Investment Fraud Lawyer Blog

According to the “Financial Times”, public pensions are facing a $2,500 billion deficit due to chronic underfunding of retirement obligations and the severe US economic recession. As far back as 2008, the Pew Center on the States estimated a funding gap of at least $1,000 billion for pension, healthcare and other non-pension benefits like Medicaid. The most likely ways to bridge this money gap are through a sale of assets, issuing bonds, and legislative intervention. All of these possibilities have a downside.

Continue reading " Underfunded Public Pensions Spell Trouble " »

Bloomberg commentator Susan Antilla smells a rat. Wall Street is “fighting full-tilt” against the SEC’s whistleblower proposal that would tend to expose hidden wrongdoing. The SEC is “barraged” with their objections. “That’s not how people behave unless they’re hiding something,” Ms. Antilla says in her Bloomberg.com article, “Madoff Repeat Odds Rise With Neutered Watchdog….”

Continue reading " New Whistleblower Law Has Corporations Running Scared " »

In 2008, Bank of America bought Countrywide Financial, which was accused of predatory lending in making loans to people it knew did not meet proper underwriting standards. Government-sponsored entities like Fannie Mae and Freddie Mac, private investors, and bond insurers have made demands on Bank of America that securities backed by Countrywide-originated loans be repurchased, according to David Reilly’s Wall Street Journal article, “BofA Tones Down Mortgage Fight.” The number of outstanding mortgage repurchase claims against Bank of America is in excess of $12 billion, according to the article.

Continue reading " Will Bank of America Move Quickly to Settle All Mortgage-Backed Security Repurchase Demands? " »

With the stock market booming, many investors’ trust in brokers and financial institutions to “do what is right” has … decreased, according to Andrew Osterland’s recent InvestmentNews article entitled, “Brokers still in doghouse with clients, survey finds.” “The state of consumer trust in the industry is not good,” according to Julie Crothers, a senior officer of the public relations firm that performed the survey.

Continue reading " Survey Raises Concerns about Wall Street's Trustworthiness " »

First it was Florida and the Southwest watching their housing prices plummet, now Seattle, Atlanta and Minneapolis have followed suit. The ongoing correction has yet to end as the housing market goes into a double-dip cycle. Mortgage applications are at a 15-year low. These developments do not bode well for the rest of the winter and into spring.

Continue reading " No Market is Immune to the Real Estate Crash " »

The new whistleblower program that pays big cash rewards for tips about investment fraud has already resulted in a large number of high quality tips to the SEC, but it has also gotten the attention of Wall Street. As the SEC tries to implement regulations and procedures to carry out the program, several large companies have urged the agency to adopt a requirement that whistle-blowing employees first report their complaints to their employer before going to the government. They argue that such a requirement would give employers an opportunity to correct problems without SEC intervention, but whistleblower advocates argue that giving employers a heads up would also give them an opportunity to destroy evidence, pressure employees to keep quiet, and get their defense together.

Continue reading " Companies Push to Water Down Whistleblower Laws " »

Jamie Dimon, who is CEO of JPMorgan Chase & Co, told the Financial Crisis Inquiry Commission last fall that Fannie Mae and Freddie Mac were “the biggest disasters of all time.” However, according to an article on InvestmentNews.com, the role Fannie and Freddie played in the financial crisis is greatly exaggerated because the FCIC’s report on the financial crisis makes it clear that it was the “private sector that led us into the financial crisis by making massive subprime bets and then using complex derivatives deals to magnify the downside risks.”

Continue reading " Big Financial Institutions Blame Others for the Financial Crisis " »

National Securities Corp. is the latest broker-dealer in FINRA’s crosshairs over the sale of fraudulent private placements, according to Bruce Kelly’s InvestmentNews article titled “Finra goes after yet another B-D in private-placement crackdown.”

Continue reading " Private Offerings (a/k/a Reg D Offerings) Continue to Haunt Brokerage Firms " »

So-called peer-to-peer online lending first became possible in the United States five years ago, but if you are considering investing money as a lender, it would be wise to wait a couple of years to see how existing lenders fared, according to Ron Lieber’s New York Times article, “The Gamble of Lending Peer to Peer.”

