January 24, 2012

Texas Securities Fraud: BNY Mellon Capital Markets LLC Settles Allegations of Rigged Bond Bidding for $1.3M

BNY Mellon Capital Markets LLC has agreed to pay the states of Texas, Florida, and New York $1.3M to settle allegations that it was involved in a bond bidding scam to reduce Citizens Property Insurance Corp. of Florida’s borrowing expenses. The Texas portion of the securities fraud settlement is $500,000, which will go toward its general revenue fund.

Per the Texas Securities Commissioner’s Consent Order, which it submitted last month, Mellon Financial Markets is accused of helping Citizens manipulate its ARS interest rate. Reducing these rates allowed Citizens to save money while costing investors that held the ARS when they ended up making $6.7M less in interest.

The Consent Order comes from a separate probe that the Texas State Securities Board had been involved in. The board found out that Citizens had sought the assistance of MFM in both the bidding on its own auctions and the concealment of this activity.

Per the Order, although an MFM broker reported the trading situation to a supervisor, the latter did not bring it to the financial firm’s compliance department or talk about it with legal counsel. As ARS interest rates went up, MFM placed bids for the debt at interest rates that were lower than going rates for similar ARS issues. The Order accuses MFM traders of understanding the consequences that would result from the way they were bidding.

Even after the ARS market failed in 2008, MFM traders continued to choose lower rates for Citizens until BNY’s compliance and legal departments stepped in to halt the process. The Texas State Securities Board determined that BNY Mellon Capital Markets’ actions involved “inequitable practices” related to securities sales. It also said that the financial firm violated regulations by not setting up, maintaining, and enforcing supervisory procedures that were reasonably designed.

Auction-Rate Securities
ARS are long-term debt issues with interest rates that are reset at auctions, which usually occur at set interval periods. The yield is a result of bidding that takes place at the auction, where investors are given an opportunity to get their funds without waiting for the debt to reach maturity. The ARS market let Citizen and other entities obtain long-term financing at interest rates that are usually connected with shorter-term investments.

Unfortunately, when the ARS market failed, investors found out that their money had become illiquid and inaccessible despite claims by financial firms that auction rate securities were safe, liquid investments.

BNY Mellon Settles with Texas Over Probe Into Rigged Bond Biddinghttp://www.ssb.state.tx.us/News/Press_Release/12-22-11_press.php, December 22, 2011

Texas State Securities Board

Texas Securities Fraud: SEC Moves to Freeze Assets of Stewardship Fund LP, Stockbroker Fraud Blog, November 5, 2011

More Blog Posts:
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

SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts, Stockbroker Fraud Blog, December 20, 2011

Continue reading "Texas Securities Fraud: BNY Mellon Capital Markets LLC Settles Allegations of Rigged Bond Bidding for $1.3M" »

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Posted In: Auction-Rate Securities , BNY Mellon Capital Markets LLC , Financial Firms , Texas Securities Fraud

January 19, 2012

TD Bank Ordered to Pay Texas-Based Coquina Investments $67M Over $1.2 Billion Ponzi Scheme

A jury has decided than TD Bank must pay Coquina Investments $67M for playing an assisting role in attorney Scott Rothstein’s $1.2 billion Ponzi scam. Coquina Investments is located in Corpus Christi, Texas. TD Bank is the US arm of Toronto-Dominion Bank.

The Texas securities lawsuit, filed by Coquina, contends that TD Bank officers had an “active role” in the Ponzi scam. They allegedly helped keep the fraud going by meeting with victims to make it appear as if legitimate business was actually taking place. For example, investors would meet with Frank Spinosa, who was then a TD Bank vice president.

Rothstein would tell investors that they were purchasing stakes in settlements involving sexual and employment discrimination cases that his law firm Rothstein Rosenfeldt Adler, PA had already gathered evidence for or confronted potential defendants. Apparently, the cases and the settlements were all bogus.

Per the Texas Ponzi fraud complaint, Rothstein would use TD Bank to pay investors their money from the bogus settlements and provide them with documents used to hide the truth, keep them involved in the scam, and get them to reinvest. Documents were also used to bring in new investors. Meantime, earlier investors were paid with the money brought in by new investors. Coquina’s legal team maintains that the Ponzi scam could not have existed without TD Bank’s help.

Shonda Smith, the foreman of the jury that issued the verdict, said that jury members were surprised at how much the bank allowed to go through it without doing anything to put a halt to the different transactions. TD Bank, however, maintains that it did nothing wrong. It is adamant that even though it served as Rothstein Rosenfeldt Adler’s bank it was Rothstein that actually bilked investors.

Of the $67 million verdict, $32 million is for compensatory damages and $35 million is for punitive damages. Meantime, there are groups of investors that have filed their securities fraud cases against TD Bank over its involvement in Rothstein’s Texas Ponzi scam.

Rothstein pleaded guilty to racketeering, money laundering, and fraud in 2010. He admitted to running the Ponzi scam between 2005 and 2009. He has also said that Level 3 Capital Fund, Centurion Structured Growth LLC, and Platinum Partners Value Arbitrage helped keep his financial scheme afloat during the last few months by agreeing not to disclose to potential investors that he hadn’t made payments to the three hedge funds (that were planning to give him and his team a positive credit rating.) Rothstein then used new investors’ funds to pay back the hedge funds.

The funds are disputing Rothstein ‘s claims and are suing TD Bank. Rothstein has been sentenced to 50 years behind bars for his crimes.

To schedule your free case evaluation to find out whether you have grounds for a Texas securities fraud lawsuit, contact our Ponzi fraud attorneys today. Shepherd Smith Edwards and Kantas, LTD LLP represents investors throughout the state.

Toronto-Dominion Loses $67 Million Jury Verdict Over Rothstein Fraud Role, Bloomberg, January 18, 2012

TD Bank Aided Rothstein Fraud, Investors’ Lawyer Tells Jury, BloombergBusinessweek, January 17, 2012

Rothstein pleads guilty, South Florida Business Journal, January 27, 2010


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: Ponzi Scams , Texas Securities Fraud

January 4, 2012

Texas Securities Fraud: SEC Charges Life Partners Holdings Inc. in Life Settlement Scam

The Securities and Exchange Commission has filed Texas securities fraud charges against Life Partners Holdings Inc. and three of the company’s senior executives over their alleged involvement in a life settlement scam. Life Partners, which is a Nasdaq-traded company, makes nearly all of its revenue from the life settlements it brokers.

According to the SEC, CEO and Chairman Brian Pardo, CFO David Martin, and general counsel and president Scott Peden misled shareholders when they failed to reveal a significant risk, which was that Life Partners was materially underestimating the estimates for life expectancy that it was using to determine how to price transactions. The estimates have a critical effect on company profit margins, revenues, and shareholder profits.

The Commission contends that Life Partners, Pardo, Peden, and Martin took part in improper accounting and disclosure violations, which allowed the company’s books to become overvalued while making it appear as if there was a steady stream of earnings coming from the life settlement transactions that were being brokered.

