Investment Fraud Lawyer Blog

The subprime and credit crises affecting the economy have revealed an array of suitability abuses by Wall Street investment firms. While a rising stock market hides many abuses by brokerage firms, suitability abuses are more easily identifiable when times are tough. For example, many risk-averse investors with conservative objectives have recently discovered that they have sustained huge losses on unsuitable investments recommended to them as being very safe. Auction rate securities, short-term bond funds, AAA rated debt securities, and mortgage heavy mutual funds provide recent examples of suitability abuses.

Continue reading "Investor Suitability Claims on the Rise" »

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Posted In: Auction Rate Securities , Bank of America , Bear Stearns , Charles Schwab , Citigroup/Smith Barney , Common Securities Broker Abuses , Credit Suisse , Elder Abuses , Goldman Sachs , J. P. Morgan Chase , Lehman Brothers , Merrill Lynch , Morgan Keegan , Morgan Keegan Bond Funds , Morgan Stanley , RBC Dain Raucher , Raymond James , Schwab YieldPlus Fund , Subprime Mortgage & Collateralized Debt Obligation Problems , SunTrust , UBS , Wachovia

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In 2007, worldwide earnings for Dutch insurer Aegon NV dropped 20 percent. Profit in the Americas, however, rose 12 percent because of the firm’s little known division, World Financial Group Inc., whose agents sell life insurance, annuities and mutual funds from other Aegon units, as reported by Seth Lubove in a May 28th Bloomberg.com article.

According to the company’s marketing materials, what sets World Financial Group apart from traditional sales forces is its structure. The pyramid-like, multilevel sales organization produces hefty compensation for its agents but not from the sales of products as much as the recruitment of new agents. Agents who garner promotions also get a portion of the commissions earned by new agents they recruit.

World Financial has been accused by securities regulators in Missouri and Utah of misrepresenting investment returns and making unsuitable sales of variable annuities. This annuity controversy has also received attention from state securities officials in Alabama, Iowa, and Minnesota.

Continue reading "Have Things Changed At World Financial Group?" »

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Posted In: Common Securities Broker Abuses , Elder Abuses , Variable Annuities and Equity-Indexed Annuities

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At 78 million strong, baby boomers have always been a targeted demographic. Dubbed by the Social Security Administration as a “silver tsunami,” the baby boomers are an attractive opportunity for the financial services industry.

The financial services industry launched advertising campaigns geared towards boomers early. Many such firms have counted on the baby boomers to fuel growth in new products, from target-date mutual funds to investment funds that buy retirement businesses to expanded offerings form leisure industries. The experts, however, were wrong. For at least the next 25 years, as reported in the May 22, 2008 issue of Business Week, the retirement market will be much smaller than the often-cited 78 million. In fact, the growth rate will be less than four percent annually or may even be zero.

Continue reading "Retiring Baby Boomers: Fewer Than Expected" »

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Posted In: Common Securities Broker Abuses , Early Retirement Scams , Elder Abuses , Market Developments

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Cornerstone Ministries Investments, Inc., a Georgia-based company in the business of lending money to fund churches and/or faith-based organizations, filed for Chapter 11 bankruptcy on February 10, 2008 after apparently investing in speculative secular real estate ventures.

Cornerstone was able to lend money to churches by raising money through the issuance of Cornerstone stocks and bonds. Church-going consumers interested in making altruistic investments in the development of new churches were often the people investing in these stocks and bonds.

It appears that Cornerstone deviated from its core mission and branched out into secular, very speculative real estate ventures at the expense of its investors. Now that Cornerstone has filed for bankruptcy, the values of those stocks and bonds have plummeted, leaving the investors holding the bag.

Continue reading "Cornerstone Ministries Investors May Have Legal Claims Against Brokerage Firms Or Financial Advisors" »

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Posted In: Common Securities Broker Abuses , Elder Abuses

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According to opinion columnist David McPherson writing on ABCnews.go.com, certain unscrupulous financial advisers pitch a scenario to employees of major corporations. The pitch is quite attractive: You can retire early (while in your 50's), cash out your retirement plan, and live off 12 percent annual returns.

These brokers use unrealistic investments projections to convince prospects that they can retire comfortably when they are in their 50's. The brokers earn fees and commissions on millions of dollars simply by convincing employees to collect a single lump-sum payment in lieu of guaranteed monthly pension benefits.

