Investment Fraud Lawyer Blog

On Monday, Judge Shirley Wohl Kram of the U.S. District Court for the SDNY ruled that a putative class action against Moody’s Corp. can go forward. See “Shareholder lawsuit vs Moody’s allowed to proceed,” by Martha Grayhow, Reuters, Monday, Feb. 23, 2009. The lawsuit seeks class action status on behalf of Moody’s investors who purchased its securities from February 3, 2006 to October 24, 2007, according to the article. Moody’s filed a motion to dismiss, which the court granted in part and denied in part.

Continue reading " Suit Against Moody's Allowed to Proceed " »

Scammed investors are often shocked to discover that they face insurmountable barriers when they seek to recover their losses in court, says Jane Bryant Quinn in a February 11, 2009 article on Bloomberg.com entitled “Madoff Victims Face Grim Prospects in Court.” Investors have filed suits against “feeder funds” that, unbeknownst to investors, funneled their money to Madoff. Investors may think that the securities laws are there to help and protect them. They are mistaken. “The securities laws may be your worst enemy if you lost money in the Madoff scam,” said Ms. Quinn, adding “Those laws may turn out to be feeder fund protection acts.” The same would apply to any securities scam, including, more recently, the Stanford scam.

Ms. Quinn cites the Private Securities Litigation Reform Act of 1995 (“PSLRA”) as one of the unfair barriers keeping scammed investors out of court. This statute requires plaintiffs, in the initial complaint that is filed to begin the lawsuit, to allege “with particularity” facts supporting a “strong inference” that the defendant acted with fraudulent intent. But that is a nearly impossible thing to do at the initial stage of a lawsuit, and it is not the way it works in most lawsuits.

Continue reading " It Is Time To Give Investors Back Their Rights " »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 7850 but the market was closed on Monday.

• On Tuesday, the Dow Jones Industrial Average plunged 298 points.

• On Wednesday, the Dow Jones Industrial Average rose 3 points.

• On Thursday, the Dow Jones Industrial Average dropped 90 points.

• On Friday, the Dow Jones Industrial Average lost 100 points and closed the week at 7366.

Continue reading " Page Perry's Market Monitor - February 20, 2009 " »

Investors who still hold auction-rate securities are facing many increasing problems, according to an article in today’s Bloomberg.com by Michael McDonald. Last February, the $330 billion market for auction-rate securities essentially froze when major Wall Street firms discontinued supporting auction-rate securities. A year later, investors are still stuck with as much as $176 billion of auction-rate securities that pay an average of 1.36%. Thus, it is apparent that many investors have been left out in the cold even after regulators forced some firms to buy back more than $50 million of auction-rate securities. Investors are stuck is because the market remains frozen and issuers either have no incentive to refinance or are unable to refinance. Many investors rightly complain that a large portion their liquid wealth is frozen and paying next to nothing in interest, and, while they may be able to liquidate their holdings in the secondary market, they can do so only if they accept less than what they paid for the auction rate securities.

Continue reading " Things Continue to Get Worse for Auction-Rate Securities Investors " »

Amegy Bank and Amegy Investments, Inc., a registered broker-dealer, commenced an arbitration proceeding against Merrill Lynch to recover $140 million paid for auction rate securities sold to it by Merrill, according to a February 10, 2009 article by Mary Alice Robbins in LAW.COM. Amegy alleges that Merrill knew but failed to disclose that there was no reliable market for auction-rate securities, that Merrill was propping up auctions that would otherwise fail, and that Merrill intended to stop propping them up very soon but didn’t tell anyone that. When Merrill withdrew its support, the auctions failed, leaving Amegy and its clients (who had purchased auction-rate securities from Amegy) with frozen investments.

Continue reading " "Downstream" Broker-Dealer Sues Merrill Over Auction-Rate Securities " »

In the wake of Bernard Madoff’s alleged $50 billion Ponzi scheme, the United States Securities and Exchange Commission today charged Robert Allen Stanford and three of his companies with orchestrating multi-billion dollar fraudulent investment schemes. In addition to naming Mr. Stanford personally, the SEC Complaint names as Defendants Antiguan-based Stanford International Bank, Ltd., Houston-based broker-dealer and investment advisor Stanford Group Company, investment advisor Stanford Capital Management, LLC, and two other individuals – James M. Davis and Laura Pendergest-Holt. The action was filed in the United States District Court for the Northern District of Texas, Dallas Division. According to the SEC, the fraudulent schemes involve purported Certificates of Deposit (“CDs”) marketed by Stanford International Bank as well as a proprietary mutual fund wrap program marketed by Stanford Group Company.