Peden and Pardo are also charged with insider trading. The SEC claims that the two men sold about $300,000 and $11.5M, respectively, of Life Partners stock at prices that were inflated even though they had material, non-public information disclosing that the company had relied on short life expectancy estimates to make revenue.

In a statement issue by the SEC's Division of Enforcement Director Robert Khuzami, the agency is claiming that Life Partners also deceived shareholders by retaining a medical doctor to designate baseless life expectancy estimates to underlying insurance policies. Dr. Donald T. Cassidy, who lacks actuarial training and had no previous experience in assigning life expectancy estimates, began working with Life Partners in 1999. (The Commission claims that Pardo and Peden neglected to perform substantial due diligence on the doctor’s qualifications to do this job. They also are accused of telling him to use a methodology created by a former underwriter, who is one of the company’s owners.)

Beginning fiscal year 2007 through fiscal year 2011’s third quarter, Life Partners allegedly understated impairment costs related to life settlement investments and prematurely recognized revenue. The company is also accused of improperly accelerating revenue recognition starting from the closing date until when it got a non-binding agreement with the policy owner to sell the life settlement. Because Life Partners used these Dr. Cassidy’s life expectancy estimates in its impairment calculations, millions of dollars in impairment costs were understated.

The SEC wants the repayment of bonuses and profits from stock sales.

Life Settlements
These usually involve the selling and buying of fractional interests of life insurance policies in the secondary market. For a lump sum amount, life insurance policy owners sell investors their policies. The amount that is offered is supposed to factor in the life expectancy of the insured and the policy’s terms and conditions. The longer the insured is expected to life, the more the investor has to pay in premiums. Policies owned by persons expected to not life as long cost more.

SEC fraud case could give new life to life settlements controversy, Bloomberg/Investment News, January 4, 2012

SEC Charges Life Settlements Firm and Three Executives with Disclosure and Accounting Fraud, SEC, January 3, 2012

SEC Complaint


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

Continue reading "Texas Securities Fraud: SEC Charges Life Partners Holdings Inc. in Life Settlement Scam" »

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Posted In: Insider Trading , Life Settlements , SEC Enforcement , Texas Securities Fraud

December 20, 2011

SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts

In its latest effort to help investors that lost money in the $7 billion Stanford Financial Group Ponzi scam recoup their losses, the Securities and Exchange Commission is suing the Securities Investor Protection Corporation. Both have been in disagreement over whether Stanford investors qualify for protection against SIPC rules, which are supposed to back brokerage firm client accounts against failure and cover investors for up to $500,000 in losses.

The SEC has said that this coverage should apply to Stanford investors because not only was broker-dealer Stanford Group Company a part of Stanford Financial, but also clients had to set up brokerage accounts to buy the certificate of deposits that their money was placed in. Upon purchase of their CD’s, they were given papers noting that the transaction was SIPC-covered. However, the SIPC, which is not in charge of regulating brokerage firms, contends that because clients’ money was placed in supposedly safe CDs sold by Stanford Financial, investors do not get to avail of this protection.

Now the Commission is seeking a court order that would compel the investor protection corporation to start liquidating Stanford Group Company. This filing is a key step in allowing customers to start getting their money back.

The SEC claims that it is solely authorized to decide whether SIPC should get involved. This is the first time the Commission has pulled rank to force the SIPC to take specific action. If the court grant’s the SEC’s order, SPIC plans to appeal.

Federal authorities seized Stanford Financial in 2009. R. Allen Stanford is accused of running the Ponzi scam and using the money belonging more than 21,000 clients to fund his expensive lifestyle. Investors were promised improbable interest rates that were supposedly spurred by a unique investment strategy.

This week, a hearing to determine whether R. Allen Stanford is fit to stand trial is scheduled to take place. The SEC has sued R. Allen Stanford for securities fraud and he is charged with 23 criminal counts of wrongdoing. Although he remains in federal custody, his criminal trial was delayed to allow him to go into detox for his addiction to anti-anxiety meds and anti-depressants.

One of his defense attorneys claims that the medications and a traumatic brain injury that he sustained when he was beaten in jail have caused him to develop amnesia. Meantime, prosecutors are expected to argue that Stanford is pretending that he severe memory loss.

Allen Stanford's Move to Trial or Treatment Argued in Court, SF Gate, December 20, 2011

SEC, SIPC ready to rumble over Ponzi payouts, Investment News, December 20, 2011

S.E.C. Files Suit to Recoup Losses in Stanford Case, New York TImes, December 12, 2011


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

Continue reading "SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts" »

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

Posted In: Ponzi Scams , Texas Securities Fraud

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

December 5, 2011

Texas Securities Fraud: Unregistered Adviser Confesses to Selling Almost $400K in Promissory Notes and Investments Despite Cease and Desist Order

William Erik Byrne, who is unregistered securities advisor, admits that he sold $389,000 in investment and promissory notes to investors even after he received a cease and desist order from the Texas State Securities Board in 2005. He also is accused of giving out investment advice to clients even though he was not authorized.

State regulators also filed a Texas securities complaint against Byrne for selling unregistered variable annuities from Hampton Insurance Co. Ltd. Not only were none of the VAs were filed with the Texas Department of Insurance, but also, Hampton Insurance was not under that department's supervision.

Byrn says that between 2006 and 2009 he sold investments to clients without telling them that Texas regulators had ordered him to stop or why. State officials also say that Byrne failed to tell investors that previous clients hadn’t been paid according to the terms of their contracts.

Working with a Registered Adviser
State and federal laws require that investment advisers and broker-dealers and their representatives be registered. Registration is usually with a state securities agency or the Securities and Exchange Commission. Unfortunately, there are those that don't follow this requirement and try to get away with this.

As an investor, you want to make sure that the representative and/or financial firm you want to work with is registered. Otherwise, if there is a problem later on, such as a broker-dealer or investment adviser going out of business, there may not be a way for you to recoup your losses even if a court or arbitrator rules in your favor.

You should also do your own research. You can find out whether an investment adviser is correctly registered by reading its Form ADV registration form. This form also should let you know whether the investment adviser has had any previous run-ins with regulators or past problems with other clients.

Unregistered and Registered Securities
Although it is typically illegal to sell unregistered securities, there are exemptions. You can get Form ADV from the investment adviser, the regulatory body the adviser is registered with, or by going to the Investment Adviser Public Disclosure Web site.

Read the Enforcement Actions Against Byrne

Rule 144: Selling Restricted and Control Securities, SEC

Texas State Securities Board

Investment Adviser Public Disclosure Web

More Blog Posts:
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

Texas Securities Fraud: SEC Moves to Freeze Assets of Stewardship Fund LP, Stockbroker Fraud Blog, November 5, 2011

Continue reading "Texas Securities Fraud: Unregistered Adviser Confesses to Selling Almost $400K in Promissory Notes and Investments Despite Cease and Desist Order " »

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

Posted In: Texas Securities Fraud

December 2, 2011

Texas Securities Fraud: Raymond James Financial Services Pays Elderly Senior Investor About $1.8M Following Loss of Appeal

Raymond James Financial Services has paid the $1.79M Dallas securities arbitration award plus interest it owes to Hurshel Tyler and the estate of his wife Mildred. They filed their claim with the Financial Industry Regulatory Authority. Both were in their 80’s.