In April, the Financial Industry Regulatory Authority (FINRA) launched an effort to warn employers and employees of early retirement schemes that “promise more they can deliver." Over the last two years, FINRA has disciplined two brokerage firms – Securities America Inc., and Citigroup Capital Markets Inc. – that had targeted employees of Exxon and BellSouth with similar schemes.

Continue reading "FINRA: Beware Early Retirement Scams" »

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Posted In: Common Securities Broker Abuses , Early Retirement Scams , Elder Abuses , Regulatory Developments , Smart Investing Tools

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On January 30, 2008, the North American Securities Administrators Association Inc. (NASAA) released a list of 11 "pro-investor legislative priorities" that it plans to support this year.

Investment News journalist Bruce Kelly reported that “state securities regulators are worried that the recent emphasis on making U.S. capital markets more competitive could lead to the pre-emption of their power by federal regulators.” Thus, NASAA’s first priority is to “support a strong and effective regulatory structure for capital markets."

NASAA's second priority is to "restore fairness and balance in the securities arbitration system."

Continue reading "NASAA's 2008 Legislative Agenda" »

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Posted In: Common Securities Broker Abuses , Elder Abuses , Regulatory Developments , Securities Arbitration

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Believe it or not, some states are actually “partnering” with marketing firms to convince low- and middle-income seniors to buy long-term care insurance policies that they do not need and cannot afford, according to an article in today's Wall Street Journal by Jennifer Levitz and Kelly Greene entitled States Draw Fire for Pitching Citizens On Private Long-Term Care Insurance.

LTC insurance is one of the most complex and expensive forms of insurance around. It also provides agents some of the highest commissions in the business – between 30% and 65% of the first-year premium payments plus 3% to 5% a year after that. The benefits for many targeted customers are nonexistent because their income and assets are low enough that they would qualify for free long term care under Medicaid.

To add insult to injury, some of these insurance companies play “hardball” with their customers, jacking up LTC premiums by as much as 700% after the first year, and refusing to pay legitimate claims. The National Association of Insurance Commissioners (“NAIC”) reported a 74% increase in complaints to state regulators relating to claim denials on LTC policies from 2003 to 2006. NAIC also said that more than 70% of those denials are reversed after complaints were made – a “pattern of error” not found with other types of health insurance.

Continue reading ""We're From The Government ... And We're Here To Sell You Long Term Care Insurance"" »

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Posted In: Elder Abuses

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In a Page One story in the Wall Street Journal on February 12, 2008, reporters Ellen Schultz and Theo Francis alerted us to one of the latest financial schemes targeting seniors, veterans, and the disabled. This is the latest twist for the fast growing payday loan industry – lenders who make high interest loans that are secured by the borrower’s future paychecks. The industry is now targeting recipients of monthly government benefits, including social security, disability, and veteran’s benefits.

Since federal laws bar the government from sending benefits directly to lenders, the lenders create relationships with banks that arrange for prospective borrowers to have their government benefits electronically deposited into an account. The banks then transfer funds to respective payday lenders who subtract the debt repayments, fees and interest before giving recipients the balance, which seniors often refer to as their “allowance.”
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With effective annual percentage rates as high as 400% or more, payday lenders can completely control a Social Security recipient’s finances. No statistics are publicly available on the proportion of payday loans that are backed by Social Security and other government benefits. An analysis of data from the U.S. Department of Housing and Urban Development revealed that payday lenders are located around government-subsidized housing for seniors as well as the disabled.

Continue reading "High Interest Payday Lenders Trap Seniors, Veterans And The Disabled" »

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Posted In: Elder Abuses

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On Thursday, February 14, 2008, correspondent Sarah Krouse reported in the Atlanta Journal-Constitution on testimony given before the Senate Special Committee on Aging regarding mortgage scams that are targeting seniors.

According to Krouse, three of the common types of fraud are:

Title Transfer – A scammer convinces a homeowner to sign a fraudulent document that serves to sign the house over to the scammer;

Home Sale – A foreclosure “rescue” company buys the house with the promise that the senior can remain as a renter and repurchase the house in a few years. Needless to say, these promises are unenforceable; and

Mortgage Negotiation – A fake rescue firm tells the homeowner that it will negotiate an extended and/or lower payment of the mortgage. The senior makes the mortgage payments to the firm, but none of the money reaches the mortgage company.

