Investment Fraud Lawyer Blog

The Securities and Exchange Commission recently charged Provident Capital Indemnity Ltd., its president, and its auditor with conducting a massive life settlement fraud, according to Darla Mercado’s InvestmentNews article, “Backer of life settlement insurers hit with fraud charges.” The SEC’s suit also names Provident Capital’s president, Minor Vargas Calvo, and supposed outside auditor, Jorge L. Castillo, as defendants.

Continue reading " SEC Charges Company with Massive Life Settlement Fraud " »

According to a recent article in InvestmentNews.com, rising salaries along with huge bonuses helped “push” traders to make riskier investments and also “limited regulators’ ability to lure top talent to police banks.” These finding were reported by the Financial Crisis Inquiry Commission who were tasked with discovering the origins of the financial crisis.

Continue reading " Wall Street's Pay Structures Caused Excessive Risk Taking, Contributed to the Financial Crisis " »

“UBS AG Yield Optimization Notes with Contingent Protection linked to the common stock of Lehman Brothers Holdings Inc. …” (hereinafter referred to as “the Notes”) sold by UBS Financial Services, Inc. circa 2007-2008 have been described as the worst investment ever (or at least one of the worst investments ever) by some securities practitioners

Continue reading " Investor Alert - The Worst Investment Ever? " »

Countrywide Financial, a unit of Bank of America Inc, has been accused of “massive fraud” in a lawsuit, according to an article by Karen Freifeld on Bloomberg.com. The lawsuit alleges that investors were misled about mortgage-backed securities. The investors claim that they wanted “conservative, low-risk investments” and bought “hundreds of millions of dollars of Countrywide mortgage-backed securities from 2005 to 2007” that were anything but low-risk. Among the institutional investors who filed the complaint are TIAA-CREF Life Insurance Co., New York Life Insurance Co., and Dexia Holdings Inc.

Continue reading " Bank of America Unit Sued by Institutional Investors for "Massive Fraud" Involving Mortgage-Backed Securities " »

The State Treasurer of South Carolina has filed a lawsuit against The Bank of New York Mellon Corp. (“BNY”) seeking to recover up to $200 million in losses in Lehman Brother’s debt and subprime mortgage-backed securities in connection with a securities lending program that was managed by BNY. See “SC Sues BNY Over $200M In Suprime, Lehman Losses,” by Christie Smythe, Law 360, Jan. 27, 2011.

Continue reading " South Carolina Sues The Bank of New York Over Toxic Lehman Brothers Debt and Subprime Securities " »

The Financial Crisis Inquiry Commission has issued a report concluding that the 2008 financial crisis was “avoidable” and was caused by shoddy mortgage lending, the excessive packaging and sale of loans to investors, and heedless risk-taking on mortgage-backed securities by Wall Street, as well as regulatory failures, according to Sewell Chan in his New York Times article, “Financial Crisis Was Avoidable, Inquiry Finds.”

Continue reading " Commission Concludes that Wall Street was a Major Cause of the Financial Crisis " »

The Securities and Exchange Commission recently recommended that stockbrokers be required to put the interest of their clients in front of the stockbroker’s bottom line. However, stockbrokers are not the only advisors who put themselves first, according to an article by Anna Maria Andriotis of SmartMoney.com. Advisors from all different spectrums have incentives in selling certain products to customers in order to improve their personal bottom line.

Continue reading " Some Financial Advisors Don't Put Their Clients' Interests First " »

The quality and timeliness of information that state and local governments are disclosing about their finances is becoming a growing concern for both investors and regulators. The Securities and Exchange Commission (SEC) is searching for cases in which municipalities failed to warn investors of fiscal problems. Recently, the SEC brought a case against New Jersey, claiming that the state failed to give bond investors a full picture of its large pension obligations.

Continue reading " Concerns Arise Regarding the Adequacy of Disclosure in the Municipal Bond Markets " »

The biggest lender in the United States, Bank of America Corp., may have to book a charge totaling $8.5 billion in costs stemming from disputes over faulty mortgages and mortgages securities, according to a Bloomberg.com article written by Hugh Son. The company may take the charge in the fourth quarter of this year and the cost could grow even further with lawyers "smelling blood in the water" as put by Christopher Kotowski, an Oppenheimer analyst.