They contend that they were advised by an ex-Raymond James representative to take their $3.5M in bond funds and place them in variable life insurance and variable annuities. Unfortunately, the life insurance policy was tied to $2M in improper loans, interest obligations, and ongoing tax that made it difficult to return the financial product to the brokerage firm. Tyler and Mildred’s estate claim that the stockbroker, Daul Davis, made a recommendation to them that was unsuitable.

Davis not only advised the Tylers to liquidate their municipal bond portfolio and make the new investments, but also, unknown to the couple, he moved them from one variable annuity to another, which cost them a significant surrender fee and commission. The Tylers’ Texas stockbroker lawyer says that by making the couple’s son the new annuity’s annuitant, the financial firm and Davis earned over twice the commission than if Hurshel Tyler had been the annuitant. (Usually, the annuitant and annuity owner are the same person. However, the insurance company that was involved only offered a 3.25% commission for annuitants over 80 years of age, while the commission for someone younger than that was 7.5%)

A FINRA arbitration panel sided with Tylers. The couple had sought to recoup their money, but instead panel members instead awarded them with compensatory damages.

Raymond James went on to appeal that decision. The broker-dealer argued that the couple should have given the annuities back. They also contended that they shouldn’t have to pay the couple’s $250K in legal fees because Florida, which is where the financial firm is based, doesn’t allow for this type of award.

Although Raymond James has gone ahead and paid the arbitration award, the broker-dealer maintains that the payment is unjust. The financial firms claims that not only did the couple make over $800,000 while the accounts were under its watch, but also, any losses they sustained occurred after they moved the accounts to a different broker-dealer. Raymond James says that despite disagreeing with the FINRA panel’s ruling, it has gone ahead and paid what it considers an “erroneous award” because in the long run doing so now would be less costly than continuing to contest it.

This Texas securities arbitration award is the largest one that Raymond James has ever had to pay.

Raymond James Pays Highest Arbitration Award in History, LifeHealthPro, November 30, 2011

After appeal fails, RJ forks over $1.8M to 87-year-old client, Investment News, November 30, 2011


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

Texas Securities Fraud: SEC Moves to Freeze Assets of Stewardship Fund LP, Stockbroker Fraud Blog, November 5, 2011

Houston Judge Overturns $9.2M Securities Fraud Ruling Against Morgan Keegan, Stockbroker Fraud Blog, October 11, 2011

Continue reading "Texas Securities Fraud: Raymond James Financial Services Pays Elderly Senior Investor About $1.8M Following Loss of Appeal" »

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

Posted In: Financial Firms , Raymond James , Texas Securities Fraud

November 11, 2011

Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme

The CFTC has been able to get a permanent injunction and default judgment against former Houston resident Jeffery Alan Lowrance and First Capital Savings and Loan. As restitution for their involvement in an alleged off-exchange foreign currency Ponzi scam, both will pay $1.2 million in restitution and a civil monetary penalty of $3.3 million. They have been permanently banned from commodity-related activities.

According to the order, Lowrance and First Capital Savings and Loan fraudulently solicited at least three dozen to get involved in forex trading. The two of them allegedly falsely claimed that they were successful traders and promised up to 4.15% monthly returns on their investments. They also are accused of publishing bogus client account statements that showed supposed monthly profits on the financial firm’s Web site. The court said that not only did both Lowrance and First Capital fail to put the money clients gave them into forex trading accounts, but also, they allegedly misappropriated the funds to set up a religious newspaper, support Lowrance’s personal expenses and the expenses of his family members, and pay supposed profits to existing investors. The order mandates that any entity or person that provided Lowrance and his company with domain registration or web hosting services now pull offline any of their Web sites that are soliciting clients to trade forex or commodity futures.

It was the U.S. Attorney’s Office for the Northern District of Illinois that indicted Lowrance for running a $25 million financial scam. In July, the SEC charged him with running a multimillion-dollar Ponzi scheme that defrauded hundreds of investors. Lowrance allegedly raised about $21 million. The investors he targeted lived in over two dozen US states. He enticed investors by claiming to share their Christian values and government views.

The SEC complaint contends that Lowrance and his financial firm told investors they were guaranteed a “predictable” income each month, along with returns as high as 7.15%. Certain clients even received bogus credit letters. Even though by 2008 Lowrance and his company had lost all of the investors funds, between June 2008 and February 2009 he still solicited at least another $1 million from at least three dozen investors.

The SEC is alleging violations of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, and the Securities Act of 1933. It is seeking penalties, disgorgement, and other relief.

Court Orders Jeffery A. Lowrance and His Company to Pay More than $4.5 Million for Operating Foreign Currency Ponzi Scheme, CFTC

SEC CHARGES OPERATOR OF $21 MILLION FOREX PONZI SCHEME, SEC, July 15, 2011

Read the indictment (PDF)


More Blog Posts:
Texas Securities Fraud: SEC Moves to Freeze Assets of Stewardship Fund LP, Stockbroker Fraud Blog, November 5, 2011

Money Laundering Charges Filed Against of Houston Criminal Defense Lawyer Accused of Defrauding Defendants of Over $1M, Stockbroker Fraud Blog, October 28, 2011

Houston Judge Overturns $9.2M Securities Fraud Ruling Against Morgan Keegan, Stockbroker Fraud Blog, October 11, 2011

Continue reading "Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme" »

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

Posted In: CFTC , Ponzi Scams , Texas Securities Fraud

November 5, 2011

Texas Securities Fraud: SEC Moves to Freeze Assets of Stewardship Fund LP

The SEC has gotten emergency order to freeze the assets of James G. “Jay” Temme and Stewardship Fund LP, which he owns. Both are accused of Texas securities fraud, including making false statements to investors that their money was being used to purchase and restructure pools of home mortgages that weren’t performing.

Since 2008, Temme, a Texas resident, and his company allegedly obtained at least $35M from investor groups. At least 31 entities and individual investors were involved in about 16 partnerships. Investors were those who had obtained interests in limited partnerships purportedly set up to invest in non-performing residential mortgages and real properties. Temme allegedly gained their trust by cultivating relationships with others that would vouch for him.

The SEC says that Temme would tell investors that the money was going toward buying “tapes” of nonperforming mortgages. The nonperforming mortgages were then supposed to be turned into performing loans. The buys were supposedly obtained at a discount and returns were to be either determined by principal plus interest payments from homeowners or from the reselling of the underlying properties or mortgages.

Unfortunately, contends the Commission, some of the mortgages that Temme claimed to own were not his. He allegedly generated false documents, issued financial transactions that were not authorized, used the money of new investors to pay off those that had invested earlier, and falsely promised certain investor groups that loans were bought on their behalf. He and Stewardship have also been accused of telling investors that the money that was used to compensate other investors instead going into the purchase of certain properties or mortgages.

