Articles Posted in Financial Firms

8/31/11 is Deadline for Opting Out of $100M Oppenheimer Mutual Funds Class Action Settlement

Published on: August 17, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Our securities fraud lawyers would like to remind you that if you want to opt out of the $100M class action settlement with Oppenheimer Mutual Funds you have to do so by August 31, 2011. OppenheimerFunds Inc. agreed to pay that amount over accusations that it mismanaged its Oppenheimer Champion Fund (OCHBX, OPCHX and OCHCX) and its Oppenheimer Core Bond Fund (OPIGX). The class action was filed by investors accusing OppenheimerFunds of misrepresenting in its offering documents the degree of risk involved in complex securitized instruments, including mortgage-backed securities and credit default swaps.

Under the class action agreement, Champion Fund investors are to be paid $52.5 million. Core Bond investors are to receive $47.5 million. While this amount may seem like a lot, with thousands of class action claimants, Core Bund Fund investors will likely receive approximately 12 cents on the dollar, while Champion Fund investors will receive about 3 cents on the dollar.

This is not a lot of money for your losses, which is why you may want to seriously consider opting out of the class action and pursuing your own securities lawsuit or arbitration claim. Please contact our stockbroker fraud law firm today and ask for your free case evaluation.

You have until August 31, 2011 to send a written exclusion to the class counsel. Your letter cannot be postmarked after the deadline. Failure to opt out will prevent you from filing your own case at a later today. You should, however, get your share of the settlement.

OppenheimerFunds is a Massachusetts Mutual Life Insurance Company subsidiary. Defendants of the class action were charged with violating the Investment Company Act of 1940 and the Securities Act of 1933.

The Oppenheimer Core Bond Fund lost at least 33% of its value in 2008. During the first three months of 2009 it lost another 10%. The bond was promoted as appropriate for and offered by a number of 529 college savings plans, a number of annuities, and retirement plans. The Champion Fund lost about 80% of its value in 2008.

While staying part of a class action in a securities case may appear to be the easy way to recover your investment losses, this is truly not the case. Why should you get back so much left when you’ve lost so much?

By retaining the services of an experienced securities fraud law firm, you increase your chances of recovering the maximum amount possible. We know how devastating it can be to lose money that you have worked so hard for and saved.

OppenheimerFunds Settles Mismanagement Case for $100 Million, Bloomberg Businessweek, July 26, 2011
OppenheimerFunds to pay $100 million to settle mismanagement case, Denver Post, July 27, 2011
More Blog Posts:
Mortgage-Backed Securities Lawsuit Against Bank of America’s Merrill Lynch Now a Class Action Case, Stockbroker Fraud Blog, June 25, 2011
Class Members of Charles Schwab Corporation Securities Litigation Can Still Opt Out to File Individual Securities Claim, Stockbroker Fraud Blog, December 6, 2010
Wells Fargo Settles Mortgage-Backed Securities Class Action Case for $125M, Institutional Investor Securities Blog, July 19, 2011 Continue Reading ›

Citigroup Global Markets Fined $500,000 by FINRA for Inadequate Supervision of Broker Accused of Bilking Sick and Elderly Investors

Published on: August 16, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Two months after a federal grand jury indicted Tamara Lanz Moon for misappropriating more than $800,000 in clients’ money, the Financial Industry Regulatory Authority (FINRA) has fined Citigroup Global Markets $500,000 for failing to properly supervise her. Moon is charged with six counts of mail fraud. The acts of broker misconduct allegedly took place between 2001 and 2008, when the 43-year-old broker was employed by Citigroup Global Markets as a registered sales assistant with Series 7 and 63 licenses.

Court documents report that Moon targeted at least 22 Citigroup clients who were sick, elderly, or for some reason couldn’t properly monitor their accounts. Her alleged victims included an elderly client suffering from Parkinson’s disease. Moon also allegedly forged signatures, changed account documents, opened accounts with deceased clients’ social security numbers, created bogus letters of authorization, revised customer addresses, and made unauthorized trades. She was fired in 2008 after Citigroup finally discovered her alleged misconduct. FINRA would go on to permanently barred her from the industry. Moon, who was arrested by the FBI following recent indictment, is out on bail.