Continue reading " Mortgage Problems Continue to Haunt Bank of America " »

The Wall Street banks obviously have their swagger back as evidenced by their CEOs’ plans to attend the World Economic Forum in Davos, Switzerland. According to Christine Harper in her Bloomberg article entitled “Wall Street Partying in Davos as Bankers Overcome Crisis Angst,” concerns over compensation and regulation have receded, and the focus will be back to wooing clients, winning business, and, of course, partying.

Continue reading " Wall Street Returns to the "Days of Wine and Roses" " »

Zeke Faux’s Bloomberg article, “Indexed Annuities Obscure Fees as Sellers Earn Trip to Disney,” focuses on the undisclosed fees and perks that incentivize agents to gloss over negatives like substantial surrender charges that penalize purchasers who might need to sell the product to meet an unexpected expense.

Continue reading " Index Annuities are Extremely Rewarding - For the People that Sell Them " »

On January 7, 2011, the Securities and Exchange Commission charged a Greensboro, N.C.-based investment adviser firm, SJK Investment Management LLC and its owner Stanley Kowalewski with defrauding investors in two hedge funds by secretly diverting millions of dollars in self-dealing transactions.

The SEC alleges that, starting in mid-2009, Kowalweski raised more than $65 million from investors such as pension funds, school endowments, hospitals and non-profit foundations, and diverted $16.5 million of it to a secret third fund, which he treated like his own personal bank account. Among other things, Kowalweski allegedly used $3.9 million of it to purchase a vacation home.

Continue reading " North Carolina Investment Adviser Sued for Fraud " »

All is not well in the Land of Lincoln. The state’s governor’s office confirmed this week that the Securities and Exchange Commission (SEC) has launched an inquiry into public statements by Illinois officials concerning the state’s underfunded pension fund.

Continue reading " SEC Investigates Illinois " »

Life Partners Holdings Inc., a Waco, Texas company that has arranged sales of several billion dollars of life-insurance policies to investors, is being dissected by the Securities and Exchange Commission, according to Mark Maremont and Leslie Scism in their Wall Street Journal article, “SEC Probes Company Over Life-Span Data.” The SEC is examining how the company derived its mortality estimates, which are critical for investors who seek to value the investment.

Continue reading " SEC Investigates Investments in Life Insurance Policies and Viatical Settlements " »

Investors who purchased Lehman notes from UBS have won seven out of the eight securities arbitration cases that have gone to a final arbitration hearing, which is an unusually high win rate, according to Dan Jamieson in his InvestmentNews article entitled “Sour notes from Lehman haunt UBS.” Most recently, a Financial Industry Regulatory Authority (FINRA) arbitration panel awarded $2,200,000.00 – 100% of the compensatory damages requested – to the Chairman and CEO of CNA Financial Corp. (Motamed v. UBS, decided December 2010). This award “shows that even a seemingly sophisticated investor — at a disadvantage — can win back his or her money.”

“Every time UBS loses one of these cases, the phones light up again,” said Seth E. Lipner, of Deutsch & Lipner in New York, who is co-counsel with Page Perry in Atlanta on Lehman structured note cases. In earlier cases (Edelson v. UBS, decided November 2010; Severi vs. UBS, decided in December 2009; and Marcus et al. v. UBS, decided April 2010), arbitration panels ordered UBS to buy back the Lehman principal protected structured products from investors at their original cost.

Continue reading " UBS's Sale of Lehman Principal Protected Notes Was an Unmitigated Disaster for Investors " »

The U.K. bank Barclays PLC was handed a $12.2 million fine and will be required to pay up to $96 million to customers who were improperly sold two stock-and-bond funds, according to an article in the Wall Street Journal by Margot Patrick. The settlement arose out of an investigation by the U.K.’s Financial Services Authority. It was the biggest fine yet for a retail matter and according to the FSA reflects the “serious failings” in the way products were marketed and determined to be suitable for investors by Barclays.

