Investment Fraud Lawyer Blog

The U.S. Department of Justice is investigating accounting fraud at unspecified Chinese companies listed on U.S. stock exchanges, according to a Wall Street Journal article entitled “Shift in Sentiment Toward China’s Internet Darlings.” The Department of Justice has not identified the companies being investigated. Last year, the SEC was reportedly investigating financial services firms that helped bring these Chinese companies to market, as well as the Chinese companies themselves.

Continue reading " Shares of Chinese Internet Companies Plunge Over Alleged Accounting Fraud " »

Investment fraud accounts for $40 billion in investor losses per year, according to the association of state securities regulators called the North American Securities Administrators Association (NASAA). Con artists take advantage of fear as well as greed, and fear of running out of money is prevalent these days.

Continue reading " Protect Yourself Against Investment Scams " »

The little stream of protest called “Occupy Wall Street” may soon turn into a torrent. The protest, which began on September 17 with 3,000 protesters, appears to be spreading both to other groups and unions and other cities. (Twitter is awash with calls to "occupy Boston" tonight). Crain’s quoted a political consultant as saying: "It’s become too big to ignore.” This week the protest may be becoming even larger as a result of support from unions and community organizations. See “Occupy Wall Street Protests Posed to Grow Rapidly With Union Support." (TPM Idea Lab).

Continue reading " Is the 'Occupy Wall Street' Movement Gaining Traction? " »

The Recession of 2008 slowed our economy to a crawl and also produced significant societal changes. High unemployment among young adults aged 16 to 29 produced the biggest impact on the American way of life, followed by increased immigration and the resulting increase in the poverty rate. The 2010 Census revealed some landmark changes since World War II and these changes were highlighted by Hope Yen in an article for the Associated Press and picked up by MSNBC.COM.

Continue reading " Recent Economic Data Is Troubling " »

One of the latest animals from the alternative investment zoo is called “factored structured settlements.” As investors have become frustrated with low yields and high volatility of traditional financial instruments like stock and bond funds, brokerage firms have increased their sales of an array of alternative investments. Factored structured settlements work like this:

Continue reading " Factored Structured Settlements: Another Risky Alternative Investment " »

To demonstrate that this blog is not just full of thoughts put to words, we offer the following link to an entertaining and thought provoking music video that proves that disappointment in, and anger against, Wall Street events over the last few years is not limited to this country.

Please welcome the acclaimed English acoustic duo Show of Hands, comprised of Steve Knightley and Phil Beer, performing their song Arrogance, Ignorance and Greed (AIG).
http://www.youtube.com/watch?v=T-n8ITk6UWM

Jobs at Wall Street banks are being eliminated at an increasingly rapid pace and this bodes ill for many employed in the financial services sector.

Bloomberg’s recent article “UBS Bankers Face Dwindling Options for Jobs” underscores this situation. Those pushed out at UBS will doubtless find few opportunities on Wall Street. The bigger story, however, is that what is happening at UBS is just a small part of the overall “brain drain” occurring all across Wall Street these days, as the larger global banks are cutting jobs at the fastest rate since 2008.

Continue reading " Job Cuts at UBS - A Microcosm of What's Happening on Wall Street " »

Prices and sales in the housing market appear to be grim through 2015 according to economists, builders and others in the industry. The biggest drop already occurred in 2008. Ancillary industries such as landscaping, mortgage lending, and home improvement feel the loss as well.

Continue reading " The Housing Markets Aren't Bouncing Back " »

Alternative funds, mutual funds that use hedge fund-type strategies but do not charge typical hedge fund performance fees of 20%, aren’t producing expected results. The attraction of alternative funds was the promise of growth with of downside protection as a result hedging strategies.

Continue reading " Alternative Funds: Long Term Performance Doesn't Justify the Risks " »

A Bank of America employee will collect $930,000 from his former employer, Bank of America, for being fired in violation of the whistleblower protections. The employee blew the whistle on fraud at Countrywide Financial Corp. and led internal investigations that found “pervasive wire, mail and bank fraud involving Countrywide employees,” according to the U.S. Department of Labor. He was terminated soon after the bank acquired Countrywide in 2008. In addition, Bank of America must reinstate the whistleblower. He claimed that others who tried to report fraud to Countrywide’s employee-relations department suffered persistent retaliation. The $930,000 includes back wages, interest, compensatory damages and attorney fees.