According to FINRA, Citigroup failed to investigate or detect a number of “red flags” that should have let the financial firm know that Moon was improperly handing client funds. The SRO is also accusing FINRA of failing to put into place reasonable controls and systems related to the supervisory review of client accounts, which allowed Moon to falsify records, and neglecting to identify suspicious activity related to disbursements and transfers in the accounts that she was using to misappropriate clients’ money.

Morgan Stanley Reports a Possible $1.7B in Mortgage-Backed Securities Losses

Published on: August 16, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Morgan Stanley says it may sustain $1.7B in losses over a number of securities fraud cases related to subprime mortgage deals. Citigroup Inc.’s (C.N) Citibank is the plaintiff of the securities lawsuit over the Capmark VI CDO and STACK 2006-1 CDO deals, while there are 15 plaintiffs seeking punitive damages over Cheyne Finance, a structured investment vehicle. Morgan Stanley is also reporting losses over a mortgage-backed security deal involving MBIA Corp.

Our securities fraud attorneys would like you to contact us if you are someone who sustained financial losses in any of these MBS deals with Morgan Stanley. Here are more details about the cases:

• Morgan Stanley says the losses in the Citibank securities fraud lawsuit may be a minimum of $269M over a credit default swap on the Capmark VI CDO deal and another one on the credit default swap involving the STACK 2006-1 CDO deal.

CapWest Loses $940,000 Dallas Securities Case in FINRA Arbitration

Published on: August 15, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Financial Industry Regulatory Authority (FINRA) has ordered CapWest Securities Incorporated to pay nearly $940,000 in a Texas securities fraud case filed by a group of investors over the recommendation and sale of numerous illiquid, risky, convertible debentures. The claimants had accused CapWest of breach of fiduciary duty, breach of contract, state and federal securities law violations, fraud, gross negligence, negligence, and other actions.

Last month, the FINRA arbitration panel ordered CapWest to pay claimant Robert E. Lee, both as an individual and as a Robert Earl Lee Revocable Trust trustee, $137,000 in compensatory damages. CapWest was also ordered to pay $478,500 in compensatory damages to Beatrice M. McCrae and Buford E. McCrae, both as individuals and on behalf of B.E. McCrae Family Limited Partnership. Robert E. Lee was also to receive $37,330 in interest for the period of October 25, 2008 through July 15, 2011 at a 5% per annum rate. For Buford E. McCrae and Beatrice E. McCrae, the interest of 5% per annum was $95,180 for the period of October 16, 2006 through July 15, 2011. Under the Texas Deceptive Trade Practices Act, Robert E. Lee is to receive $17,450 in punitive damages. Buford E. McCrae and Beatrice M. McCrae are to get paid $57,370. Payment of the claimants’ costs, legal fees, and other fees were also granted.

Convertible Debentures

AIG Files $10 Billion Mortgage-Backed Securities Lawsuit Against Bank of America

Published on: August 13, 2011 | by Shepherd Smith Edwards & Kantas, LLP

American International Group (AIG) is seeking to recover over $10 billion in mortgage-backed securities-related losses from Bank of America (BAC). The losses were allegedly sustained on $28 billion in investments.

In what may be the largest MBS-related action filed by one investor, the complaint accuses Bank of America and its units Countrywide Financial and Merrill Lynch of misrepresenting the quality of the mortgages that were in the securities that investors bought. AIG also claims that Bank of America used false data to persuade the credit rating agencies to give the MBS high ratings.

Bank of America, which contends that the disclosures that were made were robust enough for sophisticated investors and that AIG is a “seasoned investor,” is denying AIG’s allegations against it. According to Bank of America spokesperson Lawrence Di Rita, the reason AIG suffered the financial losses at issue is because it was reckless in pursing profits and high yields in the “mortgage and structured finance markets.”

