Investment Fraud Lawyer Blog

The state of Hawaii took a $250 million write-down on the auction rate securities in its investment portfolio at the end of 2009, according to a recent Bloomberg report. The write-down included 57 issues of student loan-backed securities that were purchased from Citigroup for over $1 billion in 2007 and early 2008, when they were sold to the state as tax equivalents that could be liquidated within 7 to 10 days. But the state—like thousands of other investors holding auction rate securities—has been unable to liquidate, prompting the state to write down their value to $752 million. The liquidity problem with these securities has exacerbated budget woes for a state that has a $1.2 billion deficit due to the drop of tourism revenue tied to the recession.

Continue reading "Auction Rate Securities Abuses Contribute to State's Financial Woes" »

Charles Schwab Corp. added a record number of independent investment advisors in 2009 as thousands of brokers left Wall Street firms, like Bank of America, Merrill Lynch, and Morgan Stanley Smith Barney, to launch their own investment advisory firms. See Reuters “Schwab says ‘breakaway broker’ trend has legs,” by Joe Rauch, Jan. 25.

Continue reading "Charles Schwab Confirms Trend of Brokers Breaking Away from Major Firms" »

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 markets were closed on Monday for Martin Luther King Day.

• On Tuesday, the Dow Jones Industrial Average opened at 10,610 and soared 116 points.

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

• On Thursday, the Dow Jones Industrial Average fell 213 points.

• On Friday, the Dow Jones Industrial Average plunged 216 points and closed the week at 10,173.

Continue reading "Page Perry's Market Monitor - January 22, 2010" »

An Illinois-based pension fund has brought a shareholder’s derivative action seeking to recover billions of dollars in executive compensation paid by Goldman Sachs. This could be the first of many such suits, reported James Armstrong of Law360, “Goldman Pay Suit Could Signal New Wave of Litigation,” Jan. 8, 2010.

Continue reading "Institutional Investors Are Fed Up With Wall Street Pay Excesses Too" »

Two months ago we reported that Citigroup Global Markets, Inc. had asked a New York court to dismiss a $72 million lawsuit filed against it by KV Pharmaceutical Co. Last week it was announced that Citi had agreed to settle with KV.

Continue reading "Citi Settles $72 Million Lawsuit Involving Auction Rate Securities" »

How short their memories. Wall Street firms on the brink of failure until rescued by a controversial taxpayer bailout continue to show their unabashed greed by claiming entitlement to massive amounts of money earned on funds "invested" by American taxpayers. Without those bailouts, most, if not all the Wall Street firms would be bankrupt or teetering on failure. Nevertheless, undeterred by the rising anger on Main Street and the populist backlash in Washington D.C., and flush with record revenues of $449.6 billion, Wall Street firms are on track to pay over $145 billion in bonuses for 2009, according to the Wall Street Journal.

Continue reading "Wall Street Firms "Thumb Their Noses" at Taxpayers and Washington Politicians - Award Obscene Bonuses Anyway" »

The first public hearings by the Financial Crisis Inquiry Commission were notable for what did not happen. The well-prepared Wall Street bankers faced the cameras with apparent humility, parried Commission clunkers with their own platitudes, and left pretty much unperturbed. Those who expected the reprise of the 1930s Pecora hearings must have been disappointed. “Pecora’s revelations enraged the public and stampeded Congress into creating the SEC and separating commercial banks from investment banks,” according to Paul Wiseman in his USA Today column, “Depression-era star muckraker shapes Wall Street inquiry.” He added: “In public hearings, Pecora squared off against the elite financiers of the age, pointing at them with his cigar and coaxing them into what [Senate historian Donald] Ritchie calls ‘startling admissions of wrongdoing.”

Continue reading "The Reason Real Change is Needed - Wall Street Maintains a Business as Usual Stance as Public Hearing Begin on the Financial Crisis" »

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 year at 10,428 and, on Monday, the market soared 156 points.

• On Tuesday, the Dow Jones Industrial Average dropped 12 points.

• On Wednesday, the Dow Jones Industrial Average gained 2 points.

• On Thursday, the Dow Jones Industrial Average rose 33 points.

• On Friday, the Dow Jones Industrial Average moved up 11 more points and closed the week at 10,618.

Continue reading "Page Perry's Market Monitor - January 8, 2010" »

The Wall Street Journal reports that “hundreds of businesses are fighting to recover billions of dollars tied up in frozen auction-rates securities, a year after Wall Street firms agreed to $60 billion in settlements over the collapsed market for the investments.” See “Firms Fight Banks Over Billions in Frozen Notes,” WSJ 1/2/10. While regulators stepped in to help individual investors after the auctions froze in February 2008, many corporate and institutional investors did not benefit from settlements between banks, broker-dealers and the SEC, FINRA and state attorneys general. According to Atlanta attorney Craig T. Jones, investors were left holding about $330 billion in illiquid securities when the auctions froze, so $60 billion in settlements is only a drop in the bucket.”