Continue reading " Whistleblower Problems Add to Bank of America's Woes " »

Any kind of crisis is fair game on Capitol Hill. A favorite complaint right now is that “regulations kill jobs”. Both political parties repeat this talking point and industry lobbyists use it as a rallying cry. There aren’t a lot of polls or studies on whether or not this is true. So far the evidence points to a mere shift in the type of jobs within an industry unless there is an outright ban on a product.

Continue reading " Regulations and Jobs " »

In recent years, hedge funds have become dominant players in the investment markets and the evidence suggests that hedge fund trading (which regularly involves thousands, if not hundreds of thousands, of shares) has been a significant contributing factor to market volatility.

Continue reading " Do Hedge Funds Create and Burst Bubbles for their Own Benefit? " »

Class warfare, now a part of the current political mantra, is the cry when it comes to proposals to tax the rich at a higher rate to raise revenues. To consider any issue “warfare” assumes a serious conflict or disagreement sometimes with the intent to destroy. Paul Krugman, in an article for The New York Times, takes a look at that very subject.

Krugman points out that median income has risen 100 percent since World War II according to the Congressional Budget Office. During the period of 1979 to 2005 the median income of the middle class increased 21 percent compared to 480 percent for the top 100th of 1 percent of income distribution. Some of the disparity can be attributed to government policies, financial deregulation, and continued pressure on organized labor. In the current environment a big driver of the disparity is our tax system as it has evolved and so far the wealthy do not appear to be suffering from any form of class warfare.

Continue reading " Class Warfare? " »

The risks are increasing for investors in principal protected notes, reverse convertibles and other structured products associated with Bank of America, Citigroup and Wells Fargo. Moody’s recently announced that it has downgraded the debt of those financial institutions. One reason given: the U.S. government is unlikely to bail them out again. “It is more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled, as the risks of contagion become less acute,” said Moody’s.

Continue reading " Risks Increase for Structured Products Involving Bank of America, Citigroup and Wells Fargo " »

The time is ripe for financial scammers who seek to take advantage of senior investors. Recently a 76-year-old Texas insurance agent was sentenced to up to 15 years for selling fake annuities to other elderly investors. The scammer in this case just happened to be the same age as many of his elderly victims. Mr. Langford apparently stole close to $7 million from dozens of clients through the sale of phony “private annuities” and promissory notes that promised interest rates as high as 9%.

Continue reading " Seniors Are Increasingly Targeted in Financial Scams " »

Most investors are not well informed about exchange traded funds and 46% describe themselves as “novices,” according to a survey taken by Charles Schwab Corp. Yet the survey also found that 44% planned to increase their exchange traded funds investments. Let’s hope these investors avoid the numerous extreme and exotic funds out there, which add risks that most investors do not understand or want.

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

Nontraded (private) real estate investment trusts ('REITs') are highly risky for retail investors. These investments typically charge extremely high fees, are illiquid and are virtually impossible to value. The Financial Industry Regulatory Authority (FINRA) is reportedly finalizing a proposed rule that would decrease the time that broker-dealers have to estimated the value a nontraded REIT.

Continue reading " Regulators Seek More Accurate Disclosures about Nontraded (Private) REITs " »

Investors, especially in retirement accounts, are pouring money into so-called “stable value funds” but the stability of those funds is not as advertised. The funds are often sold as higher-yielding money market funds, but they lack the safety and stability of a money market fund. Also, the higher-than-money-market yield and stability come at a price - locking up investors’ money and imposing hefty surrender charges on certain withdrawals.

Continue reading " Stable Value Funds Aren't So Stable " »

What in the world is going on with corporations today? How does one draw the line between capitalism and greed? Whatever happened to the theory that when employee hard work contributes in a positive way to the corporate bottom-line, everyone prospers? These are some issues addressed by Sally Kohn writing for The Guardian, a British national daily newspaper.

Continue reading " Wall Street Versus Main Street: Greed Versus Common Sense " »

A recent report from the SEC Inspector General has given the SEC another “black eye.” Apparently, senior management at the SEC allowed its general counsel. David Becker, to participate and vote in a decision on whether Madoff victims would be entitled to recover fraudulent “profits” in their account or whether recoveries would be limited to the amounts invested. The problem - Mr. Becker had a personal interest in the decision. He along with two brothers inherited a Madoff account held by his mother, who died in 2004, and Becker and his brother closed the account shortly thereafter with a $1.5 million “profit” (the amount invested by his mother was $500,000).

Continue reading " Another 'Black Eye' for the SEC " »

Most of us who have been around since the Space Age began grew up in a middle class home with a Dad who worked, a Mom who stayed home to take care of the house and kids and at least one dog. There was that “corporate ladder” to climb with the promise of raises and promotions to those who worked hard. The economy thrived on the employment of trained and motivated people. Technological advances were in their infancy. This Middle Class Picture is the equivalent of the American Dream – work hard at your job and you too can have a home, a car, college for the kids and a comfortable retirement. Unfortunately, this “picture” is fading fast.