Bank of America’s 2008 acquisition of Countrywide for $4 billion has cost the financial firm much more in mortgage-related fines, losses, loan buybacks, and litigation expenses. Courthouse News Service database reports that Countrywide and Bank of America have been named as defendants in 1300 lawsuits in 2011 alone. Recently, Bank of America agreed to settle investor MBS claims for $8.5 billion. Parties to the settlement included the Bank of NY Mellon, BlackRock, the Federal reserve Bank of New York, and PIMCO. However, the New York Attorney General is now calling that settlement inadequate.

As for AIG, which is still largely owned by taxpayers following its 2008 government bailout, the New York Times says that the insurer is preparing similar securities fraud complaints against JPMorgan Chase, Goldman Sachs, and Deutsche Bank to try to recover some of the billions that it lost during the economic crisis.

Government Not Proving Helpful In Pursuing Investment Banks
Contrary to investors, who are seeking to hold big banks accountable in civil court, the Justice Department closed many of its investigations into Wall Street’s big banks without filing any criminal charges. Although it has brought cases against three employees at big financial banks, no executives have been charged. However, a spokesperson for the Justice Department says that the government has pursued the cases were appropriate and that it is much more difficult to prove that a crime has been committed beyond a reasonable doubt than to find a party liable in civil court.

The New York Times reports that a person familiar with the case says that the Justice Department has concluded its investigation into Countrywide’s actions heading into the financial crises and that there will be no charges filed. The government also recently closed its probe into Washington Mutual, with the finding that there was no evidence of criminal wrongdoing. The Washington bank almost failed because of high-risk mortgages.

Related Web Resources:

AIG sues Bank of America for $10 billion over mortgages, USA Today/AP, August 8, 2011

Stifel, Nicolaus & Co. and Former Executive Faces SEC Charges Over Sale of CDOs to Five Wisconsin School Districts

Published on: August 10, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The SEC is charging Stifel, Nicolaus & Co. and its former Senior Vice President David W. Noack with securities fraud over the sale of unsuitable, high-risk complex investments to 5 Wisconsin school districts. Stifel and Noack allegedly misrepresented the risks involved in investing $200 million in synthetic collateralized debt obligations (CDOs) and did not disclose certain material facts. The investments proved a “complete failure.”

The Five Wisconsin School Districts:
• Kimberly Area School District • Kenosha Unified School District No. 1 • School District of Waukesha • School District of Whitefish Bay • West Allis-West Milwaukee School District

All five school districts are suing Stifel and Royal Bank of Canada in civil court. Robert Kantas, partner of Shepherd Smith Edwards & Kantas LTD LLP, is one of the attorneys representing the school districts in their civil case against Stifel and RBC. Attorneys for the school districts issued the following statement:

“We believe that Stifel, Royal Bank of Canada and the other defendants defrauded the five Wisconsin school districts, along with trusts set up to make these investments. In 2006, these defendants devised, solicited and sold $200 million ‘synthetic collateralized debt obligations’ (CDOs), which were both volatile and complex, to these districts and trusts. While represented as safe investments, these were in fact very high risk securities, which were wholly unsuitable for the districts and trusts. In an attempt to protect taxpayers and residents, the districts hired attorneys and other professionals to investigate the investments and the potential for fraud. Then, with a goal of seeking full recovery of the monies lost in this scheme, a lawsuit was filed in Milwaukee County Circuit Court in 2008 to seek fully recovery of the losses and maintain and protect valuable credit ratings of these districts. To date, more than 3 million pages of documents have been obtained and examined by the attorneys for the districts. The districts also properly reported to the SEC the nature and extent of the wrongdoing uncovered. Over the past year, they have provided the SEC with volumes of documents and information to facilitate its investigation.”

In its complaint filed in federal court today, the SEC says that Stifel and Noack set up a proprietary program to assist the school districts in funding retiree benefits through the investments of notes linked to the performance of CDOs. The school districts invested $200 million with trusts they set up in 2006. $162.7 million was paid for with borrowed funds.