Previous attempts to freeze Temme’s assets in the past were reportedly disregarded by him, and he would set up other bank accounts and seek funds from other investors even as others filed securities fraud cases against him. Allegations against Temme and Stewardship include failure to pay promised returns, not properly advising investors about their investments, misappropriating of investor funds, and misrepresenting how the investment proceeds were to used.

The SEC is charging Securities Exchange Act of 1934 and Securities Act of 1933 antifraud provisions. It is seeking:

• Preliminary injunction
• Final judgment that includes the permanent enjoining from future violations of the federal securities laws
• Financial penalties
• Disgorgement of ill-gotten gains
• Prejudgment interest

Read the SEC Complaint

SEC Wins Asset Freeze in Alleged Mortgage Restructuring Scheme, Bloomberg, October 18, 2011


More Blog Posts:
Money Laundering Charges Filed Against of Houston Criminal Defense Lawyer Accused of Defrauding Defendants of Over $1M, Stockbroker Fraud Blog, October 28, 2011

Houston Judge Overturns $9.2M Securities Fraud Ruling Against Morgan Keegan, Stockbroker Fraud Blog, October 11, 2011

Dallas Mavericks Owner Mark Cuban's Allegations of Misconduct Against the SEC Enforcement Staff are Without Merit, Says Inspector General’s Report, Stockbroker Fraud Blog, October 18, 2011

Continue reading "Texas Securities Fraud: SEC Moves to Freeze Assets of Stewardship Fund LP" »

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

Posted In: Texas Securities Fraud

October 28, 2011

Money Laundering Charges Filed Against of Houston Criminal Defense Lawyer Accused of Defrauding Defendants of Over $1M

Abraham Moses Fisch, a Texas criminal defense attorney, has been arrested and charged with money laundering, conspiracy to commit money laundering, obstruction of justice, and conspiracy. According to prosecutors, Fisch and Lloyd Glen Williams, who is Houston used car financier, allegedly ran a scam that fooled criminal defendants into thinking they could get the charges against them dropped if they were willing to pay money. Since 2008, the two men have allegedly bilked $1.48 million from a number of defendants through their Houston financial fraud.

For example, per the Houston Chronicle, in 2006, Fisch told accused convinced that cocaine trafficker Edilberto "Beto" Portillo that he could get him released from prison for $1 million. At the time, Portillo was charged with money laundering and drug trafficking. He agreed to pay this amount to Fisch’s friend, who turned out to be Williams. Although Williams wasn’t a lawyer, he was presented was someone who had high level contacts and could resolve criminal cases, get charges dismissed, or have prison sentences reduced.

Another defendant that the two men bilked was Umawa Oke Imo. The Houston physical therapy agency owner just went to prison for a $45 million Medicare/Medicaid fraud scheme.

Prosecutors say that the two co-conspirators would mislead their clients about the process of working with the government. The two men also allegedly lied to some, telling them that government officials had accepted the funds as bribes. Not only did the scheme cost those charged with crimes money, but it also prevented them from reaching legitimate plea agreements and caused them to wrongly think that the cases against them would be dropped.

Per the indictment against Fisch and Williams, the two men money laundered the money they made from the fraud. Fisch is also charged with failing to submit his tax returns in a timely manner every year that he received money for the financial scam. If convicted, he faces 10 years/each of the obstruction of justice counts, 5 years for conspiracy, 10 years for each money laundering charge, 1 year for each failure to file tax return count ((between 2006 and 2010), and 10 years for conspiracy to commit money laundering. Meantime, Williams just pleaded guilty to filing a false tax return and obstruction of justice. He faces up to three years behind bars for the bogus filing, five years max for conspiracy, and a $250,000 fine.

Also arrested was Fisch’s wife, Monica Bertman, who allegedly assisted with her husband’s financial scam. If convicted, she faces up to 10 years for obstruction of justice, up to five years for conspiracy, and also a $250,000 fine.

Feds say Houston lawyer bilked more than $1 million, Chron.com, October 28, 2011

Local Defense Attorney and Others Arrested in Connection with Scheme to Obstruct Justice, FBI, October 28, 2011


Dallas Mavericks Owner Mark Cuban's Allegations of Misconduct Against the SEC Enforcement Staff are Without Merit, Says Inspector General’s Report, Stockbroker Fraud Blog, October 18, 2011

Houston Judge Overturns $9.2M Securities Fraud Ruling Against Morgan Keegan, Stockbroker Fraud Blog, October 11, 2011

Merrill Lynch Faces $1M FINRA Fine Over Texas Ponzi Scam by Former Registered Representative, Stockbroker Fraud Blog, October 10, 2011

Continue reading "Money Laundering Charges Filed Against of Houston Criminal Defense Lawyer Accused of Defrauding Defendants of Over $1M" »

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

Posted In: Texas Securities Fraud

October 18, 2011

Dallas Mavericks Owner Mark Cuban's Allegations of Misconduct Against the SEC Enforcement Staff are Without Merit, Says Inspector General’s Report

According to the US Securities and Exchange Commission’s Inspector General, billionaire Mark Cuban’s allegations of misconduct against the federal agency’s enforcement staff are unfounded. The Dallas Mavericks basketball team owner’s accusations stem from the insider trading case that the SEC had filed against him.

In its 2008 Texas securities lawsuit against Cuban, the SEC accused him of selling his stake in Mamma.com after being told in confidence that the search engine company was planning a private investment in public equity transaction. The PIPE transaction was likely going to cause the company’s stock to drop in value, and SEC says that although Cuban had agreed to keep the information confidential he went ahead and sold his shares. This caused him to avoid losing more than $750,000.

The Commission considered this a breach of his confidentiality agreement and an act of insider trading. The SEC based its insider trading theory against the billionaire on its rule defining duties of confidence and trust to include a person agreeing to keep information confidential. In 2009, a federal judge dismissed the case against Cuban on the grounds that he hadn’t been an “insider” in this instance.

Last year, however, the U.S. Court of Appeals for the Fifth Circuit in Texas revived the securities case against him. The court said it was “plausible” that Cuban knew he wasn’t supposed to sell his shares in order to avoid losing money. However, it refrained from deciding whether the billionaire entrepreneur was wrong to sell his stock. A lower court in Dallas has been ordered to review the case for additional discovery.

Cuban has responded with complaints to SEC Inspector General H. David Kotz. He contends that the enforcement agency’s lawyers treated him unfairly and had been “biased and improper.” He also claims that investigators abused the “Wells notice” process and sent one out before finishing his investigation, as well as intimidated one of his witnesses. Cuban also is accusing the SEC of closing its probe into Mamma.com to get the company’s executives to help in the agency’s investigation into the insider trading allegations against him.

