Morgan Stanley

Wells Fargo, Goldman Sachs, JP Morgan Chase, Citigroup, UBS Securities, Bank of America, Moody’s Investment Services, and Fitch Ratings are Among Defendants Sued On Behalf of Wells Fargo Certificate Investors for Alleged Securities Fraud Violations

Published on: March 5, 2009 | by Shepherd Smith Edwards & Kantas, LLP

The Boilermaker-Blacksmith National Pension Trust is suing a number of investment banks, credit rating agencies, and underwriters, including Wells Fargo, WFASC, Morgan Stanley & Co., Credit Suisse Securities (USA) LLC, Barclays Capital Inc., Bear Stearns & Co., Countrywide Securities Corp., Deutsche Bank Securities Inc., JPMorgan Chase Inc., Bank of America Corp., Citigroup Global Markets Inc., McGraw-Hill Cos., Moody’s Investor Services Inc., and Fitch Ratings Inc., over allegations that they made false statements in the prospectus and registration statement for certificates that were collateralized by Wells Fargo Bank, NA. The lawsuit, filed on behalf of thousands of investors that bought the certificates from Wells Fargo Asset Securities Corp., accuses the defendants of violating the 1933 Securities Act by engaging in these alleged actions.

According to the securities fraud lawsuit, the defendants concealed from investors that Wells Fargo revised its underwriting practices in 2005 and became involved in high risk subprime mortgage lending. The complaint contends that WFASC and a number of defendants submitted to the Securities and Exchange Commision prospectus and registration statements representing that the mortgages were backed by certificates that were subject to specific underwriting guidelines for evaluating a borrower’s creditworthiness. The plaintiffs contend that these prospectuses and registration statements were false because they neglected to reveal that the Wells Fargo-originated certificates were not in accordance with the credit, underwriting, and appraisal standards that Wells Fargo, per the companies, had supposedly used to approve mortgages.

The lawsuit also claims that because Wells Fargo decided to enter the subprime mortgage mortgage market in 2005, the investment bank had to take significant write-downs in 2008 because of its massive exposure to the subprime market and the WFASC certificates that these mortgages backed dropped significantly in value. The Boiler-Blaksmith fund reports that it lost about $5 million, which is more than half of what it invested.

Related Web Resources:
Read the Complaint

The Boilermakers National Funds
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Morgan Stanley Court Case Demonstrates Why Securities Arbitration is Often a Better Forum

Published on: February 27, 2009 | by Shepherd Smith Edwards & Kantas, LLP

Many lawyers and investors complain about securities arbitration. According to Shepherd Smith Edwards & Kantas LTD LLP Founder and Stockbroker Fraud Attorney William Shephard, however, the following Morgan Stanley case is “one of many cases filed in court which would have likely not been dismissed in securities arbitration.”

Earlier this month, the U.S. District Court for the Southern District of New York tossed out a securities class action lawsuit filed against Morgan Stanley, Morgan Stanley DW Inc. (MSDWI), Morgan Stanley & Co. Inc. (MS&Co.), the Technology Fund, the Information Fund, Morgan Stanley Investment Management Inc., Morgan Stanley Investment Advisors Inc. (MSIA), and Morgan Stanley Distributors Inc. The class action case is on behalf of investors in the Morgan Stanley Information Fund and Morgan Stanley Technology Fund over alleged improprieties in initial public offering shares allocations, as well as alleged conflicts of interest between Morgan Stanley’s research and investment banking departments.

According to the court, the investors claim they lost millions of dollars in the purchase of the funds as a result of violations of the 1933 Securities Act. The plaintiffs are also claiming that Morgan Stanley, MSDWI, and MS&Co. publicly said that they kept a “Chinese Wall” between their research and investment banking departments so there wouldn’t be any conflicts of interest when, in fact, this wall had fallen and MS & Co. was acting to benefit its investment banking departments. They also claim they were told that analyst recommendations and research were not influenced by the interests of Morgan Stanley or its affiliates.

