Investment Fraud Lawyer Blog

Roche International has sued Credit Suisse for over $270 million in losses that the drug company incurred after the bank’s brokers invested $545 million of its money in auction rate securities. Roche’s Credit Suisse relationship managers were Julian Tzolov and Eric Butler, who are now serving federal prison sentences for securities fraud in connection with auction rate securities. In its lawsuit, Roche alleges that it was among Tzolov and Butler’s victims, accusing them of investing the company’s money in risky auction rate securities while claiming it was invested in highly liquid, government-backed student loan securities.

Continue reading "Credit Suisse Sued Again over Auction Rate Securities Abuses" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Common Securities Broker Abuses , Credit Suisse , Regulatory Developments , Securities Arbitration , Securities Litigation

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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 9996 and, on Monday, the market rose 96 points.

• On Tuesday, the Dow Jones Industrial Average fell 51 points.

• On Wednesday, the Dow Jones Industrial Average dropped 92 points.

• On Thursday, the Dow Jones Industrial Average moved up 132 points.

• On Friday, the Dow Jones Industrial Average sunk 109 points and closed the week at 9972.

Continue reading "Page Perry's Market Monitor - October 23, 2009" »

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Posted In: Auction Rate Securities , Brokerage Firms , Deutsche Bank , Employment Issues , Goldman Sachs , J. P. Morgan Chase , Market Developments , Morgan Stanley , Municipal Bonds , Smart Investing Tools , SunTrust , Wells Fargo

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A federal judge in Atlanta recently dismissed a class action lawsuit brought against SunTrust for fraud in the sale of auction rate securities. The case was not dismissed on the merits of investors’ claims against SunTrust, but based on technical legal requirements about what it takes to plead a claim. Those requirements are strict in securities fraud cases that get filed in federal court, especially class actions, but they do not apply to cases that get filed in arbitration.

Continue reading "Arbitration or Class Action - Which is Better for Investors?" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Securities Arbitration , Securities Class Actions , SunTrust

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Citigroup Global Market, Inc. has filed a motion to dismiss an action against it by KV Pharmaceuticals Co. arising out of sales of auction rate securities, according to an August 25 article in Law360 by Christine Caufield entitled "Citigroup Argues KV Pharma Knew ARS Risks." The case is pending in the United States District Court for the Eastern District of Missouri. Citigroup appears to following the playbook of other Wall Street firms, arguing that KV was a "sophisticated investor" that knew the risks of ARS, that KV failed to identify any material misrepresentations by Citigroup, failed to allege it relied on any Citigroup statements in deciding to invest, failed to establish any actual loss, and failed to file suit before the statute of limitations ran out.

Continue reading "Wall Street's Defense Tactics Confirm Betrayal of Corporate Clients" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Charles Schwab , Citigroup/Smith Barney , Common Securities Broker Abuses , Securities Litigation

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Regions Bank has agreed to pay $1 million to settle investment fraud charges brought by the Securities and Exchange Commission, according to a September 21 article by AP Legal Affairs writer Curt Anderson. On September 21, the SEC issued a Cease-and-Desist Order finding that Regions, the primary banking subsidiary of Regions Financial Corporation, was a cause of U.S. Pension Trust Corp.'s and U.S. College Trust Corp.'s (collectively, USPT) violations of federal securities laws.

Continue reading "Regions Bank's SEC Problems Grow" »

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Posted In: Auction Rate Securities , Brokerage Firms , Common Securities Broker Abuses , Investment Advisers , Morgan Keegan , Morgan Keegan Bond Funds , Regulatory Developments

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Eighteen months after the auction rate securities markets collapsed when Wall Street withdrew its support, companies like Bristol-Myers Squibb Co., Texas Instruments, Corning, and Teva Pharmaceuticals are still suffering from the Wall Street debacle. They have written down their auction rate securities by $4.8 billion, according to an August 28 article on Bloomberg.com by Duncan McNichol called "Wall Street Betrayal Seen in $4.8 Billion Company Debt Losses." The brokerage firms selling auction rate securities led their corporate clients to believe that auction rate securities were a lot like a money market funds while, at the same time, the they knew that auction rate securities faced grave problems and were being misrepresented as being safe and liquid. Similarly, many of the risks and problems in the auction rate securities markets went undisclosed to corporate buyers. Of 449 publicly trade companies holding $22 billion of auction rate securities, all but 45 have written down the value of their ARS holdings.