Continue reading " Barclays Hit with $108 Million Charge " »

Municipal bond funds are hemorrhaging. Investors removed $4 billion from municipal-bond funds in the week ended January 19, the largest outflow since Lipper began measuring muni fund flows in 1992, said Kelly Nolan and John Kell in their Wall Street Journal article, “Record $4 Billion Exits Muni Funds.” The previous record was a $3.1 billion outflow last November. $1.5 billion. It was the 10th consecutive week of outflows, which total approximately $20.6 billion. The four-week moving average was an outflow of $2.2 billion, up from $1.9 billion in the previous four-week period.

Continue reading " Investors Exit Municipal Bonds as Congress Explores Bankruptcy for States " »

The Securities Exchange Commission in cooperation with the North American Securities Administrators Association (NASAA) have issued warnings to investors about the risks of peer-to-peer lending via the Web.

In the current economic environment where it is often difficult to obtain a conventional loan from banks, peer-to-peer lending or P2P, has become popular. Peer-to-peer lending allows individuals and small businesses to use an intermediary to obtain loans over the internet from other internet users. This type of social lending, or online loan matchmaking, invites investors to fund these loans based on the promise of a steady above average capital return. P2P intermediary firms, such as Lending Club, tell investors the pool of loans which they are buying into could yield about 12%, but because borrowers could default on their loans, to be expecting more like 9%.

Continue reading " Securities Regulators Voice Concerns About Peer-to-Peer Loans " »

According to an article by Charles Riley for CNN Money they are. Municipal bonds continued to sell off last week with investor worried about state and local government budget shortfalls highlighted by the media in recent weeks. States such as California and Illinois face budget shortfalls of billions of dollars, making the growing fears easy to comprehend. Meredith Whitney, a prominent bank analyst, went on 60 Minutes in front of a nation audience and gave a “doomsday prediction of up to 100 sizable defaults in the muni bond market”; adding to the growing concern that states, along with cities and small countries with default on their municipal bonds.

Continue reading " Are Municipal Bond Fears Overblown? " »

The Securities and Exchange Commission has charged three affiliated New York based investment firms and four senior officers with fraud, misuse of client assets, and other securities laws violations involving their $66 million advisory business.

Continue reading " New York Investment Firms Charged with Fraud " »

Now that the Republicans have increased their clout in Congress, we could end up with the same problems that brought the economy to its knees in 2008. Under the Dodd-Frank Act, the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) need to hire hundreds more workers to meet their mandate but without funding they cannot move forward. The agencies are currently only funded through March 2011 at 2010 levels. The SEC has said that any further delays will be “detrimental to investors and the markets” just as lack of oversight contributed greatly to the debacle of 2008.

Continue reading " Are Republicans Trying to Derail Financial Markets Reform and Frustrate Enforcement of Antifraud Laws? " »

The world of foreign currency exchange trading or forex is rife with fraud. We are talking about stealing customers’ funds, as well as misrepresentations and omissions to disclose the true risks of forex trading even when the investors’ money is actually invested. Consider the following.

Continue reading " Fraud Permeates the Forex Markets " »

Beware of index deferred annuities, says Lisa Gibbs in her CNNMoney article, “Index annuities are a safety trap.” If your goal is to protect principal, you give up too much for that protection in an index annuity; there are better ways to do it, according to the article.

Index annuities account for a disproportionately large share of investor complaints, according to the article: “According to data that 16 states provided to MONEY, index annuities accounted for 30% of annuity-related complaints to regulators in 2009, even though they represent just 13% of annuity sales. In senior-heavy Florida, it was 55% of complaints.”