Continue reading " What's Happened to the Middle Class? " »

Bond investors have significant risks lurking in their portfolios according to many experts. U.S. Treasury securities are priced for recession and very expensive. Yields are at historic lows. Inflation is highly probable before this decade is out, according to experts. Even a modest rise in interest rates would kill long and intermediate term U.S. Treasury bonds. One advisor who ran the numbers found that a rise of 3 percent in Treasury yields would result in a 40.7 percent loss on the 30-year bond and a 23.5 percent loss on the 10-year. Many money managers and advisors are avoiding U.S. Treasuries. A recent InvestmentNews headline reads: “Disastrous bond rout just up the road, experts warn.”

Continue reading " Bond Investors Face Their Own Set of Risks " »

UBS will slash bonuses and eliminate more positions as a result of the now estimated $2.3 billion trading loss it has called “unauthorized,” according to observers. Apparently, the positions that resulted in the $2.3 billion loss were normal in size and appeared to be hedged, but the hedges were “fictitious positions.” As a result, there may be no bonus pool at all as well as sharp employee cuts. See Bloomberg article, “UBS Bonuses at Risk After $2.3B Trading Loss” (Sep 18, 2011).

Continue reading " UBS to Eliminate More Jobs and Slash Bonuses " »

Demographics is destiny, the saying goes, and the behavior of three big demographic groups is adversely affecting the traditional stock market. These groups are selling stocks (equities) and apparently staying away. Baby boomers (ages 46 to 64) are or soon expected to be net sellers of stocks to generate cash for retirement living, according to the Federal Reserve Bank of San Francisco. Generation X (ages 31 to 45) and Generation Y (ages 18 to 30) regard the stock market with fear and loathing, much like their Great Depression era grandparents, whose burned-in thriftiness persisted in better times. Finally, all of the groups are reducing their equity investments because of the extreme daily volatility that has almost become the norm.

Continue reading " Are the U.S. Equity Markets at Risk? " »

Unemployment is due to remain at 9 to 10% and the nation’s poor continue to increase. Incomes across the board have declined over the last several years but the poor show a greater loss than the rich. As Hope Yen points out in an article for the Associated Press, the statistics behind this phenomenon are abundant and all point to the fact that one in six Americans, 46.2 million people are now living in poverty and those without health insurance are at a 20 year high of 49.9 million.
The figures just released by the Census Bureau show the numbers increasing faster than in the early 1980s when we had severe government cutbacks creating high inflation, unemployment, high interest rates and an energy crisis. Mississippi claims the largest share of poor people at 22.7 percent and New Hampshire the lowest at 6.6 percent.

Continue reading " Unemployment and Poverty Continue to Grow in America " »

The recent UBS “rogue trader” debacle illustrates that, while exchange traded funds based on major indices may be suitable investments for many investors, more extreme and exotic exchange traded funds often involve tremendous risk, and are therefore unsuitable for most investors.

Continue reading " Exchange Traded Funds Can Blow Up " »

MarketWatch is reporting a prediction by John Stephenson, senior vice president of First Asset Management in Toronto, that a new, Lehman-like financial crisis will occur in the next six to twelve months, this time involving the debt of government and European banks. Mr. Stephenson predicts that stocks will fall to levels that existed just after the collapse of Lehman in 2008. The decline will be “deep” and “ugly,” he told MarketWatch columnist Howard R. Gold. Mr. Gold takes him seriously. See his column entitled “Lehman Brothers II crisis is coming soon.”

Continue reading " Market Risks Continue to Grow " »

The stock market is more volatile than ever, according to a recent study done by the New York Times. Intra-day price fluctuations of four percent or more have occurred almost six times more since 2000 than they did on average between 1960 and 1999. Ten of the twenty largest daily price increases and eleven of the 20 largest daily price decreases have occurred in the past three years. Louise Story and Graham Bowley of the New York Times report that “Market Swings Are Becoming New Standard.” Observers wonder whether this is a structural (permanent) change or a transitory phenomenon.

Continue reading " Has Market Volatility Become the Norm Rather than the Exception? " »

Many investors, both individuals and corporations, were misled by their brokers and harmed during the credit crisis. For various reasons, however, many such investors have not yet taken action to recover their losses. Some have delayed taking action in order to see whether the misconduct warranted legal action while others just put it off until a later time. Investors need to appreciate that time is running out on their claims, and they should act now or forever hold their peace.