Continue reading "Auction Rate Securities Debacle Reveals Wall Street's Betrayal of Corporate Investors" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Common Securities Broker Abuses , Regulatory Developments , Securities Arbitration , Securities Litigation

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A retired securities lawyer and his wife have filed suit in the U. S. District Court for the Middle District of North Carolina over losses they sustained as a result of investing in preferred stock auction rate securities issued by Nuveen Investments. Auction rate securities are debt instruments -- in this case preferred stock-- for which interest is regularly reset through a Dutch auction. Auction rate securities were once routinely marketed as safe, cash equivalents that were highly liquid, but the broker-dealers who sold them failed to disclose that liquidity was entirely dependent upon the success of the auction process, which was being artificially supported by the undisclosed participation of brokers bidding in auctions where they had an interest. The North Carolina suit alleges fraud and securities law violations at all levels, including claims against the issuers, the underwriters, and the broker-dealers who sold the securities and managed the auction process.

Continue reading "Investor Sues Nuveen, Merrill, Citigroup and Deutsche Bank over Auction Rate Securities" »

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Posted In: Auction Rate Securities , Brokerage Firms , Citigroup/Smith Barney , Common Securities Broker Abuses , Deutsche Bank , Investment Advisers , Merrill Lynch , Securities Arbitration , Securities Litigation

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Charles Schwab’s recent article in the Wall Street Journal, entitled “Brokers Aren’t Responsible for Bad Bets,” is a cynical attempt to change the subject that compares very unfavorably with the intellectual honesty of Warren Buffet, according to Susan Antilla in her August 21 article in Bloomberg.com. Mr. Schwab’s article was in response to a lawsuit filed against Charles Schwab & Co., Inc. by the Attorney General of New York. The lawsuit alleges, in essence, that Schwab owed its customers a duty to properly understand and make accurate representations concerning the auction rate securities it sold, and that Schwab breached that duty by misrepresenting them as liquid, short-term investments without discussing the risks. These representations gave investors a false sense of security that their investments would always be liquid when auction rate securities, in fact, faced significant, inherent liquidity risks. The Complaint can be found at http://www.oag.state.ny.us/media_center/2009/aug/aug17a_09.html.

Continue reading "Despite Assurances to Investors, Schwab Doesn't Want to Play by the Rules" »

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Posted In: Auction Rate Securities , Brokerage Firms , Charles Schwab , Common Securities Broker Abuses , Investment Advisers , Regulatory Developments , Securities Litigation

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Northern Trust Securities, Inc. has succeeded in obtaining the dismissal of a class action filed against it by Aimis Art Corp. arising out of the sale of auction rate securities, reported Liz McKenzie in her Law360 article entitled “Northern Trust Escapes Investor’s ARS Action.” Aimis filed the lawsuit on September 17, 2008. On September 29, 2008, Northern Trust announced a program through which it would repurchase certain of the auction rate securities. In December 2008, Aimis received the par value of its investment in the auction rate securities. The case was pending in the U. S. District Court for the Southern District of New York.

Continue reading "Auction Rate Securities Class Action Dismissed When Brokerage Firm Buys Back Holdings of Investor" »

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Posted In: Auction Rate Securities , Brokerage Firms , Securities Class Actions

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Brokerage firms who sold auction rate securities had to feel a jolt if they read Chad Bray’s recent article in the Wall Street Journal (“Broker Convicted in Auction-Rate Case”). A jury convicted a former Credit Suisse broker of a crime – subject to 45 years in prison – after less than a day of deliberation. It’s true that the government claimed that he and another broker changed the names of securities on communications with clients to conceal the fact that the securities were not backed by federally guaranteed student loans, which is not something every broker who sold auction rate securities did. Nevertheless, the jury found the broker “guilty of securities fraud and two counts of conspiracy,” according to the article, and “securities fraud” is a charge widely associated with sales practices related to auction rate securities. In the words of the U.S. Attorney who prosecuted the case: “The defendant’s fraudulent misrepresentations saddled investors with unknown risks they did not bargain for…. [an allegation found in most civil lawsuits involving auction rate securities] This case shows that those who engage in such schemes will be held to account for their criminal activity.”

