Class Action Lawsuits

News Flash: Brookstreet Securities Closes its Doors

Published on: June 22, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Today was “Black Friday” for Brookstreet Securities, as it closed for business. The firm’s 650 independent contractor brokers have been terminated, says Stanley Brooks, President of the firm. Brookstreet clients are left in limbo, many with huge losses in their accounts.

As reported earlier this week, Brookstreet Securities Corp, based in Irvine, California, told its agents that “disaster” had struck and it was in eminent danger of folding. The e-mail communication (previously posted on this site) claimed this was as a result of mark-downs on collateralized mortgage obligation securities (CMOs) by Fidelity’s National Financial Services (NFS), which cleared trades and maintained accounts for Brookstreet.

Some of Brookstreet’s clients report that their accounts continued to fall in value this week. Yet, if they attempted to do anything NFS told them they must to talk to their (Brookstreet) broker, but their broker was not answering the phone. Meanwhile, Some of these clients’ margin accounts slipped into the “red”, meaning not only have these investors’ funds disappeared but NFS now claims the investors owe it money!

Will Brookstreet Securities Be Wiped Out by a CMO Debacle?

Published on: June 21, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Claims are being filed and steps are being taken toward a class action to assist investors recover their losses after Brookstreet Securities reportedly advised its 500 brokers via E-mail that “disaster” had struck which could soon close the firm! Text of the firm’s internal e-mail is as follows:

“Disaster, the firm may be forced to close…

“Today, the pricing system used by National Financial has reduced values in all Collateralized Mortgage Obligations. Many of those accounts were on margin and have suffered horrendous markdowns and unrealized as well as realized losses.

Janus Avoids Responsibility to Mutual Fund Shareholders for Alleged Role in Widespread Market Timing Scandal

Published on: June 11, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Shareholders of mutual funds Janus Capital Group may not pursue a class action claim that the company violated federal securities laws by permitting hedge funds to engage in market timing with the shares of mutual funds operated by Janus, the U.S. District Court for the District of Maryland ruled.

In recent years, the U.S. Congress has been persuaded to limit class actions involving securities only to claims under federal securities laws. Meanwhile, federal securities claims are limited to misrepresentations and omissions in the purchase and sale of securities and do not, for example, include claims for actions which are simply fraudulent or negligent. Furthermore, courts have decided that no one can be held liable for assisting, or “aiding or abetting”, others in violating federal securities law. Such limitations enabled Janus avoid its responsibility and have the class action against it dismissed.

In their complaint, the plaintiffs, purchasers of Janus Group stock, alleged that the Janus Funds misstated in their fund prospectuses their policies regarding market timing and late trading.

AOL Time Warner Shareholders May be Able to File Late Fraud Claims if Class Certification is Denied.

Published on: June 11, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Following the 2001 merger of AOL and Time Warner the stock price of the combined company, AOLTW, went into a year-and-a-half decline, and numerous shareholder class action securities fraud suits were filed. The various class actions were consolidated in a federal court in New York.

If the case is soon dismissed AOL Time Warner Inc. shareholders may be able to bring otherwise expired individual securities fraud claims against the company, but they must first wait for a decision on class certification in a pending lawsuit, a federal court in New York ruled.

When a class action is on file, the statute of limitations for an investor to file an individual claim will be “tolled” (extended while the class action is pending) but such tolling can not be used until “class certification” is approved by the court. The “standby suit”–anticipating the denial of certification– was filed by the investor, but the court determined that, because the limitations periods had expired on the investor’s individual claims his case, and the class action was still pending, tolling during the class action could not be employed and the case was dismissed.

Claims Against Goldman Sachs for Alleged Fannie Mae Fraud Must Be Filed Individually

Published on: May 14, 2007 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. District Court for the District of Columbia dismissed class action claims against Goldman Sachs & Co. stemming from two Real Estate Mortgage Investment Conduit–or REMIC–deals with Fannie Mae.

Judge Richard Leon said that the plaintiffs–Fannie Mae investors–-failed plead a case which involved “direct acts” of securities fraud by Goldman. (In a court system friendly to those accused of securities fraud, claims are not allowed for aiding and abetting Federal Securities violations and class action claims involving securities fraud can no longer be filed under state laws.)

However, this court’s decision does not prevent members of the former class action from now seeking their own claim against Goldman in court or arbitration. Clients of Goldman who purchased shares of Fannie Mae during this period would likely have the stronger claims. Such claims could include aiding and abetting, conspiracy and other claims under state laws which were not allowed in the class action. Fortunately, statutes of limitations on individual claims are usually preserved while a class action case is pending in court.