Continue reading " Proceed with Caution if You are Considering Peer-to-Peer Lending " »

Real estate prices across the country are dropping even further according to the S&P/Case-Shiller Index. As reported on CNNMoney.com by staff writer Les Christie, recent results show prices in all 20 key cities dropped 1.3% for an annualized decline of 15%. Six markets reached their lowest price levels since the beginning of the bust in mid-2006. They are Atlanta, GA, Charlotte, NC, Miami, Portland, OR, Seattle and Tampa, FL. Sales volume is down by 25%. If we are not already in a double-dip slump we may be soon.

Continue reading " Falling Real Estate Prices Threaten Economic Recovery " »

According to an article from InvestmentNews.com, the Securities and Exchange Commission has charged a 77-year-old Amish financial advisor with defrauding others in the Amish community over a 24-year period. Monroe L. Beachy, the man being charged, was able to raise more than $33 million dollars from more than 2,600 investors, the majority of whom were Amish. According to the article written by Jessica Toonkel, Mr. Beachy told his investor that he would place their money in "risk-free U.S. government securities" but instead invested in speculative investments and "lied about it."

Continue reading " Advisor Scams Investors for Over 24 Years " »

Brian Kim who made two appearances on CNBC’s financial news show “Squawk Box” in 2009 to promote his business has been indicted by Manhattan District Attorney, Cyrus Vance, for perpetrating a $4 million Ponzi scheme. Kim, 35, was indicted on charges of grand larceny and scheme to defraud for a scam that started in 2003 involving 45 West Coast investors mostly in the Silicon Valley technology industry. His business, Liquid Capital Management promised returns of 240% through doctored financial statements and fake “pitch books”.

Continue reading " Financial Media Misused to Perpetrate Ponzi Scheme " »

As panic has come over the muni market with widespread fears of default at all levels, many municipal bond investors are still ignoring warnings forecasts of possible defaults and are relying on the fact that a huge portion of the municipal bonds issued are “general obligations” of the states and cities issuing the bonds. Although the default rate historically on general obligation bonds has been small - only three defaults have occurred since 1970, this may change.

Continue reading " Risk of Tax-Backed Municipal Bonds Grows " »

Just before the holidays, in a “little-noticed” decision, New York’s Appellate Division, First Department overturned a long-standing legal doctrine called “Martin Act Preemption,” and expanded investor protection according to a Law360 article entitled “Preemption And The Martin Act.”

Continue reading " New York Increases Investor Protection " »

Documents recently released by the Financial Crisis Inquiry Commission show how close Citigroup and Morgan Stanley came to collapse, according to a New York Times Dealbook column by Susanne Craig and Ben Protess entitled “New Details Emerge About Morgan Stanley and Citi in the Crisis.”

Continue reading " Have Citigroup and Morgan Stanley Really Changed? " »

If you are an investor who lost money in the financial crisis, your stockbroker or investment advisor may owe you money. There are a variety of legal claims that can be brought for investment malpractice, ranging from fraud and misrepresentation to making unsuitable investment recommendations. But there are also legal deadlines for bringing such claims, and time may be running out if you have not yet discussed your options with a lawyer who handles investor rights claims.

Continue reading " Victims of Investment Malpractice or Other Financial Misconduct During the Recent Financial Crisis May Be on the Verge of Losing Legal Rights " »

CNBC.com recently reported that al Qaeda terrorists in Yemen may be targeting financial institutions or their executives for an attack in the not too distant future. Such attacks could be in the form of package bombs or chemical or biological agents transmitted through the mail. Wall Street firms have been briefed by the FBI’s Joint Terrorism Task Force and encouraged to increase their security.

Continue reading " Are Terrorists Targeting Wall Street? " »

With the rise of consumerism, most Americans take for granted the right to sue doctors, lawyers and other professionals for malpractice. But there is one form of professional malpractice that most people, including trial lawyers, are not familiar with. Stockbrokers, investment advisers, money managers and chartered financial analysts, among others, are financial professionals who are required to adhere to strict standards of conduct.

Continue reading " Investment Malpractice -A General Overview " »

Brokerage firms are worried about a new FINRA Rule that would require them to report misconduct to FINRA in situations where the misconduct “has widespread or potential widespread impact” (FINRA’s words) and the firm has concluded or reasonably should have concluded on its own that violative conduct has occurred” (FINRA’s words). See Dan Jamieson’s InvestmentNews article, “New Finra reporting rule alarms B-Ds.”