Continue reading "Bad News for Brokerage Firms that Sold Auction Rate Securities" »

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Posted In: Auction Rate Securities , Brokerage Firms , Common Securities Broker Abuses , Credit Suisse , Securities Litigation

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Raymond James “long-suffering clients remain frozen in auction-rate securities hell,” says Gretchen Morgenson in her August 2 article in the New York Times called “Investors Without a Lifeline.” Raymond James misrepresented auction rate securities to retail investors as safe and liquid, just like many larger Wall Street firms that have settled with the regulators and agreed to buy them back. But Raymond James is refusing to buy back auction rate securities it sold to investors on the ground that it did not underwrite them, it just sold them. In its most recent quarterly filing, Raymond James further indicated that it lacks sufficient regulatory capital and borrowing power to buy back the securities, and says, if it were forced to do so, that “could adversely affect the results of operations,” according to the article.

Continue reading "Raymond James Ignores Customers to Whom it Sold Auction Rate Securities" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Common Securities Broker Abuses , Investment Advisers , Raymond James , Regulatory Developments , Securities Arbitration , Smart Investing Tools

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The recent settlement between regulators and broker-dealers that sold auction rate securities are not good news for large and institutional investors, reports Law360 in a July 30 article entitled “Will Their Be An Onslaught of ARS Litigation?” The settlements typically require the defendant firms to by back auction rate securities from individual investors, nonprofits and small companies with less than $10 million in assets at the firm. On the other hand, the brokerage firms are only required to use their “best efforts” or “work with” large investors in addressing their liquidity problems. Armed with this knowledge, and the knowledge that the government will not assist them, a number of institutional investors have gone the self-help route by taking legal action. Among them are Ashland Inc. ($194 million), Braintree Laboratories ($33 million) and Texas Instruments ($524 million), Ocwen Financial Corp. and Bankruptcy Management Solutions Inc. More large companies are expected to do the same.

Continue reading "Large Investors Are Pursuing Auction Rate Securities Claims" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Securities Arbitration , Securities Litigation

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On July 21, 2009, the Securities and Exchange Commission (“SEC”) filed a Complaint against Morgan Keegan & Company, Inc. in the United States District Court for the Northern District of Georgia for misleading investors about the liquidity risks of auction rate securities that it sold. Morgan Keegan sold approximately $925 million of auction rate securities between November 1, 2007 and March 20, 2008 after it knew the market for such securities was deteriorating and it had decided to stop supporting the market, according to the SEC. The Complaint alleges that Morgan Keegan’s sales practices violated the anti-fraud provisions of the United States securities laws, and seeks an order directing Morgan Keegan to stop violating those laws, repurchase all auction rate securities it sold before March 20, 2008, disgorge all ill-gotten gains or unjust enrichment it has enjoyed as a result of its unlawful activities, and pay civil monetary penalties pursuant to federal statutes.

Continue reading "SEC Charges Morgan Keegan with Fraud in the Sale of Auction Rate Securities" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Common Securities Broker Abuses , Morgan Keegan , Regulatory Developments

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New York Attorney General Andrew Cuomo has sent a letter to Charles Schwab & Co. giving notice of his intent to bring a civil fraud suit against the brokerage firm for its sales practices in connection with auction rate securities. Auction rate securities are variable rate instruments in which the rates are determined through periodic auctions, but since the auction markets collapsed in February 2008 the investors holding such securities have been unable to liquidate their investments. In an enforcement letter dated July 17, 2009, Cuomo’s office contends that Schwab misrepresented to its customers that auction rate securities were a safe, liquid cash equivalent without disclosing that the liquidity of the securities was completely dependent upon the success or failure of the auction process, which was subject to manipulation by the broker-dealers who sold the securities and ran the auctions.