Kotz’s office, in its 101-page report following its investigation into Cuban’s allegations against the SEC, said that there is not enough evidence to support the billionaire’s accusations. The OIG included also included its findings into the conduct of ex-SEC trial lawyer Jeffrey Norris, who was suspended after sending emails that may have been politically charged to Cuban (Norris was later fired for similar misconduct). Kotz’s office says that Norris hadn’t been involved in the SEC’s investigation into the Cuban case.

SEC lawsuit against billionaire Cuban revived, Salt Lake Tribune, September 21, 2010

US sports magnate charges against SEC unfounded, Reuters, September 17, 2011

Mark Cuban’s Grudge Match With the S.E.C., NY Times, April 30, 2011

SEC Watchdog Finds Little to Support Cuban's Allegations of Improper Conduct, BNA Securities Law Daily, October 3, 2011

Read the OIG Report (PDF)

Mamma.com

Related Web Resources:
After District Court Dismisses Texas Securities Fraud Against Billionaire Mark Cuban, SEC Appeal Can Now Move Forward, Stockbroker Fraud Blog, August 17, 2009

Ex-Goldman Sachs Board Member Accused of Insider Trading with Galleon Group Co-Founder Seeks to Have SEC Administrative Case Against Him Dropped, Institutional Investor Securities Blog, April 19, 2011

Houston Judge Overturns $9.2M Securities Fraud Ruling Against Morgan Keegan, Stockbroker Fraud Blog, October 11, 2011


Continue reading "Dallas Mavericks Owner Mark Cuban's Allegations of Misconduct Against the SEC Enforcement Staff are Without Merit, Says Inspector General’s Report" »

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Posted In: Insider Trading , Texas Securities Fraud

October 10, 2011

Merrill Lynch Faces $1M FINRA Fine Over Texas Ponzi Scam by Former Registered Representative

Two years after San Antonio broker was sentenced to prison for Texas securities fraud, FINRA has fined Merrill Lynch $1M for not properly supervising its former employer. These failures allegedly allowed Bruce Hammonds to run a Ponzi scam that defrauded investors of $1.4M.

Hammonds persuaded 11 people to invest in the Texas Ponzi scam, which he operated under the name B&J Partnership. It was supervisors at Merrill Lynch that gave the green light for him to open an account for B & J. The supervisors also are accused of not monitoring the funds that moved between customers and Hammonds.

Rather than putting investors’ money in a Merrill Lynch fund, he put $1.4 million of their funds in his working capital account. He even gave clients charts showing how the B & J fund was performing even though the fund wasn’t real. Hammonds used the money to pay for his personal spending, including a supposed house-flipping business.

He later pleaded guilty to federal securities charges. In addition to five years behind bars and three year supervised release. Hammond has been barred from the securities industry. All investors have been paid back in full for their losses.

In deciding to fine Merrill Lynch, FINRA found that the financial firm did not have a supervisory system that did a satisfactory enough job of monitoring accounts of employees for signs of possible misconduct. The system was only able to immediately capture accounts opened by an employee if he/she used his/her social security number as the main tax identification number. The SRO also said that between 1/06 and 6/10 Merrill Lynch did not monitor another 40,000 employee/employee-interested accounts.

By agreeing to settle, Merrill is not denying or admitting to the charges.

Failure to Supervise
It is a brokerage firm’s responsibility to establish written procedures for how to properly supervise its employees' activities. These procedures must then be implemented to prevent broker fraud. When misconduct does arise and failure to supervise played a role in allowing the incident to happen, the financial firm can be held liable for securities fraud.

Brokerage companies have to supervise every broker that they license to work for them. Even if an accused broker is later found not liable, there is still a possibility that the brokerage firm or supervisor can be held liable for failure to supervise and be ordered to pay damages. For example, a broker may not have received the proper training or was given the wrong information by the financial firm, and this resulted in Texas securities fraud that caused an investor to suffer losses.

FINRA Fines Merrill Lynch $1 Million for Supervisory Failures That Allowed a Registered Representative to Operate a Ponzi Scheme, FINRA, October 4, 2011

Shepherd Smith Edwards & Kantas LTD LLP is Investigating Merrill Lynch in Light of Recent FINRA Fines Against the Firm for Failure to Supervise, MarketWatch, October 5, 2011

More Blog Posts:
Former Merrill Lynch Employee, Guilty of $1.4 Million Texas Securities Fraud Scheme, Receives Prison Term, Stock Broker Fraud Blog, October 5, 2009

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

Actions of Former Ferris, Baker Watts, Inc. General Counsel Accused of Supervising Rogue Broker to be Reviewed by SEC, Institutional Investors Securities Blog, December 9, 2010

Continue reading "Merrill Lynch Faces $1M FINRA Fine Over Texas Ponzi Scam by Former Registered Representative" »

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Posted In: FINRA , Financial Firms , Inadequate Supervision , Merrill Lynch , Ponzi Scams , Texas Securities Fraud

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" »

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

September 22, 2011

Financial Scammers Are Now Using YouTube, Facebook, LinkedIn, Twitter, and Other Websites to Target Investors, Warns Texas Securities Commissioner

Texas Securities Commissioner Benette L. Zivley wants investors to be aware that fraudsters are now using the Internet as a vehicle for their investment schemes. Online social networking Websites, such as Facebook, Twitter, YouTube, and Linked in, are among the sites being used to find potential victims, gain access to their personal information, and build relationships of “trust.” Scammers have even been known to purposely “mimicking” a target’s interests to try and get someone to invest. Considering that about 750 million users (who on average are linked to about 80 groups, community pages, and events) are logging 700 billion minutes a month on Facebook alone, this shouldn’t come as a surprise.

Affinity fraud scams are among the easier investment schemes to perpetuate online. This type of financial scam usually targets professional organizations, community service groups, religious communities, and other social networks. Whereas in the real world, a fraudster would have to work to establish actual connections with its target communities, now he/she can easily become part of these groups by pretending to share similar interests, religions, careers, or hobbies.

Online media channels, such as YouTube have now also become video forums through which to market financial scams. Remember, anyone can record an impressive sales pitch or edit professional looking footage to make themselves appear legitimate.

The State Securities Board warns that not only are financial scammers using the Internet to target investors, but also, they are going online to recruit their sales teams so that they can swiftly sell millions of dollars worth of inappropriate/bogus investments to their victims.

The Federal Bureau of Investigation offers a number of tips for how to avoid investment fraud schemes on the Internet:
• Don’t let a sophisticated Web site impress you. These days, sites with bells and whistles are not the difficult to get up and running.
• Do your due diligence before investing, including checking to see that the company involved is legitimate.
• Be careful about responding to investment opportunities made through unsolicited e-sources.
• Exercise caution when investing with companies and individuals located outside the US.
• Make sure you learn about the different terms and conditions involved with your investment.

You may want to limit how much personal information you make available/accessible on your social networking sites to people that you don’t know well.

A few warning signs that someone may be targeting you with an investment scheme:
• The promise of no risk and high returns
• Offshore operations
• Payments having to be made through an e-currency site
• Testimonials from “satisfied” clients

You can always contact the State Securities Board and request a free background check on a financial firm, investment professional, or the investment being offered. IT is also a good idea to always ask for written information (such as a prospectus) about an investment opportunity, as well inquire about the risks involved.