“We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world," commented Rose Romero, Regional Director of the SEC’s Fort Worth Regional Office. “As we allege in our complaint, Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors,” added Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement.

Continue reading " SEC Charges R. Allen Stanford In Huge Fraud " »

Corporate and institutional investors who have been left stranded with auction-rate securities can now expect to receive increasing scrutiny by the SEC and auditors. On December 31, 2008, the SEC announced that it would not suspend the “Fair Value” accounting rules. In connection with this announcement, the SEC is now indicating they are increasing their examination of auction-rate securities holders who carry the securities at par value, use broker quotes for valuation or use third-party valuations not based on trading data. As a result, corporate and institutional investors must value the auction-rate securities at their actual market values. Under FAS 157 (the fair-value accounting rule), market value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Continue reading " Corporate Investors Holding Auction-Rate Securities Face Scrutiny by the SEC " »

According to an article by Jacqueline Bell appearing in Securities Law 360 on February 5, 2009, broker-dealers and registered representatives are often better off fighting charges brought by the SEC and FINRA as opposed to settling with the regulators.

Continue reading " SEC and FINRA Regulatory Actions - To Fight or To Settle " »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 8281 and dropped 10 points on Monday.

• On Tuesday, the Dow Jones Industrial Average plunged 382 points.

• On Wednesday, the Dow Jones Industrial Average rebounded 51 points.

• On Thursday, the Dow Jones Industrial Average fell 7 points.

• On Friday, the Dow Jones Industrial Average lost 82 points and closed the week at 7850.

Continue reading " Page Perry's Market Monitor - February 13, 2009 " »

A FINRA arbitration panel entered a $400 million award against Credit Suisse based on claims that it improperly sold auction rate-securities to a large corporation, STMicroelectronics. The award also requires that Credit Suisse pay over $6.5 million in attorney’s fees. This is the first in what is likely to be a long line of significant awards against brokerage firms that engaged in improper sales of auction-rate securities to corporations.

Attorney J. Boyd Page of Page Perry LLC in Atlanta applauded the decision saying, "It's good to see arbitration panels recognizing that many corporate and institutional investors were victimized by abusive conduct in the auction-rate securities debacle. These investments were sold as safe parking places for cash and important facts were withheld from investors. It would be a travesty of justice to deny recovery under such circumstances."

Continue reading " Corporate Investor Wins $400 Million on Auction-Rate Securities Claim " »

Reacting to public pressure and direct governmental influence, UBS AG has decided to eliminate cash bonuses for senior executives of its investment bank, and plans to reduce bonuses firm-wide, according to an article by Carrick Mollenkamp in the February 6, 2009 edition of the Wall Street Journal. The plan calls for UBS to reduce bonuses by a whopping 80%. “Frustrations inside UBS boiled to the surface” over the plan and the potential loss of talent and deleterious effect on the franchise, according to people familiar with the matter.

Continue reading " Elimination of Bonuses Creates Discontent on Wall Street " »

Various companies, including Citigroup Global Markets Inc., Wells Fargo Securities, LLC, Bank of America Securities LLC, Merrill Lynch & Co. Foundation Inc., Morgan Stanley & C., Inc., UBS Securities LLC, and Wachovia Capital Markets, are under fire from American National Insurance Company and the City of South San Francisco. Both parties are suing these companies for underwriting commercial paper sold by Lehman Brothers that was loaded with high-risk, subprime investments. According to the allegations, not only did Lehman misstate its financial condition or subprime exposure, but the bank also continued to market CDOs, or high-risk investments, even as the market for these securities was collapsing. The underwriters are liable for the losses because they helped Lehman conceal its critical subprime exposure, the complaints alleged.