Continue reading "New York Attorney General Notifies Schwab of Intent to Sue over Auction Rate Securities Fraud" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Charles Schwab , Regulatory Developments , Securities Arbitration

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According to a July 20, 2009 article in the Wall Street Journal, TD Ameritrade Inc. agreed to buy back $456 million of auction rate securities from its clients as part of a settlement with NY Attorney General Andrew Cuomo, the SEC, and Pennsylvania regulators. Investors around the country, including individuals, charities, nonprofit entities and businesses will be entitled to monetary returns. TD Ameritrade said it may need until June 30, 2010 to complete the buybacks.

Continue reading "Regulators Settle Auction Rate Securities Claims Against TD Ameritrade" »

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Posted In: Auction Rate Securities , Brokerage Firms , Regulatory Developments

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Lehman Brothers Holdings Inc is being sued by two of its former clients for more than $190 million based upon allegations the failed bank mislead them about the market for auction-rate securities.

Continue reading "Lehman Brothers Hit with $190 Million Suit over Auction Rate Securities" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Lehman Brothers , Securities Litigation

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A new wave of lawsuits and arbitrations are being filed on behalf of investors who purchased auction rate securities but have not been eligible to participate in redemptions offered by big banks as a result of regulatory settlements. See article entitled “’Stranded’ ARS investors sue for a share of pie” by Jed Horowitz in the May 24, 2009 edition of InvestmentNews. These stranded investors purchased auction rate securities from “downstream” broker-dealers who sold but did not underwrite auction rate securities. The firms include Raymond James Financial Inc., Oppenheimer Holdings Inc., E*Trade Financial Corp., and TD Ameritrade Holding Corp., which were among the biggest distributors of auction rate securities, according to the article.

Continue reading "Investors Left Out of the Auction Rate Securities Regulatory Settlements Are Suing to Recover Losses" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Morgan Keegan , Oppenheimer , Raymond James , Regulatory Developments , Securities Arbitration , Securities Litigation , UBS

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Since the collapse of the auction rate securities market in February 2008, many of the broker-dealers who sold those securities have made arrangements to help customers get their money back—either because of regulatory actions, because of lawsuits, or because it was the right thing to do. Raymond James was one of the firms that hawked auction rate securities as a safe cash equivalent, but it does not appear that Raymond James's customers have gotten any relief even though these securities were clearly misrepresented and most of the the investors who bought them have been unable to cash out for the last 14 months. Why are the regulators ignoring Raymond James and leaving that firm's customers out in the cold to fend for themselves?

Continue reading "Auction Rate Securities Update: Why Are The Regulators Ignoring Raymond James's Customers?" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Common Securities Broker Abuses , Raymond James , Regulatory Developments , Securities Arbitration

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The state of Virginia has sued Stifel, Nicolaus & Company on behalf of investors in the state who purchased over $8 million worth of auction rate securities from the firm. This is the latest of many similar suits which are being filed by all over the country on behalf of investors who were misled about the risk and liquidity of auction rate securities. These securities were routinely misrepresented as conservative cash equivalents.

Continue reading "Virginia Files Suit Over Auction Rate Securities" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Regulatory Developments , Securities Arbitration , Securities Litigation

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Seven months after the Atlanta Journal and Constitution (AJC) reported that SunTrust Bank was negotiating with regulators to buy back $500 million in auction rate securities from SunTrust customers, the bank has decided not to pay back all of its customers. According to a statement released by the Financial Industry Regulatory Authority (FINRA) in May 2009, four (4) other investment firms agreed to repurchase $554 million worth of auction rate securities from investors who were misled about the liquidity of their investments, but SunTrust Investment Services, Inc. and SunTrust Robinson Humphrey, Inc. – both of which are subsidiaries of SunTrust Bank based in Atlanta – withdrew a previous offer to settle with FINRA.

Continue reading "SunTrust Backs Out Of Deal To Pay Back Investor Losses" »

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Posted In: Auction Rate Securities , Bonds , Brokerage Firms , Common Securities Broker Abuses , Regulatory Developments , Securities Arbitration , Securities Litigation , SunTrust

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