Among the conflicts of interest, the investors are alleging that the defendants engaged in at least one of the a number of roles involving companies that with shares included among the funds’ portfolio securities for the class periods, including:

• As underwriters for certain securities.
• As investment bankers for certain companies with securities in the funds’ portfolios.
• Preparing and sending out research reports and recommendations about companies that had shares in the funds’ portfolios.
• Trying to get first-time or more underwriting and additional business from the companies that had shares in the portfolios.

The plaintiffs contend that MS & Co. factored in how much investment bank business research analysts were able to secure when determining their total compensation. This resulted in MS & Co.’s promotion of Morgan Stanley shares or those of potential clients, which then would lead to the price inflation of the companies’ shares. They also claimed that the portfolio funds had a substantial amount of Morgan-Stanley sponsored-stocks and that Morgan Stanley took part in “laddering,” which involved rewarding customers with “hot” IPO shares when they went after research tie-ins that artificially inflated an IPO stock’s aftermarket share price.

The court, however, dismissed the lawsuit saying that the plaintiffs failed to plead material omissions that Morgan Stanley should have disclosed. Continue Reading ›

NASAA Says Investors with Frozen Auction-Rate Securities Should Ask Investment Firms About Buyback Opportunities

Published on: November 19, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The North American Securities Administrators Association is reminding investors to ask the investment firms that sold them any now-frozen auction-rate securities about repurchase opportunities. Following the ARS market collapse, securities regulators in 12 US states joined together to form a multi-state Task Force dedicated to finding out whether Wall Street investment firms had misled investors when persuading them to invest in the ARS market.

As part of their settlement agreements reached with the firms in question, 11 major Wall Street investment banks have said they will buy back over $51 billion in ARS from charities, retail investors, and small companies. However, these repurchase offers may not be available indefinitely.

NASAA President Fred Joseph says the best way to avail of any redemption offers is to contact the investment firms as soon as possible. So far, 11 firms have agreed in principle to buy back over $50 billion in ARS. NASAA says additional repurchase opportunities are expected to become available in the coming months.

Investment Firms with ARS Hotlines:

Bank of America 1-866-638-4183 Deutsche Bank 1-866-926-1437 Citi 1-866-720-4802 JP Morgan 1-866-450-8470 Goldman Sachs 1-888-350-2857 Merrill Lynch 1-888-706-1381 UBS 1-800-253-1974 Morgan Stanley 1-800-566-2273 Wachovia 1-866-283-794
Meantime, more investigations are under way into the sales practices of US firms that marketed and sold auction-rate securities to investors. Unfortunately, many investors who were told ARS were liquid investments are now dealing with frozen securities and cannot access their funds.

If you invested in the auction-rate securities industry and your ARS became frozen during the market’s collapse, you may be the victim of securities fraud.

Related Web Resources:
Small firms caught in ARS buyback vise, November 16, 2008 Continue Reading ›

Wachovia Securities Analyst Comments on Bear Stearns’ Sale and Calls Merrill Lynch the “Riskiest” Investment Bank

Published on: March 19, 2008 | by Shepherd Smith Edwards & Kantas, LLP

In a note to investors, Wachovia Securities Analyst Doug Sipkin commented on the state of the leading Wall Street securities firms in light of the worsening global credit crisis.

Sipkin blamed the “The failure of Bear Stearns” on a “management issue” rather than a “market issue.” JP Morgan Chase & Co. recently purchased Bear Stearns, the fifth largest securities company, for $236 million-that’s $2/share-a 90% market drop in just two days. The securities firm ran out of money after clients took away funds.

Sipkin, however, reassured investors that the action taken by the Federal Reserve to reduce emergency lending rates will keep the other four big securities firms in business.

Countrywide Financial, Merrill Lynch, and Citigroup Executives Defend Their Hefty Compensations Following Subprime Mortgage Crisis

Published on: March 12, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Appearing before the U.S. Congress last week, Countrywide Financial CEO and founder Angelo Mozilo, Ex-Citigroup CEO Charles Prince, and Ex-Merrill Lynch Chairman and CEO Stanley O’Neil gave their testimonies to the House Committee on Government and Oversight Reform.

The three men say that reports about their compensation are “grossly exaggerated” and that they too have lost millions of dollars from the mortgage debacle. On Thursday, the Congressional issued a report stating that the three men earned $460 million between 2002 and 2006.

