomsen said that although Kelly and his group promised safe investments, the scheme was run in a manner that placed investors at great risk because it was going to inevitably fall apart.

Kelly and the other defendants are charged with violation of the federal securities laws’ antifraud and registration provisions. The SEC is asking for civil penalties, disgorgement of ill-gotten gains, and permanent injunctions.

The SEC’s action is one of more than 40 enforcement actions since 2005 that the SEC has brought as part of its crackdown on investment scams targeting the elderly. The SEC thinks that Kelly and his group may have hoped to avoid detection by operating their securities fraud scam from abroad. It expressed its ongoing commitment to holding anyone trying to scam elderly investors accountable.

If you are a senior investor that has lost money because you were the victim of investment fraud, you should contact Shepherd Smith and Edwards right away. We have dedicated our legal practice to helping investors recover their losses.

Contact Shepherd Smith and Edwards today and ask for your free case evaluation.

Related Web Resources:

SEC Charges 26 Defendants in $428 Million Securities Fraud That Targeted Senior Citizens and Retirement Savings, SEC.gov, September 5, 2007

SEC charges 26 with fraud preying on elderly, Reuters.com, September 5, 2007

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Posted In: Senior Investors

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Stock Broker Fraud Blog

Published by Houston Securities Fraud Lawyers Shepherd Smith Edwards & Kantas

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Fraud is Cause of Financial Loss! Say One in Five Older Americans

SEC Files Charges in $428 Million Securities Fraud Case Over Exploitation of Senior Investors

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