Continue reading " The Financial Press Continues Its Attack on Equity Index Annuities " »

In the current economic environment where banks and large financial institutions have received financial bailouts, cash strapped broker dealer Capital Financial Services, Inc. is seeking to get a legal bailout. Despite rules of the Financial Industry Regulatory Authority to the contrary and established judicial precedent favoring arbitration, Capital Financial, an independent broker dealer that sold $65.3 million in high risk private placements, is attempting to combine 36 separate arbitration claims and lawsuits as part of a class action settlement. Merging all of the pending litigation, that involves Capital Financial’s sales of Provident Royalties’ private placement offering could potentially let Capital Financial off the hook for millions in damages and legal fees.

Continue reading " Broker/Dealer Capital Financial Attempts to Circumvent the Arbitration Process and the Bankruptcy Laws " »

Recent moves by The Vanguard Group highlight the increasing risks in the municipal bond sector. As a result of volatility in the municipal bond market, Vanguard has withdrawn documents it filed with the Securities and Exchange Commission (SEC) to launch three new municipal bond index funds and three municipal bond exchange-traded funds.

Continue reading " Vanguard's Actions Reveal Concerns about the Municipal Bonds Market " »

With interest rates rising, many fixed-income investors are looking for alternatives to traditional bond funds. In her Wall Street Journal article, “Are ‘Alternative’ Bond Funds Safe?” Eleanor Laise makes it clear that they are not safe. Rather, she describes how they use complex “hedge-fund-like tactics,” such as derivatives, credit default swaps, interest rate bets, currency bets, and rapid in-and-out trading, to try to achieve “amped-up” returns. In addition to the increased risks, they come with increased fees and expenses that effectively require managers to take more risk to achieve the equivalent return of an investment with lower expenses. Also, many of them lack a significant track record.

Continue reading " 'Alternative" Bond Funds Carry Huge Risks " »

Leslie Scism’s Wall Street Journal article, “Insurers Sued Over Death Bets,” describes how life insurance policies sold to investors, who expect to receive a big payment when the insured dies, have led to lawsuits by insurance companies and investors against each other, as well as by relatives of some of the deceased elderly, alleging that death benefits belong to the family members.

Continue reading " Investors in Life Insurance Policies and Viatical Settlements Are Urged to Beware " »

It may seem like something out of a movie where thieves or opportunists try to make money by taking advantage of fractions of a penny differences in trading, but unfortunately the National Futures Association, a self-regulatory organization policing the futures market, is beginning to analyze trades executed by its 16 member forex (foreign exchange) firms to see whether firms are taking unfair advantage of such differences which the industry refers to as “slippage.”

Continue reading " Forex Trading Under Investigation " »

InvestmentNews has published an article expressing its strong support for a rule that requires brokers and investment advisers alike to adhere to the highest fiduciary standard of conduct: “In the name of investor protection, we urge the Securities and Exchange Commission to exercise its rulemaking authority to require brokers to act in their clients' undivided best interests at all times. See “SEC should require fiduciary standard,” InvestmentNews, January 16, 2011.

Continue reading " InvestmentNews - All Brokers and Advisers Should Be "Fiduciaries" " »

Anton Troianovski’s WSJ article, “Ruling Offers a Peek Into Boom’s Fallout,” shows how individual investors, many of them retired and seeking safe income, were victim’s of both the commercial real estate bubble and, more particularly, promoters and sellers of tenant-in-common (or TIC) interests in commercial real estate. One of the big promoters was a company named NNN Realty Advisers, which merged with well-known Grubb and Ellis, a publicly traded company that, according to its website, “is one of the largest and most respected commercial real estate services and investment companies in the world.“

Continue reading " Investor Alert - Beware of Tenant-in-Common (TIC) Interests in Real Estate Sold as Safe Investments " »

Bank of America has agreed to pay $2.6 billion to settle charges that Countrywide (which BofA acquired) made material misrepresentations about home loans it sold to Fannie Mae and Freddie Mac, according to articles in the New York Times by Gretchen Morgenson (“$2.6 Billion to Cover Bad Loans: It’s a Start”) and Bloomberg.com by Steve Dickson (“BofA Resolves Fannie, Freddie Loan Putback Dispute”).