Continue reading "Common Mortgage Scams Target Seniors" »

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Posted In: Elder Abuses , Subprime Mortgage & Collateralized Debt Obligation Problems

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Senior citizens have worked hard to build a lifetime's worth of savings. Consequently, stockbrokers and financial advisors often target them for "free" investment seminars in hopes of obtaining new business relationships. Many so-called "senior advisors" use misleading professional designations to engender trust. In reality, they are just interested in selling seniors a product that either carries a high commission, such as variable and equity index annuities, or is a high-risk investment that puts the senior's nest egg at risk.

In fact, a recent survey of state securities regulators conducted by the North American Securities Administrators Association shows that senior citizens make an estimated 44 percent of all investor-related complaints, up from 28 percent in 2005. The same study also revealed that variable and equity index annuities were involved in 48 percent of cases of senior financial exploitation reported to state securities regulators.

Senior investment fraud is a serious ongoing problem that is growing year by year.

Page Perry, LLC is an Atlanta-based law firm with over 125 years collective experience representing investors in securities related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry, LLC has successfully represented investors against brokers and their firms for causes of action based on elder abuse. For further information, please contact us.

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Posted In: Elder Abuses

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As more baby boomers approach retirement age, the demand for high-quality financial advice has been on the rise. To meet this demand for competent advice, brokerage firms began touting themselves through advertisements and other marketing mediums as “full service” firms capable of providing sound financial advice on a wide array of issues from retirement planning to tax advice. In recent years, it also seemed like every day a new credential popped up next to the names of these so-called “financial professionals.”

This marketing campaign has served to confuse investors. Experts in the industry have long believed that ordinary investors have no idea that there are different types of financial advisers and, more importantly, that each may owe different legal duties to their clients. Because of the anticipated confusion among consumers, the SEC requested that RAND Corporation conduct a study to examine the public’s understanding between the two main types of financial professionals, brokers and investment advisers.

In a nutshell, according to the RAND study, a broker is defined as someone who conducts transactions in securities on behalf of others, while an investment adviser is someone who provides advice to others regarding investments. According to the RAND study, consumers discern absolutely no difference between the two, believing that both types of financial professionals are acting in their best interest.

Continue reading "Financial Advisors vs. Investment Advisers vs. Brokers: Rand Corporation Study Concludes That Investing Public Sees Them All The Same" »

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Posted In: Brokerage Firms , Common Securities Broker Abuses , Elder Abuses , Smart Investing Tools

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On October 26, 2007, the Wall Street Journal reported that insurance product marketers are tricking seniors into waiving their rights under the national Do Not Call List.  The Do Not Call law allows companies to call people on the list if they have agreed in writing to receive calls.  Because of this loophole in the law, companies that generate insurance product sales leads have mushroomed.  

It works like this.  Postcards offering information on subjects of interest to seniors are mass mailed by marketing companies to generate sales leads.  These “lead cards” are often imprinted with American flags, have a Washington, D.C. return address, and appear to have been sent by the government or AARP.  The cards often have warnings such as “changes in your Medicare benefits,” or “new legislation passed by Congress that will affect you and your heirs,” or an “AARP study found that probate taxes are hurting seniors.  They offer purportedly helpful information to those who send back the card with their contact information.  The cards do not mention that they were actually sent by a marketing company or that the recipient’s name and contact information will be sold and turned over to insurance salespeople.

Insurance salespeople use the information to sell variable annuities with high surrender charges and lengthy pay-out deferrals, and living trusts that provide no benefit to those who return the card.  They typically present themselves with trumped-up credentials such as “Senior Estate Advisor,” and employ high-pressure and misleading sales practices.  The Wall Street Journal article related a number of specific cases involving elderly people who were persuaded to invest most or all of their nest egg in complicated variable annuities that effectively locked up most of their money for years by imposing substantial charges on withdrawals. The victims were led to believe that they could withdraw their money at any time. The sales commission on such products is typically 9.5%, according to the article.

Such improper sales practices have prompted some state attorneys general to take legal actions against several of these lead generators, charging them with falsely suggesting endorsements by the government or AARP.  Regulators in as many as 20 states have opened fraud investigations.  AARP sued ChoicePoint, Inc., an Alpharetta, Georgia-based seller of personal data, and obtained a court order prohibiting Choicepoint from referring to AARP on its lead cards and from using a Washington, D.C. return address unless it had an office there, according to the article.  AARP has filed similar lawsuits against other marketing companies.

If you believe that you may have been a victim of such a scam, or were sold a variable annuity or other investment that is unsuitable for you, Page Perry, LLC may be able to help.  Our firm will review your situation and advise you on how best to proceed at no charge.  Page Perry, LLC is a nine lawyer Atlanta-based law firm with over 125 years collective experience representing investors in securities related litigation and arbitration.  Page Perry attorneys have successfully handled variable annuity and variable life insurance cases for over 20 years.  The firm is currently involved in a number of variable product cases.