The SEC contends that Stifel and Noack, who both earned substantial fees even though the investments failed completely, took advantage of their relationships with the school districts and acted fraudulently when they sold financial products that were inappropriate for the latter. The brokerage firm and its executive also likely were aware that the school districts weren’t experienced or sophisticated enough to be able to evaluate the risks associated with investing in the CDOs. Both also likely knew that the school districts could not afford to suffer such catastrophic losses if their investments were to fail. Despite this, says the SEC, Noack and Stifel assured the school districts that for the investments to collapse there would have to be “15 Enrons.” They also allegedly failed to reveal certain material facts to the school districts, including that:

• The first transaction in the portfolio did poorly from the beginning.
• Within 36 days of closing, credit rating agencies had placed 10% of the portfolio on negative watch.
• There were CDO providers who said they wouldn’t participate in Stifel’s proprietary program because they were worried about the risks involved.

The SEC claims that Stifel and Noack violated the:

• Securities Exchange Act of 1934 (Section (10b))
• The Securities Act of 1933 (Section 17(a))
• The Securities Act of 1934 (Section 15(c)(1)(A))

The Commission is seeking, permanent injunctions, disgorgement of ill-gotten gains, financial penalties, and prejudgment interest.

Related Web Resources:
SEC Charges Stifel, Nicolaus & Co. and Executive with Fraud in Sale of Investments to Wisconsin School District, SEC.gov, August 10, 2011
SEC Sues Stifel Over Wisconsin School Losses Tied to $200 Million of CDOs, Bloomberg, August 10, 2011
Read the SEC Complaint (PDF)

School Lawsuit Facts

More Blog Posts:
Wisconsin School Districts Sue Royal Bank of Canada and Stifel Nicolaus and Co. in Lawsuit Over Credit Default Swaps, Stockbroker Fraud Blog, October 7, 2008
SEC Inquiring About Wisconsin School Districts Failed $200 Million CDO Investments Made Through Stifel Nicolaus and Royal Bank of Canada Subsidiaries, Stockbroker Fraud Blog, June 11, 2010 Continue Reading ›

SEC Charges Filed Against Stifel, Nicolaus & Co. and Former Sr. VP David Noack Over CDO Sales to Wisconsin School Districts

Published on: August 10, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Three years after five Wisconsin school districts filed their securities fraud lawsuit against Stifel, Nicolaus & Company and the Royal Bank of Canada, the Securities and Exchange Commission has filed charges against the brokerage firm and former Stifel Senior Vice President David W. Noack over the same allegations. The charges stem from losses related to the sale of $200 million in high-risk synthetic collateralized debt obligations (CDOs) to the Wisconsin school districts of West Allis-West Milwaukee School District, the School District of Whitefish Bay, the Kimberly Area School District, the School District of Waukesha, and the Kenosha Unified School District No. 1.

The SEC says that not only were the CDOs inappropriate for the school districts that would not have been able to afford it if the investments failed, but also the brokerage firm did not disclose certain material facts or the risks involved. The school districts are pleased that the SEC has decided to file securities charges.

Robert Kantas, partner of Shepherd Smith Edwards & Kantas LTD LLP, is one of the attorneys representing the school districts in their civil case against Stifel and RBC. Attorneys for the school districts issued the following statement:

“It is our belief that the five Wisconsin school districts and the trusts established to make these investments were defrauded by Stifel, Royal Bank of Canada and the other defendants. Contrary to the way they were represented, the $200 million CDOs that were devised, solicited, and sold by the defendants to our clients in 2006 were volatile, complex, extremely high risk, and totally inappropriate for them. To protect residents and taxpayers, the districts later hired lawyers and others to investigate the investments and their fraud risk. Unfortunately, the failure of the investments did result in losses for the school districts, which in 2008 filed their Wisconsin securities fraud complaint in Milwaukee County Circuit Court. The school districts’ goal was to obtain full recovery of the monies lost in this scheme, while protecting and maintaining the districts’ valuable credit ratings. The districts’ lawyers have already examined three million pages of documents regarding in this matter. Meantime, the districts have taken the proper steps to report to the SEC the nature and extent of the wrongdoing uncovered. In the past year, the districts have given the SEC volumes of documents and information for its investigation.”