An example of a recent investment fraud scam that took place through the Internet involves a woman who solicited investments through the classifieds on Craig’s list. She also used these investors’ credit histories to apply for credit cards and loans. Another financial scammer, a man, used the online dating site Match.com to meet a woman and convince her that if she gave him $10,000, within a year he would be able to grow that into $1 million.

Our Texas securities fraud law firm is dedicated to helping clients recover their losses brought about by investment fraud scams.

SECURITIES COMMISSIONER WARNS OF DANGERS IN SOCIAL MEDIA, ONLINE MARKETING, Texas State Securities Board, September 22, 2011

Internet danger: Scammers use social network sites to find victims, Chester on Tribune, September 21, 2011

Federal Bureau of Investigation


More Blog Posts:
Man Allegedly Involved in Texas Securities Fraud Scam that Bilked Over 7,000 Deaf Investors of $3.45M is Charged by the SEC, Stockbroker Fraud Blog, September 12, 2011
Ex-Wextrust Capital COO Pleads Guilty to Role in $255M Affinity Fraud Scam, Stockbroker Fraud Blog, February 27, 2011

Texas Minister Pleads Guilty to Involvement in $7.2M “White Hat Guys” Securities Fraud that Bilked Thousands of Petro America Corporation Investors in the US and Canada, Stockbroker Fraud Blog, February 27, 2011


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

Posted In: Affinity Fraud , Texas Securities Fraud

September 12, 2011

Man Allegedly Involved in Texas Securities Fraud Scam that Bilked Over 7,000 Deaf Investors of $3.45M is Charged by the SEC

The Securities and Exchange Commission has charged Jody Dunn with fraud. Dunn is accused of soliciting $3.45 million from over 7,000 deaf investors in a Texas securities scam. He is also deaf. According to the SEC, he engaged in material misrepresentations, the fraudulent and unregistered offering and selling of securities, and the misappropriation of investor funds.

Per the commission, Dunn told investors he would place their money with Imperia Invest IBC, which guaranteed returns of 1.2% a day. He solicited investments for Imperia between August 2007 and July 2010.

While he did send the send the remaining funds to the Imperia-owned offshore accounts, he never confirmed that the financial firm was really investing the money—even though he allegedly knew that Imperia lost investor funds and wasn’t properly crediting clients’ accounts. Dunn also never paid investors the interest they were owed and he failed to tell them that his fee was more than 10% of the money he collected from them.

Last year, the SEC charged Imperio with involvement in a $7 million fraud scam and secured a court order freezing the internet-based firms assets. The SEC claims that Imperia defrauded approximately 14,000 investors, who were told that they could only obtain their money by paying a few hundred dollars for a Visa debit card. Apparently, however, the financial firm did not have ties Visa and it never paid any money back to its victims.

In the commission’s complaint against Dunn, it is accusing him of making a number of misrepresentations to investors including:

• Claiming he would help them get into Traded Endowment Policies (viatical settlements) by having them invest through Imperia even though none of their money was used to buy TEPs.

• Claiming he knew the people behind Imperia even though he had never met anyone affiliated with the financial firm.

• Not being able to give an accurate analysis of the way he calculated profits or fees.
.
TEPs or Viatical Settlements
With TEPs, the insurance policy owner sells the policy before it matures. These are sold at a discount but in an amount greater than the current cash surrender value. All beneficial obligations then go to the new owner. Investors of the Imperia-offered TEP investments had to put in at least $50 for an $80,000 loan from a foreign bank. The funds were then supposed to go toward buying a TEP. The SEC is accusing Dunn of violating sections of the Securities Act and sections of the Exchange Act and Rule 10b-5 thereunder.

SEC Charges Solicitor in Investment Scheme Targeting Deaf Community, SEC, September 9, 2011

Texan defrauded deaf investors out of $3.45M, Investment News, September 12, 2011

Read the SEC Complaint (PDF)

SEC Charges Internet Company With Defrauding the Deaf, New York Observer, October 7, 2010


More Blog Posts:
Morgan Keegan & Company Ordered by FINRA to Pay $555,400 in Texas Securities Case Involving Morgan Keegan Proprietary Funds, Stockbroker Fraud Blog, September 6, 2011

Texas Minister Pleads Guilty to Involvement in $7.2M “White Hat Guys” Securities Fraud that Bilked Thousands of Petro America Corporation Investors in the US and Canada, Stockbroker Fraud Blog, June 21, 2011

Alleged $800 Affinity Fraud Scheme Prompts SEC to Sue GTF Enterprises and Its Money Manager, Stockbroker Fraud Blog, June 4, 2010

Continue reading "Man Allegedly Involved in Texas Securities Fraud Scam that Bilked Over 7,000 Deaf Investors of $3.45M is Charged by the SEC" »

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Posted In: Affinity Fraud , Texas Securities Fraud , Viaticals

September 6, 2011

Morgan Keegan & Company Ordered by FINRA to Pay $555,400 in Texas Securities Case Involving Morgan Keegan Proprietary Funds

A FINRA panel in Houston has ordered Morgan Keegan & Company to pay the Claimants of a Texas securities fraud $555,400 in compensatory damages. The Claimants had accused the financial firm of misrepresentation, negligence, vicarious liability, failure to supervise and violating the Texas Securities Act, the Texas Deceptive Trade Practices Act, and NASD Rules.

The securities claim is related to the sale and recommendation of a number of Regions Morgan Keegan proprietary mutual funds that were allegedly touted as diversified, conservative, and low risk despite a supposed higher rate of return:

• Regions Morgan Keegan High Income Fund
• Regions Morgan Keegan Advantage Income Fund
• Regions Morgan Keegan Multi-Sector High Income Fund
• Regions Morgan Keegan Strategic Income Fund

The funds were actually high-risk mortgage-backed securities that were not appropriate for the Claimants.

After a 5-day hearing, the panel found Morgan Keegan liable in the Texas securities case and ordered the financial firm to pay damages to the WCR Family Limited Partnership, as well as a 4% per annum interest on the $550,400 for the period of July 29, 2011 until payment is made in full. The panel did dismiss all claims brought by the Wilhelmina R. Smith Estate.

Morgan Keegan Securities Fraud Cases
For the past couple of years, our Texas stockbroker fraud law firm has been diligently pursuing claims against Morgan Keegan related to their Regions Morgan Funds. The cases came following claims by investors that the financial firm defrauded them by misrepresenting the risk involved in the investments. Investors sustained many of the losses when the subprime mortgage market collapsed.

Over 400 securities claims have been filed over Morgan Keegan’s RMK funds. Already tens of millions of dollars have been awarded to claimants.