All three men say their income from the firms are tied to the profits that the companies made in the years prior to the mortgage crisis and that their company stock has dropped dramatically since then.

Pondering the SEC’s Role in the Subprime Mortgage Crisis

Published on: February 11, 2008 | by Shepherd Smith Edwards & Kantas, LLP

What was the role of the Securities and Exchange Commission in the collapse of the subprime mortgage bubble? Although mortgage brokers, investment banks, and ratings agencies are frequently held responsible for the demise, little is said about the roles of the Financial Industry Regulatory Industry (FINRA) and the SEC-both watchdog agencies that are responsible for monitoring complex credit derivatives and their suitability requirements for investors.

Yet where was the SEC when it was time to oversee investment banks and determine whether they had sufficient capital for their balance sheets, trading positions, and the appropriate risk management systems so that major losses could be avoided?

One notable problem is that there is not enough clear data available about the credit derivatives market. Structured finance products, including collateralized debt obligations (CDOs) are traded over-the-counter in the United States. This means that price information for these products is not easily accessible.

Deutsche Bank Trust Company, Goldman Sachs Group, and Bank of America Corporation are Among the 21 Lenders Named in Cleveland, Ohio Lawsuit

Published on: January 24, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The city of Cleveland, Ohio is suing 21 financial institutions for hundreds of millions of dollars in damages caused by subprime lending and securitization. The defendants named in the lawsuit are:

• Deutsche Bank Trust Company • Ameriquest Mortgage Company • Bank of America Corporation • The Bear Stearns Companies • Citigroup, Inc.

• Countrywide Financial Corp.

Class Action filed against Morgan Stanley on Behalf of Former Eastman Kodak Employees

Published on: January 17, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Lawyers have filed a class action suit against Morgan Stanley for a group of former Eastman Kodak employees they say were persuaded to retire early and invest their retirement assets through Morgan Stanley.

According to the Dow Jones News Wire, the class action is seeking nearly a half billion dollars in damages from Morgan Stanley because its brokers advised the Kodak employees retire early with promises of financial security that never materialized. One of the attorneys estimates 1,000 investors or more are involved. If so, the claim seeks approximately $500,000 per former Kodak retiree.

Firms which report the results of class action cases estimate that recovery in securities class action cases is LESS THAN THREE PERCENT of the actual losses to investors! If one were to assume that 1,000 Kodak retirees lost, on average, $500,000, each may receive LESS THAN $15,000 according to this average.

Two Former Morgan Stanley Advisers are named in SEC Market Timing Lawsuit

Published on: January 2, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission is suing two ex-Morgan Stanley advisers for allegedly circumventing the market timing restrictions of 50 mutual fund companies, and, as a result, allegedly defrauding some 50 mutual fund companies.

Between January 2002 and August 2003, Former advisers Darryl Goldstein and Christopher O’Donnell earned about $1 million in fees and commissions because of their alleged misconduct. Attorneys for both men say their clients will fight the charges.

The SEC says that the two men, on more than one occasion, strategically engaged in several deceptive practices, including the opening of several brokerage accounts and trading in them, trading with variable annuity contracts, and using a number of financial advisor identification numbers while trading. The deceptive practices were meant to get around the restrictions that mutual funds had regarding market timing.

Morgan Stanley and WestLB Lose Cases Because of E-Mail Evidence—or Lack Thereof

Published on: December 4, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Brokerage firms involved in legal disputes are finding that they are being forced to hand over relevant electronic conversations that are resulting in large jury verdicts, regulatory fines, and the possibility that investors might re-open arbitration cases where e-mail conversations had been suppressed.

Here are a few cases where e-mail records played a key role that was generally not in the favor of the brokerage firm:

Morgan Stanley may have to pay several thousand investors anywhere from $3,000 to $20,000 after settling a case with FINRA, who says the brokerage firm did not in fact lose millions of e-mails because of the September 11 terrorist attacks. Investors had said these e-mails could have helped prove their arbitration cases against Morgan Stanley. FINRA says that millions of these e-mails had been restored to the firm’s system and Morgan Stanley tried to withhold this fact.