The school districts had invested the $200 million ($162.7 million was borrowed) in notes that were tied to the performance of synthetic CDOs. This was supposed to help them fund retiree benefits. According the SEC, however, Stifel and Noack set up a proprietary program to facilitate all of this even though they knew that they were selling products that were inappropriate for the school districts and their investment needs.

Stifel and Noack allegedly told the school districts it would take “15 Enrons” for the investments to fail, while misrepresenting that 30 of the 105 companies in the portfolio would have to default and that 100 of the world’s leading 800 companies would have to fail for the school districts to lose their principal. The SEC claims that the synthetic CDOs and the heavy use of leverage actually exposed the school districts to a high risk of catastrophic loss.

By 2010, the school districts’ second and third investments were totally lost and the lender took all of the trusts’ assets. In addition to losing everything they’d invested, the school districts experienced downgrades in their credit ratings because they didn’t put more money in the funds that they had set up. Meantime, despite the fact that the investments failed completely, Stifel and Noack still earned significant fees.

The SEC is alleging that Noack and Stifel violated the:
• The Securities Act of 1933 (Section 17(a))
• Securities Exchange Act of 1934 (Section (10b))
• The Securities Act of 1934 (Section 15(c)(1)(A))

The Commission wishes to seek disgorgement of ill-gotten gains along with prejudgment interest, permanent injunctions, and financial penalties.

Related Web Resources:
SEC Charges Stifel, Nicolaus & Co. and Executive with Fraud in Sale of Investments to Wisconsin School Districts, SEC.gov, August 10, 2011

SEC Sues Stifel Over Wisconsin School Losses Tied to $200 Million of CDOs, Bloomberg, August 10, 2011

Read the SEC Complaint

School Lawsuit Facts

More Blog Posts:
Stifel, Nicolaus & Co. and Former Executive Faces SEC Charges Over Sale of CDOs to Five Wisconsin School Districts, Stockbroker Fraud Blog, August 10, 2011

JP Morgan Settles for $153.6M SEC Charges Over Its Marketing of Synthetic Collateralized Debt Obligation, Institutional Investor Securities Blog, June 18, 2011

Wells Fargo Settles SEC Securities Fraud Allegations Over Sale of Complex Mortgage-Backed Securities by Wachovia for $11.2, Institutional Investor Securities Blog, April 7, 2011

SEC and SIFMA Divided Over Whether Merrill Lynch Can Be Held Liable for Alleged ARS Market Manipulation

Published on: July 29, 2011 | by Shepherd Smith Edwards & Kantas, LLP

In Wilson v. Merrill Lynch & Co. Inc., the Securities Industry and Financial Markets Association and the Securities and Exchange Commission have submitted separate amicus curiae briefs to the U.S. Court of Appeals for the Second Circuit that differ on whether Merrill Lynch can be held liable for allegedly manipulating the auction-rate securities market. While SIFMA argued that an SEC order from 2006 that settled ARS charges against 15 broker-dealers affirmed the legality of the auction practices when they are properly disclosed, the SEC said that Merrill did not provide sufficient disclosures about its conduct in the ARS market and therefore what they did reveal was not enough to “preclude the plaintiff from pleading market manipulation.”

It was last year that the U.S. District Court for the Southern District of New York dismissed an investor claim that Merrill Lynch, which was acting as underwriter, manipulated the ARS market to attract investment. The court said that the claimant “failed to plead manipulative activity” and agreed with the brokerage firm that adequate disclosures were made. After appealing to the Second Circuit, the investor requested that the SEC provide its thoughts on five court-posed questions about the adequacy of the financial firm’s disclosures and how they impacted allegations of reliance and market manipulation.

The SEC said that the plaintiff’s claim that Merrill manipulated ARS auctions don’t preclude him from pleading, for fraud-on-the-market reliance purposes, an efficient market. SIMFA, however, said the plaintiff was precluded from claiming “manipulative acts” because investors have been made aware through “ubiquitous industry-wide disclosures about auction practices” that broker-dealers’ involvement in ARS actions is impacted by the “natural interplay” of demand and supply.