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Posted In: Elder Abuses , Variable Annuities and Equity-Indexed Annuities

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Just days after the Wall Street Journal published an article suggesting that the brokerage firm Ameriprise Financial Services was being investigated by state securities regulators for charging customers hundreds of dollars for financial plans that they never received, the New Hampshire Bureau of Securities Regulation filed a complaint against the firm.  

The complaint alleges that the brokerage company failed to deliver nearly 500 financial plans, conducted unapproved sales contests and intentionally limited compliance oversight.  Additionally, the Minneapolis-based brokerage company was accused of failing to disclose adequately all fraudulent activities to the state of New Hampshire while it was under supervision by the state and by an independent consultant in 2005.

In a press release issued by New Hampshire, the Bureau Director stated, “What we’ve found is an unprecedented and widespread compliance failure on a number of levels within the company as well as an unprofessional workplace environment and attitude that would do little to inspire the trust and confidence of New Hampshire investors… This conduct was a direct result of an Ameriprise sales culture more concerned with sales commissions than compliance.” The regulator said that the company could face penalties and client restitution of up to $10 million.

On the day that the Wall Street Journal article was published, Page Perry, LLC questioned on its website whether the incidents described in that article pointed to a wide spread compliance problem within the firm.  The comments from the Bureau Director above would appear to answer, at least in part, this question.

Page Perry, LLC is a nine lawyer Atlanta-based law firm with over 125 years collective experience representing investors in securities related litigation and arbitration.  While past results are not necessarily indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions.  The firm is currently involved in cases against Ameriprise Financial Services.

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Posted In: Common Securities Broker Abuses , Elder Abuses

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On October 25, 2007, the Financial Industry Regulatory Authority (FINRA) censured and fined the brokerage firm UBS Financial Services $370,000 for failing to report critical information about its brokers, including customer complaints, regulatory actions and criminal disclosures, on FINRA’s Central Registration Depository (CRD).  

The CRD is very important to investor protection because the system is designed to keep track of an individual broker’s and brokerage firm’s disciplinary history.  Through the CRD system, investors have the ability to assess the background of brokers and make a more informed decision about whether to hire or retain them to manage their money.  To find out more information about your broker, visit the Broker Check link on FINRA’s homepage, www.finra.org.  

Page Perry’s experience with FINRA’s Broker Check feature is that the CRD reports generated are not as complete as the CRD reports that are also available through state securities regulators.  To obtain a copy of a CRD Snapshot report from your state regulator, visit the North American Securities Administrators Association’s (NASAA) website, www.nasaa.org, to obtain your state securities regulator’s contact information.  The NASAA website also has helpful information in the Senior Investor Resource Center section on how to avoid becoming a victim of investment fraud.

Page Perry, LLC has also represented investors against brokerage firms for failing to report accurately the reasons that a broker departs from a firm.  For example, in many instances, an unscrupulous broker will get fired from Firm A for defrauding his or her customers. Firm A, however, falsely reports the broker’s departure as “voluntary.”  The unscrupulous broker is then able to get hired at Firm B where he or she defrauds more customers. In fact, in many cases, customers who have already been defrauded at Firm A will unknowingly follow the unscrupulous broker to Firm B because of the trust relationship that exists between the customer and the broker.  In this circumstance, Firm A may be able to be held liable for the losses at Firm B because the unscrupulous broker would never have been hired at Firm B had the truth been disclosed about his departure from Firm A.

As stated in FINRA’s press release, "Investors, regulators and others rely heavily on the accuracy and completeness of the information in the CRD public reporting system - and, in turn, the integrity of that system depends on timely and accurate reporting by firms," said Susan Merrill, FINRA Executive Vice President and Chief of Enforcement.
    

 

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Posted In: Common Securities Broker Abuses , Elder Abuses

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According to an October 17, 2007 article in the Wall Street Journal, several states, including New Hampshire and Alabama, are investigating allegations that large numbers of Ameriprise customers are paying hundreds of dollars for financial plans that they never received.  Instead, advisors are allegedly forging customer names to make it appear that investors received these expensive plans.

According to the article, Ameriprise spokesman Benjamin Pratt minimized the alleged problem by describing these as “isolated incidents.”  But are they really so isolated?