Continue reading "The Auction Rate Securities Debacle Continues - Corporate America Takes on Wall Street" »

So many investors have lost money in investments mis-marketed under assurances the investment was “principal-protected,” or “capital guaranteed,” that the Financial Industry Regulatory Authority (FINRA) has found it necessary to issue a notice (Notice to Member 09-73) reminding brokerage firms of their sales practice duties when recommending investments such as so-called Principal Protected Notes. These securities are structured products that are typically comprised of a zero-coupon linked to the performance of some other asset. That asset might be, for example, a derivative product based on a stock index or a basket of securities as obscure as the Brazilian Real-U.S. Dollar exchange rate and the price of copper.

Continue reading "Regulators Express Concerns about "Principal-Protected" and "Capital Guaranteed" Investments" »

If you were sold Main Street Natural Gas Bonds that were guaranteed by Lehman Brothers, you are likely to have a compelling claim to recover any losses that you sustained when Lehman Brothers went bankrupt. These bonds were sold to income oriented investors as relatively safe investments. However, the brokerage firms that sold them, in many cases, did not do their homework. If they had, they would have realized that these bonds were totally inappropriate for almost any investor.

Continue reading "Investor Alert: Main Street Natural Gas Bonds Backed by Lehman Brothers" »

Huge recruiting bonuses for brokers may bode ill for customers. Large brokerage firms like Merrill Lynch and Morgan Stanley Smith Barney are offering some of the highest recruitment bonuses ever offered – up to 330% of their previous year's fees and commissions – to entice reps who rank among the top fifth of their firms' producers to come to work for them, reported Bruce Kelly in his November 15 InvestmentNews article, “Warring wirehouses add fuel to hiring fire.”

Continue reading "Wall Street Recruiting Packages Put Customers At Risk" »

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 10,023 and, on Monday, the market soared 204 points.

• On Tuesday, the Dow Jones Industrial Average rose 20 points.

• On Wednesday, the Dow Jones Industrial Average climbed 44 more points.

• On Thursday, the Dow Jones Industrial Average fell 94 points.

• On Friday, the Dow Jones Industrial Average rebounded 73 points and closed the week at 10,270.

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

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" »

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 9820 and, on Monday, fell 41 points.

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

• On Wednesday, the Dow Jones Industrial Average dropped 81 points.

• On Thursday, the Dow Jones Industrial Average fell another 41 points.

• On Friday, the Dow Jones Industrial Average lost 42 points and closed the week at 9665.

Continue reading "Page Perry's Market Monitor - September 25, 2009" »

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 9605 and, on Monday, moved up 22 points.

• On Tuesday, the Dow Jones Industrial Average rose 57 points.

• On Wednesday, the Dow Jones Industrial Average soared 108 points.

• On Thursday, the Dow Jones Industrial Average dropped 8 points.

• On Friday, the Dow Jones Industrial Average rebounded 36 points and closed the week at 9820.

Continue reading "Page Perry's Market Monitor - September 18, 2009" »

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" »

The Bankruptcy Estate of Terra Securities ASA and seven Norwegian municipalities have filed a securities fraud action against Citigroup Global Markets, Inc. and related entities, as reported in the Wall Street Journal and news wires. The complaint contends that, in 2007, Citigroup fraudulently induced Terra and the municipalities into purchasing notes linked to a "tender option bond" (or TOB) fund managed by Citigroup. TOB funds hold leveraged positions in U. S. municipal bonds. The municipalities lost approximately $90 million and Terra, a Norwegian securities firm, experienced additional losses when it was forced into bankruptcy. The case was filed in the United States District Court for the Southern District of New York.

Continue reading "Norwegian Cities Sue Citigroup to Recover Losses in Tender Option Bond Funds" »

Investors are leaving big, full service firms like Morgan Stanley Smith Barney and Bank of American Merrill Lynch, and investing their money through online discount firms like Schwab and TD Ameritrade, according to a recent CNBC.com article called “Investors Dump Brokers to Go It Alone.” This has been happening for some time now, but the trend has accelerated since investors were badly burned by the toxic securities sold by major financial institutions and the related collapse and near-collapse of many of those financial institutions.

Continue reading "Major Wall Street Firms Losing Customers" »

In her recent article in the Wall Street Journal, Eleanor Laise reports that sales of Leveraged and Inverse Exchange Traded Funds (ETFs) have exploded to $32.8 billion as of June 2009, almost tripling the $11 billion held at the start of 2008. The number of such ETFs has increased to 119, an increase of 86%, over the same period. “The explosive growth in this area over the past year reflects an aggressive sales effort,” said William F. Galvin, Secretary of the Commonwealth of Massachusetts. These products are unsuitable for and should not have been sold to most investors.

Continue reading "Regulators Investigate Sales of Leveraged and Inverse ETFs" »