Continue reading " Securities Industry Opposes Both Self Reporting and Whistleblower Rules - What are They Trying to Hide? " »

A quantitative study by two finance professors of the executive compensation structure of the largest 14 U.S. financial institutions during 2000-2008 found that: (1) CEOs were incentivized to take excessive risks and were big net sellers of their own companies’ stock, and (2) that the poor performance of banks during this period was NOT the result of unforeseen risks, as claimed by some. See blog by Simon Johnson, “Ship of Knaves,” The New York Times, Feb. 10, 2011.

Continue reading " Recent Study Concludes that Senior Executives of Large Financial Institutions Took Excessive Risks and Padded Their Own Pockets while Dumping the Losses on Unsuspecting Investors " »

The new whistleblower program that pays big cash rewards for tips about investment fraud has already resulted in a large number of high quality tips to the SEC, according to a news story this week on CNBC. According to the report, the SEC expects to receive 30,000 tips this year—just one year after the program was created under the Dodd-Frank financial reform act. SEC Enforcement Director is quoted as saying “we’re gonna get information hopefully sooner on in the life cycle of a fraudulent scheme, so there’s less investor loss, less harm.” In addition to helping the feds detect fraud in the securities industry, however, the program promises to pay big financial rewards to the whistleblowers whom report it.

Continue reading " Wall Street Whistleblower Program Already Paying Off " »

Executives at some financial firms are calling for tighter regulation on certain types of complex Exchange Traded Funds (ETF’s). According to a recent article in InvestmentNews executives at BlackRock Inc. and Invesco PowerShares Capital Management LLC are asking regulators to address suitability requirements for the sale of highly complex ETFs, such as commodities-based, inverse and leveraged funds.

Continue reading " Serious Concerns Arise Concerning Complex Exchange Traded Funds (ETFs) " »

The Wall Street Journal is reporting that the Arkansas Teacher Retirement System has filed a putative class action lawsuit against State Street Corp. alleging that the bank overcharged the it and other similarly situated customers in foreign exchange (Forex) currency transactions. See article by Jeanette Neumann, “State Street Is Sued by Arkansas Fund.” The suit was filed on February 10, 2011 in the U.S. District Court for the District of Massachusetts.

Continue reading " Forex Fraud Claims Just Keep Coming " »

The Securities and Exchange Commission's Inspector General David Kotz said the Commission needs more funding to shore up deficiencies underlying regulatory failures and wasteful decisions, according to Jessica Holzer’s Wall Street Journal article, “SEC Watchdog: More Cash Needed to Fix Problems.” While Mr. Kotz has been critical of the agency he investigates, he warned against the deep budget cuts proposed by U.S. House Republicans.

Continue reading " Ill-Advised Budget Cuts Threaten the Integrity of U.S. Capital Markets " »

Banks overcharged major investment firms for currency trades, according to a Wall Street Journal article by Gregory Zuckerman, Carrick Mollenkamp and Lingling Wei, titled “Suspicion of Forex Gouging Spreads. The article cites bank insiders and the apparent broadening scope of alleged abuses in the $4 trillion foreign-exchange market.

Continue reading " "Gouging" Issues Permeate Forex Trades " »

Citigroup's problems with its proprietary MAT/ASTA municipal arbitrage funds just keep growing. A recent Wall Street Journal article by Suzanne Barlyn entitled “Citi Units Must Pay $6.4 Million Over Muni-Arbitrage Loss,” which concerns Citi’s disastrous MAT/ASTA municipal arbitrage funds, reports a significant $6.4 million award issued against Citigroup in a MAT/ASTA case by a Financial Industry Regulatory Authority (FINRA) arbitration panel. Despite their high risks, the funds were marketed as an alternative to municipal bond portfolios. The funds also falsely emphasized their strong risk management and controls.

Continue reading " Citigroup Hit with a $6.4 Million Judgement Involving its MAT/ASTA Municipal Arbitrage Funds. " »

Many risk-averse, income-oriented investors in this low interest rate environment have put their hope in preferred stock dividends. But are preferred stocks with an average yield of nearly 7% a safe oasis in the “howling wilderness” of fixed income investments, asks Jason Zweig in his Wall Street Journal column, “Preferred Stock: Are Those Juicy Yields Worth the Extra Risk?” In a word, no, for several reasons.