Other RMK funds named in the claims include the:

• RMK Select Intermediate Bond Fund
• RMK Select High Income Fund

Earlier this summer, Regions Financial Corp. agreed to pay $210 million to settle more securities allegations that it fraudulently marketed mutual funds with subprime mortgages while artificially raising the prices of the funds. FINRA, SEC, and regulators from Kentucky, Alabama, South Carolina, and Mississippi agreed to the settlement.

Examples of FINRA arbitration settlements that Morgan Keegan has been ordered to pay over the RMK Funds:

• $881,000 to several investors. The claimants said their actions were over SEC and FINRA violations, breach of fiduciary duty, negligence, failure to supervise, vicarious liability, negligence, and breach of contract.

• $2.5 million to investor Andrew Stein and his companies. Panel members held Morgan Keegan liable for negligence, failure to supervise, and the sale of unsuitable investments.

Related Web Resources:
Regions Settles S.E.C. Case Over Former Morgan Keegan Funds, NY Times, June 22, 2011

Regions settles fraud case, may sell Morgan Keegan, Reuters, June 22, 2011

Texas Securities Act

More Blog Posts:
Morgan Keegan Settles Subprime Mortgage-Backed Securities Charges for $200M, Stockbroker Fraud Blog, June 29, 2011

Morgan Keegan Ordered by FINRA to Pay RMK Fund Investors $881,000, Stockbroker Fraud Blog, April 24, 2011

Morgan Keegan Ordered by FINRA Panel to Pay Investor $2.5 Million for Bond Fund Losses, Stockbroker Fraud Blog, February 23, 2010





Continue reading "Morgan Keegan & Company Ordered by FINRA to Pay $555,400 in Texas Securities Case Involving Morgan Keegan Proprietary Funds" »

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Posted In: Financial Advisers , Morgan Keegan , Texas Securities Fraud

August 28, 2011

Texas Securities Fraud: FINRA Fines Bluechip Securities for Ex-Employee’s Alleged Churning of Public Customer Accounts

The Financial Industry Regulatory Authority has fined Bluechip Securities Incorporated for Texas securities fraud over the alleged churning of public customer accounts by principal Muhammad Akram Khan. The fine against the Houston-based financial firm is $15,000. Khan, who was fined $385,000, has been suspended from associating with any FINRA firm for 18 months. Bluechip and Khan agreed to the securities settlement without admitting to or denying the findings.

According to FINRA, Khan executed or caused to be effected options transactions at unfair prices and that the commissions he charged were excessive. The SRO claims that Khan made about $380,296 in commission charges from theses transactions that he effected, while the accounts sustained losses of about $399,000.

FINRA says that Khan recommended to clients the opening of certain options transactions even though there was no reason to think that these recommendations were appropriate for the customers. FINRA also says that Khan had no reasonable grounds to believe that these clients were capable of assessing for themselves the risks involved in these transactions or that they could financially handle the chances that he was having them take. The SRO claims says that Khan executed these options transactions in clients’ accounts even though none of them had given him or Bluechip Securities the written authorization to take such actions.

Churning
Churning involves excessive trading in an account with the goal of making commissions. To be able to churn, a broker has to be able to take charge of investment decisions in your account.

That said, churning is prohibited by the major self-regulatory organizations and it is an illegal activity. It also may be a violation of SEC Rule 15c1-7, FINRA Rules 2310-2(b)(2) and 2310, NYSE Rules 476(a)(6) and NYSE Rule 408(c), and other securities laws.

Our Houston securities fraud lawyers represent clients that have suffered financial losses because a broker engaged in churning. We know how to prove that a client’s account was subject to excessive trading whether for purposes of commission or otherwise. Possible ways of assessing whether you’ve been the victim of churning is calculating the yearly rate of return that would be required so that the commissions charged to you are covered, assessing how many times your account’s equity is turned over to buy securities, and determining how much sale and purchase trading activity occurs in your account.

It is not uncommon for a broker engaged in churning to claim the purpose of the buying and selling of securities in your account was so that you could make a quick profit.

Bluechip Securities, Inc. (CRD® #45726, Houston, Texas) and Muhammad Akram
Khan, (CRD #1400089, Registered Principal, Houston, Texas), FINRA (PDF)


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

CapWest Loses $940,000 Dallas Securities Case in FINRA Arbitration, Stockbroker Fraud Blog, August 15, 2011

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M, Stockbroker Fraud Blog, August 9, 2011

Continue reading "Texas Securities Fraud: FINRA Fines Bluechip Securities for Ex-Employee’s Alleged Churning of Public Customer Accounts" »

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Posted In: Texas Securities Fraud

August 22, 2011

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

Kurt Branham Barton, the former CEO, president, and founder of Triton Financial, has been convicted of running a $50 million Ponzi scam that bilked over 300 investors across the country, including former Heisman Trophy winners Ty Detmer, Chris Weinke, and Earl Campbell, NFL Kicker David Akers, and ex-NFL quarterback Jeff Blake. Barton could be sentenced to life in prison for the Texas securities fraud.

A jury convicted Barton on almost 39 criminal counts, including numerous counts of wire fraud, conspiracy to commit wire fraud, making false statements to financial institutions in order to get loans, money laundering, and one count of securities fraud. The Ponzi scam ran for four years through 2009.

According to prosecutors, Barton lied to investors, including relatives, business leaders, pro football players, and Church of Jesus Christ of Latter Day Saints members, when he said that his financial firm was using their money to invest in business, real estate, and short-term business loans. In fact, Barton was taking their funds to cover personal expenses, including luxury football tickets, expensive clothes, and sports cars. He deceived potential investors, commercial lenders, and financial institutions by presenting them with bogus monthly account statements.

Examples of those hit hard by Barton’s Texas securities scam is Detmer, who, during his testimony, admitted that he lost approximately $2 million—that’s the majority of his life savings—in the Ponzi scheme. The former NFL quarterback, who is now a coach in Austin, says he has been forced to liquidate accounts that were supposed to go to his daughters’ college education. He also had to put up his house for sale. Detmer thought Barton was his best friend. The two met at church. Detmer says that he even brought new investors to Barton. Another pro football player, David Akers, now of the San Francisco 49ers, lost over $3 million because of Barton's scam. There are also many investors that aren’t famous who sustained significant losses because of the Texas Ponzi scam, including Diane Gordon, who lost her husband’s entire life insurance payment of approximately $850,000.

In 2009, the Securities and Exchange Commission filed a securities fraud lawsuit against Barton and two of his businesses. The SEC accused Barton of using famous celebrity athletes, stockbrokers, and others to promote Triton securities to new investors. Without denying or admitting to the SEC's allegations, all defendants agreed to permanent injunctions from securities fraud violations in the future, appointment of a receiver, prohibition of the destruction of documents, and orders freezing assets.