Continue reading " Time Is Running Out On Credit Crisis Legal Claims " »

The SEC is expanding its investigation into Wall Street’s sales practices involving toxic collateralized debt obligations that were linked to subprime mortgages as more and more evidence comes out that the Wall Street banks deliberately defrauded some of their customers.

Continue reading " SEC Expands Investigations into Toxic CDO Deals as the Awful Truth Begins to Come Out " »

A UBS exchange-traded-fund director has lost $2 billion of the firm’s money, raising questions about the bank’s proprietary trading and risk management systems just three years after it lost over $39 billion and had to be rescued by the Swiss National Bank.

Continue reading " Rogue Trader Reportedly Costs UBS $2 Billion " »

Close to a third of the 800,000 repossessed homes in this country are owned by the government as the result of Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) loans gone bad. Dumping them all on the market would further depress the economy yet it costs taxpayers money to keep them livable.

Continue reading " Taxpayers Foot Big Bills on Foreclosures " »

While the first exchange traded funds were liquid investments tracking broad-based stock indexes like Standard & Poor’s, MSCI and Dow Jones indexes, they have since morphed and mutated into a jungle of extremely high risk products that cater to the worst instructs of investors according to Vanguard founder John C. Bogle. Mr. Bogle who invented low-cost mutual fund investing, is not a fan of most exchange traded funds and observed, “Some kind of monster was built out of what I created.”

Continue reading " Avoid Extreme and Exotic Exchange Traded Funds (ETFs) " »

Affinity investment fraud is a big problem in the United States, according to regulators. Fraudsters take advantage of a presumption in the minds of victims that a person with whom you have something in common is trustworthy. That this is not necessarily so was demonstrated once again when deaf investors lost $3.45 million to “one of their own,” a deaf investment advisor. According to a recent InvestmentNews article by Liz Skinner entitled “Deaf investment adviser defrauded 7,000 deaf clients: SEC.”

Continue reading " Deaf Advisor Charged with Defrauding 7,000 Deaf Investors " »

Brokers and financial advisers are recommending higher yielding “floating rate” funds to investors seeking more yield in the current low yield environment, but, for a number of reasons, regulators are warning that these investments are risky.

Continue reading " Floating Rate Funds Are Not Safe Investments " »

Investors who bought toxic mortgage-backed bonds from Bank of America’s Countrywide, and homeowners seeking loan modifications are proposing drastic measures to better enable BofA to deal with the onslaught of their litigation without a bankruptcy or a receivership imposed by the Federal Deposit Insurance Corporation. According to a Reuters/CNBC.com article entitled “Will Bank of America Tale a Play Out of the Asbestos Handbook,” the proposed approaches include an asbestos litigation-style trust to deal with claims and litigation, a so-called “bad bank” managed by federal regulators, or the sale of litigation warrants by which public investors would purchase the right to receive whatever is left in a settlement trust. The bond investor litigants include American International Group (AIG) and the Federal Housing Finance Agency, among others.

Continue reading " Bank of America Must Deal with Exposure of $50-$100 Billion Associated with Toxic Mortgages Securities " »

Investors and their advisors who may be considering putting money at risk should read what noted investor George Soros and Nouriel Roubini, an economist who predicted a bubble in U.S. housing prices before the market peaked in 2006, have to say in CNBC.com’s “Crisis ‘Worse Than Lehmans,’” Scott Hamilton’s Bloomberg article “Roubini: Slowdown Brings Forward New Crisis,” and InvestmentNews’ “Absent ‘massive stimulus,’ world headed for another Great Depression: Roubini.”

Continue reading " Experts Forecast More Bad Economic Developments " »

The chasm of disparity between rich and poor is wider now than ever subjecting our economy to violent swings between boom and bust. The richest 5% of Americans now account for 37% of consumer purchases according to Moody’s Analytics. The solution is not a mere matter of income redistribution but more like tuning up the engine on a car so that it runs on all six cylinders rather than only two.

Continue reading " Washington Continues to Ignore the Middle Class - the Real Driver of Economic Prosperity " »

It is becoming increasingly likely that big hedge funds will end the year with steep losses, says Maureen Farrell in her CNNMoney article, “Big hedge funds are getting slaughtered.” Hedge funds, which are unregulated, now manage $2.04 trillion, the most money they have ever managed. Some are marketed as absolute return funds that are supposed, by virtue of complex hedging strategies, to be able to provide a positive return in up and down markets alike.