Continue reading " Preferred Stocks Are Not Low Risk Havens For Investors " »

Despite the upbeat partying and business cultivation by bankers in Davos, Switzerland, at least one attendee – 38 year-old Barrie Wilkinson, a Cambridge grad and UK-based risk management analyst – foresees a financial catastrophe that governments will not be able to handle. See InvestmentNews article, “Next banking crisis will hit in 2015 – and be much worse: Analyst.”

Continue reading " Expert Predicts a Much Worse Financial Crisis in 2015 " »

QA3 Financial Corp. will apparently join approximately twenty-four other brokerage firms that have shut down over the past twelve months. The firm announced that it will cease operations effective February 11, 2011, according to Bruce Kelly’s InvestmentNews article, “B-D down: QA3 to close up shop next week.” The announcement was made by owner and CEO Steve Wild in an email to the firms’ 400 brokers, according to the article. It is unclear as to when and how QA3 plans to inform its customers. According to InvestmentNews, Mr. Wild did not return phone calls on Thursday and Friday.

Continue reading " Brokerage Firm QA3 Will Cease Operations as a Result of Soured Private Offerings " »

The Financial Industry Regulatory Authority (FINRA) is examining sales of opaque and illiquid private investments with a critical eye, according to Bruce Kelly’s InvestmentNews article, “Private deals at top of FINRA’s hit list.”

Continue reading " Private (Reg D) Offerings, Reverse Convertibles and Leveraged ETFs are on FINRA's Hit List " »

Prosecutors have taken over whistleblower lawsuits against Bank of New York Mellon and State Street Corp. that accuse the banks of fraud in overcharging public pension funds by tens of millions of dollars for foreign-exchange transactions, according to a Reuters article edited by Lincoln Feast, entitled “Prosecutors widen currency probes: report.”

Continue reading " Prosecutors Probe Forex Abuses by Bank of New York Mellon and State Street Corp. " »

A lawsuit filed by the Madoff bankruptcy trustee, Irving Picard, which was unsealed on February 3, 2011, alleges that J.P.Morgan Chase & Co. stood "at the very center" of the Madoff fraud, according to a Wall Street Journal article by Michael Rothfield entitled “Madoff Trustee’s Suit Says J.P. Morgan at ‘Very Center of Fraud.”

Continue reading " J.P. Morgan Allegedly at the Center of the Madoff Fraud " »

Sales of indexed annuities to seniors is a form of senior financial abuse. That is what experts are saying about the product that is being aggressively and successfully marketed to seniors. See “Indexed annuities ‘terrible idea’ for seniors, says Wharton prof,” InvestmentNews, Jan. 24, 2011.

Continue reading " Indexed Annuities are Particularly Bad Investments for Senior Citizens " »

The U.S. Commodity Futures Trading Commission (CFTC) filed suit last week against 14 foreign currency exchange (Forex) dealers, according to a Jan. 26, 2011 CNNMoney article by Charles Riley, “Regulator sues foreign currency dealers.” The suit charges that the firms unlawfully solicited members of the public to engage in foreign currency transactions, operated without being registered with the CFTC, and engaged in illegal currency trading. The CFTC seeks civil monetary penalties, as well as trading and registration bans, according to the article.

Continue reading " Forex Firms Charged With Illegal Currency Trading " »

Wall Street apparently hasn't learned anything from the recent financial crisis that has brought the U.S. economy to its knees. Wall Street publicly traded companies paid out a record $135 billion in compensation and benefits last year, according to a Wall Street Journal article by Aaron Lucchetti and Stephen Hough titled “On Street, Pay Vaults to Record Altitude.” That is up 5.7% from $128 billion in 2009.

Continue reading " It's Business as Usual on Wall Street - Paychecks Reach All-Time Highs " »

A public hearing was scheduled by New York state lawmakers to “gather information on whether certain banks intentionally defrauded bond insurers about the creditworthiness of subprime mortgage-backed securities,” according to the Wall Street Journal. Joseph Morelle, who is the chairman of the New York State Assembly, said that he doesn’t “want to get ahead of (himself),” but if people were being mislead it's “obviously problematic.”

Continue reading " The State of New York is Investigating Bond Insurers' Claims that They were Defrauded by Wall Street Firms " »