Ty Detmer testifies at Ponzi fraud trial, UPI, August 9, 2011

Austin investment broker convicted of using NFL stars, churches to defraud clients, The Washington Post, August 17, 2011

The SEC's Complaint (PDF)

More Blog Posts:
Ex-Triton Financial CEO Accused of Using NFL Contacts to Commit $50M Texas Securities Fraud, Stockbroker Fraud Blog, February 17, 2011

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M, Stockbroker Fraud Blog, August 9, 2011

Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M, Stockbroker Fraud Blog, August 3, 2011

Continue reading "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" »

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

Posted In: Financial Firms , Ponzi Scams , Texas Securities Fraud , Triton Financial

August 15, 2011

CapWest Loses $940,000 Dallas Securities Case in FINRA Arbitration

Financial Industry Regulatory Authority (FINRA) has ordered CapWest Securities Incorporated to pay nearly $940,000 in a Texas securities fraud case filed by a group of investors over the recommendation and sale of numerous illiquid, risky, convertible debentures. The claimants had accused CapWest of breach of fiduciary duty, breach of contract, state and federal securities law violations, fraud, gross negligence, negligence, and other actions.

Last month, the FINRA arbitration panel ordered CapWest to pay claimant Robert E. Lee, both as an individual and as a Robert Earl Lee Revocable Trust trustee, $137,000 in compensatory damages. CapWest was also ordered to pay $478,500 in compensatory damages to Beatrice M. McCrae and Buford E. McCrae, both as individuals and on behalf of B.E. McCrae Family Limited Partnership. Robert E. Lee was also to receive $37,330 in interest for the period of October 25, 2008 through July 15, 2011 at a 5% per annum rate. For Buford E. McCrae and Beatrice E. McCrae, the interest of 5% per annum was $95,180 for the period of October 16, 2006 through July 15, 2011. Under the Texas Deceptive Trade Practices Act, Robert E. Lee is to receive $17,450 in punitive damages. Buford E. McCrae and Beatrice M. McCrae are to get paid $57,370. Payment of the claimants’ costs, legal fees, and other fees were also granted.

Convertible Debentures
This kind of loan can lets its holder convert it into stock. In certain cases, the bond’s issuer may also do this. When employing the convertibility option, the issuer is allowed to pay a reduced interest rate on the loan. Companies use these financial instruments to get capital that they need to maintain or grow their operation.

This Dallas securities fraud case isn’t the only arbitration case that CapWest has recently lost. Also last month, a FINRA arbitration panel awarded CapWest clients and former broker Attila Toth $438,000 in damages and another $130,000 in legal fees and interest.

CapWest sold two private placements--$22 million in Provident Royalties LLC-issued private placements and $30.6 million in Medical Capital Holdings Inc. notes that the SEC claims were fraudulent. Once a leading seller of private placements, CapWest is in financial trouble. Earlier this year, the broker-dealer reported that a drop in net capital, an increase of securities fraud lawsuits against it, and three years of losses in a row have raised concerns over whether the financial firm can stay in operation.

Texas Securities Fraud
If you are an investor who has sustained financial losses from working with a broker-dealer or an investment adviser, our Texas securities fraud law firm can advise you of your options. Securities claims and lawsuits can be complex cases and you do not want to go into arbitration or court without an experienced Houston securities fraud lawyer representing you.

To obtain your free case evaluation, contact our Dallas stockbroker fraud law firm today. Our Texas private placement attorneys have helped thousands of investors recoup their losses.

Will arbitration loss cap CapWest?, Investment News, August 15, 2011


More Blog Posts:
Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M, Stockbroker Fraud Blog, August 9, 2010

Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M, Stockbroker Fraud Blog, August 3, 2011

Houston Securities Fraud: Ex-Citigroup Broker Accused of Stealing Millions from Wealthy Mexican Investors is Barred from FINRA, Stockbroker Fraud Blog, July 29, 2011

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

Posted In: Arbitration , CapWest Securities , FINRA , Financial Firms , Texas Securities Fraud

August 9, 2011

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M

A 76-year-old Amarillo insurance agent has pleaded guilty to 15 counts of Texas securities fraud over the sale of bogus investments and unregistered securities that resulted in over $5 million in losses for primarily elderly investors. The Texas State Securities Board won’t sentence John F. Langford until next month, but he faces up to 100 years in prison for running this Ponzi scam.

Meantime, Langford’s business partner, Jimmy Don King, has been indicted on 10 criminal counts, including selling securities despite not having a license, selling unregistered securities, and acting as an agent/dealer but without the appropriate registration. King was the voice and face of Langford & Associates’ commercials on TV and commercials guaranteeing “not to make you poor.” (Langford also did business as Langford Funding and Langford Investments.)

The two men came under suspicion after an elderly woman sued them for securities fraud. She said that they persuaded her to invest $941,756 in private annuities. Later, a court found that the woman who suffered from dementia had been incompetent and therefore wasn't fit to make a decision about whether investing in bogus annuities that weren’t going to be due until her 90’s—a decade from when she signed on—was a good decision to make.

Many investors gave Langford their life savings in exchange for the promise of windfalls over several years. While private annuities were supposed to pay out up to 8%, promissory notes were supposed to pay out 9%. Langford paid King 5% of the investments. Investors’ money were used to pay for principal payments to prior investors, interest, as well as Langford’s personal expenses.

According to state documents that were confiscated from his office, the insurance firm had a negative cash flow. Between 2005 and 2007 Langford's property business never made over $10,000. Documents showed that he owed investors over $1 million.

Because Langford filed for Chapter 7 bankruptcy protection two years ago, many investors have had to file their claims in bankruptcy court. Claims there have totaled approximately $7 million.

Investment Fraud Against Seniors
Unfortunately there are professionals out there determined to bilk investors of their life savings. Elderly seniors, who may not be as alert or as informed as younger investors, are a prime target of financial scammers wishing to make a quick buck without regard to how victims are impacted.

According to the American Association of Retired Persons, persons over the age of 50 are easy targets for financial abuse because they:

• Expect that they will be dealt with honestly
• Are less likely to act when defrauded
• Are not as familiar with their rights in regard to the marketplace
• May have certain health issues, such as Alzheimer’s and Dementia that can allow them to be more easily duped than other people

Our Texas stockbroker fraud lawyers have seen the devastation that can be wreaked on the lives of elderly investors who’ve watched their retirement money disappear because they trusted people who purposely scammed them. There may be a way to recoup your investment losses.


Related Web Resources:
Insurance agent to face 99 years in prison for selling phony annuities, Investment News, July 29, 2011

Langford signs confessions in fraud cases, Amarillo Globe-News, July 26, 2011

Elder Abuse: Financial Scams Against Seniors, Nolo

Fraud Target: Senior Citizens, FBI

For Seniors, SEC

American Association of Retired Persons (AARP)


More Blog Posts:
Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M, Stockbroker Fraud Blog, August 3, 2011

Basketball Benefactor Accused of Texas Securities Fraud and Ponzi Scam that Targeted High-Profile Coaches Found Dead, Stockbroker Fraud Blog, July 19, 2011

Madoff Trustee Files Securities Lawsuit Against Safra National Bank of New York Seeking to Recover Almost $111.7M for Ponzi Scam Investors, Institutional Investors Securities Fraud, May 12, 2011


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

Posted In: Ponzi Scams , Senior Investors , Texas Securities Fraud

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