Related Web Resources:
Auction-Rate Securities UPDATE: SEC Brief May Help ARS Investors, Business Insider, July 26, 2011

More Blog Posts:

District Court in Texas Decides that Credit Suisse Securities Doesn’t Have to pay Additional $186,000 Arbitration Award to Luby’s Restaurant Over ARS, Stockbroker Fraud Blog, June 2, 2011

$629M Mortgage-Backed Securities Lawsuit Blames RBS Securities and Other Financial Firms For Bankruptcy of Western Corporate Federal Credit Union in 2009

Published on: July 26, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The National Credit Union Administration has filed a $629 million securities fraud lawsuit against RBS Securities, Wachovia Mortgage Loan Trust LLC, Nomura Home Equity Loan Inc., Greenwich Capital Acceptance Inc., Lares Asset Securitization Inc., IndyMac MBS Inc., and American Home Mortgage Assets LLC. The NCUA is accusing the financial firms of underwriting and selling subpar mortgage-backed securities, which caused Western Corporate Federal Credit Union to file for bankruptcy, as well as of allegedly violating state and federal securities laws.

The defendants are accused of misrepresenting the nature of the bonds and causing WesCorp to think the risks involved were low, which was not the case at all. NCUA says that the originators of the securities “systematically disregarded” the Offering Documents’ underwriting standards. The agency blames broker-dealers and securities firms for the demise of five large corporate credit union: WesCorp, US Central, Members United Corporate, Southwest Corporate, and Constitution Corporate.

Last month, NCUA filed separate complaints against JPMorgan Chase Securities and RBS Securities. The union believes that those it considers responsible for the issues plaguing wholesale credit unions should cover the losses that retail credit unions are having to cover. NCUA says it may file up to 10 mortgage-backed securities complaints seeking to recover billions of dollars in damages. As of now, it is seeking to recover $1.5 billion.

NCUA acts as the “liquidating agent” for failed credit unions. Wholesale credit unions provide electronic payments, check clearing, investments and other services to retail credit unions, which actively work with borrowers.

NCUA sues JPMorgan and RBS to recover losses from failed institutions, Housing Wire, June 20, 2011

NCUA seeks $629M in damages from RBS Securities, Credit Union National Association, July 19, 2011

Feds Sue Bankers Over Fall in Bonds, The Wall Street Journal, June 21, 2011

$75K FINRA Arbitration Award Against Wells Fargo Advisors LLC For Defaming an Ex-Employee in Form U-5 is Confirmed by District Court

Published on: July 25, 2011 | by Shepherd Smith Edwards & Kantas, LLP

In district court, Judge Samuel Conti has confirmed a Financial Industry Regulatory Authority panel’s $75,000 arbitration award to Kenneth Schaffer against Wells Fargo Advisors, LLC. It was the financial firm that began proceedings against its former employer last year.

Schaffer accused Wells Fargo of “ending” his career when on a Form U5, which is a Uniform Termination Notice for Securities Industry Registration, the firm provided descriptions of alleged infractions that he said were misleading and had prevented him from being offered another job. He claimed that the reasons given for his firing were pretextual and that he was actually let go over health issues. Schaffer also disputed Wells Fargo’s claim that he owed them money for a promissory note. While he said that the financial firm had represented the note as a “sales bonus,” Wells Fargo said that after terminating Schaffer’s employment was terminated on October 1, 2009, it should receive the entire $74,617.76 that was owed on a promissory note.

The FINRA arbitration panel, however, agreed with Schaffer and found the promissory notice “unconscionable.” It said that Wells Fargo therefore could not recover on it. The panel also said that because the Form U5 Termination Explanation was of a “defamatory nature,” the financial firm was liable to Schaffer for compensatory damages. The court confirmed the arbitration award, while denying Wells Fargo’s motion to vacate, and entitled Schaffer to recover legal fees.