State Securities Registration Laws Will No Longer Apply to Nasdaq Capital Market Listed Securities

Published on: May 8, 2007 | by Shepherd Smith Edwards & Kantas, LLP

When state securities regulators led by Elliot Spitzer of New York exposed a shocking level of crime and fraud on Wall Street, corporations and securities firms stepped up their campaign to gut state securities laws and the powers of state regulators. These special interests had already convinced Congress to forbid class action claims for securities fraud under state laws.

Meanwhile, many are accusing the SEC, with its commissioners all appointed by the President, of pandering to those same special interests. Despite its purpose to protect investors, the Securities Exchange Commission (SEC) has taken numerous actions to reduce its own restrictions and has taken positions on numerous court cases which are contrary to the interests of investors.

In its latest action, the SEC announced May 3 that, beginning May 24, securities listed on the Nasdaq Capital Market will be exempt from state “blue sky” registration requirements.

URGENT UPDATE: Edward Jones Seeks to Settle All Claims “Known and Unknown” for $18.00 per Current and Former Client Unless They Take Action Before June 11

Published on: May 3, 2007 | by Shepherd Smith Edwards & Kantas, LLP

As earlier reported, the securities firm of Edward Jones was ordered by the SEC to pay a total of $79 million to its clients and former clients. According to the SEC, the company failed to disclose kickbacks the firm received from various mutual fund companies, known as the “Preferred Fund Families.” The Preferred Families mutual funds are: American Funds; Federated Investors; Goldman Sachs Group; Hartford Mutual Funds; Lord Abbott Funds; Putnam Investments; and Van Kampen Investments.

Now, Edward Jones may be attempting to settle all potential civil claims against it “KNOWN OR UNKNOWN”, by its current or former clients FOR $18.00 PER CLIENT! The proposed settlement is as a result of a class action suit brought against the firm on behalf of millions of its current and former clients in the firm’s hometown of St. Louis, Missouri.

Language in the proposed settlement indicates the Edward Jones firm may be seeking to exempt itself from ANY AND ALL CLAIMS which could have been asserted by over 5 million of its current and former clients. Although, none of these clients would have actually signed such an agreement themself, any pending or future lawsuit, arbitration action or other legal claim could potentially be prejudiced by the final language in the settlement agreement.

Enron Litigation Continues With Actions by Stockholders and Regulators of Accounts.

Published on: March 28, 2007 | by Shepherd Smith Edwards & Kantas, LLP

As class actions against investment firms face dismissal, attorneys for investors plan to go forward with claims for individual shareholders against those same firms. After the U. S. Court of Appeals for the Fifth Circuit decided that cases in Houston against Merrill Lynch and other investment banking firms could not go forward as class actions, the door was left open for victims of Enron stock fraud to file their own claims in court or arbitration against these investment firms.

The class actions stopped the clock for filing individual claims against the defendants until appeals are completed. Also, through the class actions substantial information was learned regarding the role of these investment firms in the Enron debacle.

Meanwhile, that same Court of Appeals affirmed a district court’s order allowing Texas accounting regulators to gain access to confidential discovery material in the Enron Corp. shareholder litigation (Newby v. Enron Corp., 5th Cir., No. 05-20462, 3/16/06). The massive amounts of discovery material related to the Enron litigation led to a stipulation by parties that discovery be housed on a Web site. The district court overseeing the litigation issued a confidentiality order covering the deposition transcripts and other material, barring disclosure except to parties, their counsel, witnesses, a depository administrator, a court-appointed mediator, and a few others.

Merrill Lynch Settles Class Action Lawsuits With Mutual Fund Investors Regarding Analyst Research And Internet Companies

Published on: February 16, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Financial management and advisory company Merrill Lynch has settled three class action lawsuits involving 400 investors who claim that the company gave them misleading analyst information regarding Internet companies. The investors are buyers of mutual funds, and they will get about $40 million-6.25% of the original $645 million they had first requested in 2002. The damage amount that will be paid, however, is at the “higher end of the range of reasonableness of recovery in class actions securities litigation,” according to Southern District of New York Judge John F. Keenan who approved the settlement agreement He also says that the class has had an “overwhelmingly positive reaction” to the settlement that was reached.

The three lawsuits are among several class actions that Merrill Lynch has had to deal with since 2002, ever since New York’s then-Attorney General Eliot Spitzer investigated an alleged scheme by Merrill Lynch’s research division to publish misleading or bogus analysis regarding Internet stocks to increase investment banking business. The class action settlements reached earlier this month are the first ones to be approved in connection with the alleged wrongdoing.

Merrill Lynch paid the government $100 million over its alleged actions in 2002. Back then, the company also said it would immediately enact important reforms to further protect its securities research analysts from being influenced unnecessarily by investment banking.