Continue reading " Are Wall Street Banks Concealing Their True Exposure to Mortgage Securities Problems " »

John Kell, writing for the Wall Street Journal, recently exposed a pattern of securities fraud against a congregation of nuns living in the Bronx, New York. The broker, Paul George Chironis, settled with the Securities and Exchange Commission (SEC) when convicted of churning 2 accounts owned by the Sisters of Charity – one account held money for the care of nuns in assisted-living facilities and the other account supported the nuns’ charitable endeavors – all occurring during 2007. At that time, Mr. Chironis was affiliated with Capital Growth Financial in Boca Raton, FL.

Continue reading " Broker Defrauds Nuns " »

According to a recent article in InvestmentNews, Securities America faces 150 or so arbitration claims seeking recovery of $90 million of investor losses associated with its sale of Medical Capital Notes. The claims are shaping up to be a significant problem for Securities America and its parent company Ameriprise Financial, Inc. On New Year’s Eve, Securities America was hit with a 1.2 million dollar award in connection with its sale of the Medical Capital Notes. The award included $734,000 in compensatory damages, $250,000 in punitive damages and $171,000 in attorney and expert fees.

Continue reading " Securities America's Medical Capital Notes "Nightmare" Continues " »

Bond insurer ACA Financial Guaranty Corp. has filed fraud suit against Goldman Sachs for its role in creating and marketing a CDO called Abacus, according to Liz Moyer’s WSJ article, “ACA Sues Goldman Over Abacus.” ACA bought millions of dollars of the CDO and insured super-senior tranches for $909 million, according to the article. ACA is reportedly seeking $30 million in compensatory damages and $90 million is punitive damages.

Continue reading " Bond Insurer ACA Financial Guaranty Sues Goldman Sachs for Fraud Involving CDOs " »

The future of MBIA, the monoline insurer of mortgage-backed securities and municipal bonds, among other things, is in peril and likely dependent on the outcome of litigation, according to Floyd Norris in his Jan. 6 New York Times article, “MBIA Fights Banks for Its Life.” Standard & Poors reportedly downgraded MBIA to junk status and warned that its “capital adequacy is very weak.”

Continue reading " Monoline Insurer MBIA Accuses Wall Street Banks of Fraud Regarding Mortgage-Backed Securities " »

Banks sold more than $6 billion of reverse convertible notes last year, promising income investors returns of up to 64 percent in this historically low interest rate environment; however, reverse convertibles lost money, on average, according to a recent InvestmentNews articles entitled “Hot new asset class has ‘failed on all counts.’” In fact, reverse convertibles contain an often-hidden trap door called a put option, which can end up costing unsuspecting investors dearly.

According to Bloomberg, 1,481 reverse convertibles sold in the U.S. last year lost an average of 1 percent, compared with the Standard & Poor's 500 stock index that returned 8 percent, and corporate bonds that gained 11.1 percent, during the same period.

Continue reading " Reverse Convertibles and Similar Structured Products are "Unsafe at any Speed" " »

Normally we don't link to other websites, in part because we feel capable of providing the story for our readers.
But there are exceptions...and we think that this graphical presentation from last year by illustrator Al Granberg, Special to ProPublica, is worth a few thousand words. Check it out.
http://www.propublica.org/special/cdo-world

On December 1, 2010, the Securities and Exchange Commission charged the manager of Opulent Lite, a San Francisco-based hedge fund, with fraud for concealing trading losses. According to the SEC, Neil Godbole, Opulent’s manager, sought to mislead his investors by underreporting Opulent’s losses. In September 2008, Godbole reported trading losses of $859,000, when the fund had actually lost $4 million. Godbole also reported that the fund’s asset value was $29 million when it was only $19 million. Then, in December 2008, after the fund had fallen below $14.4 million in assets, Godbole reported to investors that the fund was valued at more than $26 million. Naturally, Godbole paid himself a management fee in 2008 based upon the inflated value of the fund.