Continue reading " Lehman Underwriters Under Attack " »

A growing number of corporations around the country are beginning to assert claims against Wall Street investment firms over Wall Street’s misleading and deceptive marketing of complex structured finance products such as auction-rate securities and collateralized debt obligations. Most recently, American Eagle Outfitters has filed claims accusing Citigroup of fraud in connection with the sale of some $258 million of auction-rate securities. Among the allegations made by American Eagle are that Citigroup misrepresented the auction-rate securities as safe and liquid and that Citigroup omitted to disclose various material facts such as the lack of demand for the auction products and the necessity of support by Citigroup.

Continue reading " Corporations Begin Holding Wall Street Accountable for the Auction-Rate Securities Debacle " »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 7994 and dropped 64 points on Monday.

• On Tuesday, the Dow Jones Industrial Average jumped 142 points.

• On Wednesday, the Dow Jones Industrial Average lost 122 points.

• On Thursday, the Dow Jones Industrial Average rose 106 points.

• On Friday, the Dow Jones Industrial Average surged 218 points and closed the week at 8281.

Continue reading " Page Perry's Market Monitor - February 6, 2009 " »

In the present economy, layoffs abound. Just last week major layoffs were announced by Pfizer, Caterpillar, ING Group, Home Depot, Texas Instruments, IBM, Starbucks, AOL, Eastman Kodak and many others. Financial firms Goldman Sachs and Morgan Stanley, which have already made significant reductions in their workforces, announced that they anticipate additional layoffs.

Continue reading " Employee Lawsuits Explode as Layoffs Rise " »

The Securities and Exchange Commission, the Financial Services Regulatory Authority and other financial regulators are facing growing political pressure to increase their investigatory and enforcement efforts in the wake of the Madoff scandal and the other failures of Wall Street. While it is not certain what reforms will be made to the organization, operations, staff, and budgets of these watchdogs, change is certainly coming. In the short term, regulated entities should expect more frequent, more regular, more thorough, and longer examinations than they have faced in the past, as the SEC and others are sensitive to the unwanted prospect of missing the slightest evidence of fraud.

Continue reading " Investment Advisors and Broker Dealers Will Face More Scrutiny After Madoff " »

The State of Louisiana and the Louisiana Stadium and Exposition District, the issuer of auction-rate securities, (hereinafter referred to as the“Issuer”) recently filed suit against the Financial Guaranty Insurance Company (“FGIC”) and Merrill Lynch related to the issuance of over $238,000,000 in auction-rate-securities.

Continue reading " Wall Street Misled Issuers of Auction-Rate Securities Too " »

Compelling pieces of evidence, including sworn statements from Bank of America, have been uncovered indicating that, during recent years, Wall Street brokerage firms conspired to cheat state and local governments and American taxpayers in the municipals markets. Municipal bonds are issued by state and local governments to raise funds for various public projects. Since the proceeds received by the governments are usually not spent all at once, they are invested in various contracts (collectively referred to as Municipal Derivatives) that provide a fixed rate of return or shift the risk of changes in interest rates. The market for Municipal Derivatives is large ($400 billion annually), concentrated among 20 major institutional sellers, and largely unregulated. Before engaging in Municipal Derivatives transactions, governments routinely engage brokers to find the best deals.

Continue reading " More Dishonesty from Wall Street - This Time Cheating State and Local Governments as well as Taxpayers " »

Wells Fargo appears to be joining Raymond James and Stifel Nicolas in refusing
responsibility for its part in the auction-rate securities fiasco. Although many large underwriters and broker/dealers that sold auction-rate securities have already settled claims, Wells Fargo recently denied allegations of wrongdoing in a lawsuit filed by Washington State regulators. In the lawsuit, regulators seek payment of restitution or damages for customers who purchased some $3.9 billion of auction-rate securities from Wells Fargo. Wells Fargo, the biggest bank on the West Coast, is disputing the allegations, saying that, “the state’s claims and allegations do not accurately portray the facts.”

Continue reading " Washington State Sues Wells Fargo Over Auction-Rate Securities " »

A recent academic study found that arbitrators who represented brokerage firms or brokers in other arbitrations awarded significantly less compensation to investor-claimants than other arbitrators. See Attorney’s as Arbitrators, by Stephen J. Choi, New York University, Jill E. Fisch, University of Pennsylvania, and A. C. Pritchard, University of Michigan, January 2009. This finding comes as no surprise to those who are familiar with securities arbitration and the securities industry.

Continue reading " It's Time to Stop Letting Wall Street Judge Wall Street " »