Continue reading " Hedge Funds Are Not Providing a Safe Haven from Market Volatility " »

Investors pulled $44.5 billion out of stock mutual funds and $10 billion out of bond mutual funds in August, and that trend is expected to continue. According to Jeff Benjamin’s InvestmentNews article entitled “Fund investors throw in towel,” this marks the biggest net outflow from mutual funds since October 2008. The 2008 credit crisis is still fresh in investors’ minds and they do not want another stomach churning debacle involving their money. The proceeds are being put in FDIC-insured money market accounts paying an average of 0.57% per annum, according to the article.

Continue reading " Investors Are Bailing Out of Mutual Funds " »

Sales of structured notes issued by Bank of America have sunk to the lowest level since January 2008 as a result of investors’ concerns about the creditworthiness of the bank, according to Matt Robinson’s Bloomberg article entitled “Bank of America Structured Notes Sales Drop as Buyers ‘Shy Away.’” Similarly, credit default swaps on BofA have surged recently, reflecting the increased premium being demanded by third parties to make good on BofA’s debt obligations should the bank default on them.

Continue reading " Concerns Arise Regarding Structured Notes Issued by Bank of America " »

Bank of America is considering eliminating 40,000 positions as a first wave of cuts to occur over a period of years, partly through attrition and hiring slowdowns. According to Dan Fitzpatrick’s Wall Street Journal article entitled “BofA Cutbacks May Hit 40,000,” the reductions are expected to come largely from the consumer side of the bank.

Continue reading " Massive Job Cuts at Bank of America " »

Robert Powell’s MarketWatch article entitled “Things are bad, but analysts can’t say sell” underscores how unreliable Wall Street’s recommendations are. Wall Street’s lack of credibility continues to undermine confidence in our financial markets. One reason for that lack of credibility is dishonest recommendations. Many Wall Street insiders have long recognized that “Hold” means “Sell” in Wall Street doublespeak.

Continue reading " Wall Street Recommendations Defy Logic and Common Sense " »

All Americans should read Paul B. Farrell’s MarketWatch article, “Occupy Wall Street will lay siege to U.S. greed.” He reports that as many as 20,000 protestors could occupy Wall Street on September 17, (interestingly a Saturday) and suggests that the number of protestors could grow to 90,000 or so if social media generates a flash mob.. The would-be occupiers, who identify themselves as “the 99% that will no longer tolerate the greed and corruption of the 1%,” say they will stay there until they get what they want, namely the elimination of Wall Street as “the greatest corrupter of our democracy.” Farrell points out that, before lightly dismissing this protest, Americans should remember that disenchanted revolutionaries have recently risen up in many other countries and even overthrown dictators.

Continue reading " Protestors Plan to 'Occupy Wall Street' " »

Many registered investment advisors and brokerage firms have increased their use of alternative investments for clients, many of whom are retired and lack the knowledge and sophistication to understand the complex investments, according to Liz Skinner’s InvestmentNews article entitled “Clients clamoring for alternative investments and advisers obliging.” But are alternative investments suitable for most investors? Similarly, are most investors provided with balanced disclosures of the risks that they are taking when they invest in alternative investments? Unfortunately, the answer to both questions appears to be no.

Continue reading " Alternative Investments Are Very Complex and Involve Significant Risks " »

The crisis in confidence dragging down the economy and financial markets is multi-factorial, but surely a significant part of the problem is that you just can’t trust Wall Street financial institutions to tell the truth about their own financial health, according to John Carney’s CNBC.com article entitled “Wall Street’s Credibility Problem.” He cites Morgan Stanley’s assertion on September 29, 2008, two weeks after the bankruptcy of Lehman Brothers, that it had a “strong capital and liquidity position.” In fact, however, almost all of its available cash was borrowed from the Federal Reserve. The firm actually reached its borrowing peak of $107.3 billion on the very same day it said it had a “strong capital and liquidity position.”

Continue reading " Wall Street's Lack of Credibility Drains Investor Confidence " »

Wall Street is aggressively selling so-called structured notes as a “safe” way to earn increased returns without increased risk. The appeal of such a pitch is obvious in these times of low interest rates and stomach-churning stock market volatility. Structured notes are gaining in popularity. Retail sales of structured notes increased by 46% in 2010 to a record $49.4 billion, according to Bloomberg, and are expected to be up again sharply in 2011. But beware, says Fortune magazine contributor Janice Revell (“Beware of Wall Street’s latest ‘safe’ investment,” CNNMoney), there is increased risk and the increased returns are illusory.

Continue reading " Investors Should Pass on Reverse Convertibles and Other Structured Products " »