Continue reading " Another Cautionary Note to Hedge Fund Investors " »

On New Year’s Eve, Securities America was hit with a $1.2 million award as a result of its sale of Medical Capital Notes. The award included $734,000 in compensatory damages, $250,000 in punitive damages and $171,000 in attorney and expert fees. According to attorney Pratt H. Davis at Page Perry, LLC, a securities arbitration and litigation firm currently handling millions of dollars of Securities America claims, “the award of punitive damages by a FINRA panel is a foreboding sign for Securities America going forward as punitive damages are rarely awarded in FINRA arbitrations.”

Continue reading " Investor in Medical Capital Notes Recovers $1.2 Million from Securities America " »

Investors who have not purchased exchange-traded funds in their portfolios have avoided them, for the most part, because they “don't know what they are,” according to Liz Skinner’s InvestmentNews article, “Investors Clueless about ETFs: Survey.” According to a survey of 2,000 adult investors conducted by Mintel Comperemedia, 64% of investors claimed ignorance about ETFs, and 15% of investors consider ETFs too complicated.

Continue reading " Most Investors Don't Understand Exchange Traded Funds (ETFs) " »

According to an article posted by the Associated Press and InvestmentNews, three advisors who called themselves the '3 Hebrew Boys' were recently sentenced to decades in prison. Timothy McQueen, 52, and Joseph Brunson, 47, were each sentenced to 27 years in prison and Tony Pough, 48, was sentenced to 30 years. The three, all from Columbia, were convicted in November 2009 of 58 counts each of mail fraud, money laundering and other charges.

Continue reading " Affinity Fraud Underlies Many Ponzi Schemes " »

A Financial Industry Regulatory Authority (FINRA) arbitration panel has awarded $2,200,000.00 – 100% of the compensatory damages requested – to Thomas F. Motamed, the Chairman and CEO of CNA Financial Corp., and his wife Christine Motamed, as a result of losses they sustained in Lehman structured products sold to them by UBS Financial Services, Inc., according to articles by Suzanne Barlyn in Dow Jones Newswires (“UBS To Pay $2.2 Mln to CAN Chief for Lehman-Related Losses”) and Lorie Konish’s on Wall Street article (“UBS To Pay $2.2M In Arbitration Settlement”).

The panel ordered UBS to buy back the notes from the couple at their original cost. In addition, the panel assessed the full costs of the hearing, in the amount of $13,650.00, against UBS. The case is Motamed v. UBS Financial Services, Case Number 09-02087, decided December 16, 2010.

Continue reading " The Beat Goes On - UBS Loses Another Lehman Structured Notes Case " »

As money remains tight, the jobless rate high, and foreclosures on the rise, the schemers and con artists come out of the woodwork to take advantage of desperate people. Some of the worst scams are those that offer big returns for investments of thousands of dollars. Even savvy business people fall prey to these “advance fee” tactics.

Continue reading " Cons and Scams on the Rise - Big Promises Yield No Rewards " »

A big “thank you” to the New York Times for allowing writer Tara Siegel Bernard in her article titled “Dear S.E.C., Please Make Brokers Accountable to Customers” to present an open letter to Mary Schapiro of the S.E.C. on the eve of her assignment to put in writing a new rule requiring stock and insurance brokers to put their customers’ interests before their own. Finally, a treatise on behalf of the regular investor! The big problem is that most investors already believe that their interests come first. Unfortunately, that’s not always the case.

Continue reading " The SEC Should Make It Clear That Brokers Are Fiduciaries " »

A federal grand jury in Texas indicted Adley Husni Abdulwahab of Houston on securities fraud charges in connection with an alleged $17 million investment scam, according to an InvestmentNews article titled “Texan indicted in alleged $17M investment scam.” He was already in custody on federal charges in Virginia for his involvement in an alleged $100 million life insurance scam.

Continue reading " $17 Million Investment Scam Uncovered in Texas " »

Effective January 1, 2011, Page Perry, LLC and Robert Wayne Pearce, PA have dissolved their joint venture to develop, cultivate and represent clients with claims arising out of the purchase of municipal arbitrage funds sponsored by Citigroup and its affiliates. The two firms will continue to jointly represent clients and prospective clients that they originated together prior to January 1, 2011.