Page Perry's experience suggests otherwise.  In March 2007, Page Perry filed an arbitration against Ameriprise Financial Services, Inc. for failure to deliver written financial plans paid for by the client.  The client's financial advisor, operating out of Ameriprise's Chattanooga, Tennessee branch office, also forged the client's signature to a number of documents to make it appear as though the client had agreed to pay for the financial plan and had in fact received it.  This arbitration is still pending.

Recent history also suggests that these problems are not isolated incidents.  Consider, for example, that this past July, a federal judge in New York approved a $100 million class action settlement by investors who alleged that American Express Financial Advisors’ (Ameriprise’s predecessor company) financial plans were generic and were designed as a way to steer clients into proprietary American Express insurance and investment products.  According to the class action complaint, the firm imposed sales quotas on its advisors to sell financial plans and proprietary products.  Page Perry’s experience suggests that firm-wide quotas lead to firm-wide compliance and suitability problems for customers who are often unsophisticated and looking for an advisor to trust.

In addition, even though not mentioned in the Wall Street Journal article, Ameriprise agreed in October 2007 to pay $225,000 in penalties to Georgia Secretary of State’s office to settle consumer complaints stemming from a fraud and forgery case.  As part of the settlement, Ameriprise also agreed to a two-year reporting and monitoring period.  According to a recent article in the Atlanta Journal-Constitution, the settlement followed an investigation launched by the Georgia Secretary of State’s office in which investigators found that the company failed to discover forgeries of customer signatures on financial documents.

According to the Wall Street Journal article, the Alabama Securities Commissioner Joseph Borg “believes more than 200 Ameriprise plans weren’t delivered to customers in Alabama.”  He also stated that Ameriprise was cooperating with his investigation and has “already made a bunch of refunds” to customers who did not receive a plan.  Also, Page Perry’s investigation efforts have uncovered information suggesting that customers in North Carolina may be victims of forgery in connection with the sale of these financial plans. 

Page Perry, LLC represents investors across the nation seeking to recover losses from financial professionals and their firms for engaging in unlawful conduct.

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Posted In: Common Securities Broker Abuses , Elder Abuses

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Federal and state regulators are investigating a widespread practice of brokers targeting seniors at “free lunch” seminars.  Regulators warn that such seminars are among the top investment scams for 2007.  Seniors and persons who may or may not be contemplating retirement are lured by complimentary meals, often at upscale hotels, restaurants, golf courses and retirement communities, and promised “educational” information with no sales pitches.  All too often, however, the brokers use the occasion to pitch unsuitable investments and retirement strategies, including cashing in their pensions, reinvesting the proceeds, retiring early, and living on the substitute paycheck from their investments that never materializes.

This is “a problem that can have absolutely devastating consequences for a large proportion of our population,” said Mary Shapiro, Chief Executive Officer of the Financial Industry Regulatory Authority (FINRA), and Chairman of the FINRA Investor Education Foundation, in an interview.

Continue reading "Fraudulent 'Free Lunch' Seminars Target Seniors" »

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Posted In: Common Securities Broker Abuses , Early Retirement Scams , Elder Abuses , Variable Annuities and Equity-Indexed Annuities

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On September 5, 2007, the United States Senate Special Committee on Aging held a hearing on Advising Seniors About Their Money:  Who Is Qualified- and Who Is Not? Senator Kohl from Wisconsin began the hearing by stating that the purpose of the hearing was to examine the growing national problem of poorly trained senior investment specialists and take the first step in much needed reform. He also stated that an investigation conducted by this committee had found that many seniors are losing their retirement income and savings by placing their trust in so-called “advisors” who in many cases may not deserve that moniker.  

The hearing focused on the controversial “Certified Senior Advisors” because the Senate investigation found that these advisors often have little to no education and no experience in extremely complicated financial matters and investment products such as equity-indexed annuities.  Senator Kohl stated that seniors should be able to trust the people who invest their money.  They should not be worried that the title after their advisor’s name is often times scarcely more than a marketing ploy and one that is not earned through a rigorous educational or financial training.

Among those who gave testimony were Christopher Cox, SEC Commissioner, Joseph Borg, the Alabama Securities Commissioner, and Lori Swanson, Attorney General from the State of Minnesota.  These regulators provided suggestions as to how annuity sales practices could be improved industry wide and advocated for the insurance companies that issue these policies to seniors to take responsibility for their agents.

Continue reading "Senate Holds Hearing On Controversial “Certified Senior Advisor” Titles And Allianz Life Insurance’s Annuity Sales Practices" » <