Mortgage Firms

Mortgage Company President Charged With Defrauding Ginnie Mae

Published on: August 19, 2016 | by Shepherd Smith Edwards & Kantas, LLP

U.S. prosecutors are charging Robert Pena with fraud. Pena, who is the founder and president of Mortgage Security— a mortgage company that is no longer in operation—was indicted on wire fraud and conspiracy charges.

Court documents state that Mortgage Security was contracted with the Government National Mortgage Association, also known as Ginnie Mae. Its job was to pool eligible residential mortgage loans and sell mortgage bonds that were backed by Ginnie Mae to investors. Mortgage Security also was supposed service the loans, including collecting payments plus interest from the borrower ( in addition to loan payoffs) and putting the money in accounts that Ginnie Mae held in trust. The funds were to eventually go to investors.

However, contends the indictment, starting in 2011, Pena allegedly started moving the funds that borrowers sent to Mortgage Security into secret accounts without Ginnie Mae’s knowledge. He purportedly used the money for business and personal expenses, eventually taking close to $3M. He allegedly tried to conceal his scam through false reports that he issued to Ginnie Mae regarding the loans. Ginnie Mae wound up having to pay investors because it had guaranteed their investments.

Securities Fraud: SEC Charges Unregistered California Man with Fraud, FINRA Bars Two Brokers, Second Scam Lands Man in Jail Again

Published on: February 17, 2016 | by Shepherd Smith Edwards & Kantas, LLP

SEC Files Charges in $1.9M Broker Scam
A California man is facing Securities and Exchange Commission charges. The regulator is accusing Gregory Ruehle of fraudulently selling purported stock in a medical device company and keeping investors’ money. The unregistered broker purportedly raised about $1.9M from over 100 investors but did not transfer or deliver the securities that they purchased to them. Meantime, Ruehle is said to have used the funds to cover his personal spending and pay off gambling debts.

According to the SEC, Ruehle began bilking investors in 2012. He allegedly misrepresented to investors in Minnesota and California that he would sell them securities that he owned in ICB International Inc., for which he was a former consultant.

Instead, said the regulator, Ruehle sold investors more securities than what he owned and he failed to tell them that the securities that belonged to him were not transferrable. Ruehle is accused of generating fake documents that he claimed came from the company and issuing bogus company stock certificates to investors, along with a letter that falsely stated that the stock had been transferred to them.

The SEC wants permanent injunction, disgorgement, prejudgment interest, and penalties against Ruehle. The unregistered broker is also now the subject of criminal charges in a parallel case that was brought by U.S. Attorney’s Office for the Southern District of California.

FINRA Bars Two Men for Hedge Fund Fraud
In other broker news, the Financial Industry Regulatory Authority has announced that it is barring brokers Walter F. Grenda and Timothy S. Dembski from the securities industry. The industry bar is for fraud involving the sale of the Prestige Wealth Management Fund, LP, which is a hedge fund.
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Goldman to Buy Back $3.15B in RMBS to Resolve FHFA Claims

Published on: August 26, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Goldman Sachs Group Inc. (GS) will pay $3.15 billion to buy back residential mortgage-backed securities related to bonds that were sold to Freddie Mac and Fannie Mae. The repurchase represents an approximately $1. 2billion premium and makes the mortgage companies whole on the securities. The RMBS case was brought by the Federal Housing Finance Agency.

It was in 2011 that FHFA sued 18 firms to get back taxpayer money from when the U.S. took control of Freddie and Fannie after the economy tanked in 2008. Goldman is the fifteenth bank to settle.

The firm will pay Fannie May $1 billion and $2.15 billion to Freddie Mac for the securities. The two had purchased $11.1 billion from Goldman Sachs. A few of the other banks that have settled with the FHFA include Morgan Stanley (MS), JPMorgan Chase (JPM), and Bank of America Corp. (BAC). The agency’s remaining RMBS fraud cases still pending are those against RBS Securities Inc. (RBS), HSBC North America Holdings Inc., (HSBC), and Nomura Holding America Inc. (NMR).

FINRA Arbitration Panel Tells Merrill Lynch to Pay $1.34M to Florida Couple Over Allegedly Misrepresenting Fannie Mae Preferred Shares’ Risks

Published on: October 17, 2012 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority panel says that Merrill Lynch (MER) has to pay Michele and Robert Billings $1.34 million for allegedly misrepresenting the risks involved in preferred shares of Fannie Mae. The couple, who used to own a pest control business, placed $2.3 million in the shares in 2008 on the recommendation of their broker, Miles Pure.

The Billings claim that Pure told them them that their investment was “safe,” backed by the government, and came with an attractive yield, when, actually, contends the couple, at the time Fannie Mae’s exposure to the residential real estate market that was failing was causing Fannie Mae to lose billions of dollars. Even as the stock’s price went down, they say that Pure discouraged them from selling. They also claim that he didn’t let them know that the financial firm’s own research showed that Fannie Mae was becoming more beleaguered. Not long after, the Billings’ shares lost their value when Fannie Mae went into government conservatorship.

They filed their FINRA arbitration claim contending civil fraud, negligent supervision, and other alleged wrongdoing. The couple, who are now retired, sought $1 million from Merrill Lynch, in addition to other relief. The $1.34 million award includes punitive damages.

While a spokesman for Merrill says that the brokerage firm doesn’t agree with the panel’s ruling, the Billings’ securities attorney expressed approval of the outcome. Meantime, the FINRA panel has denied Pure’s request to have the disclosure about this arbitration taken out of public record. Although he was not involved in this case, per the securities industry, all securities brokers who are license must have their connection to any arbitration claim noted in their public records regardless of whether/not if he/she was party to it. (The panel, however, did remove the arbitration disclosure from the record of a brokerage manager who didn’t deal directly/daily with the Billings.)

Pure is now a Morgan Keegan broker. Morgan Keegan is a Raymond James Financial Inc. (RJF) unit. Merrill Lynch is a Bank of America (BAC) subsidiary.

This securities case is an example of some of the repercussions that are still happening for investors and brokers in the wake of the economic crisis. The Billings are just two of many investors that have sustained financial losses because a brokerage firm allegedly misrepresented the risks involved in an investment. Meantime, more arbitration claims over such losses are still pending.

Merrill Lynch ordered to pay couple $1.34 million over Fannie Mae Preferred Shares, Reuters/Chicago Tribune, October 16, 2012

Bank of America Merrill Lynch hit with $1.3 million arbitration order, Investment News, October 17, 2012

More Blog Posts:
Ex-Fannie Mae Executives Have to Defend Against SEC Lawsuit Over Their Alleged Involvement in Understating Mortgage Company’s Exposure Risk, Institutional Investor Securities Blog, August 25, 2012

Merrill Lynch Told to Pay $3.6M to Brazilian Heiress for Brother’s Alleged $389M in Unauthorized Trading, Stockbroker Fraud Blog, September 22, 2012

Freddie Mac and Fannie May Drop After They Delist Their Shares from New York Stock Exchange, Stockbroker Fraud Blog, June 25, 2010 Continue Reading ›

Freddie Mac and Fannie May Drop After They Delist Their Shares from New York Stock Exchange

Published on: June 25, 2010 | by Shepherd Smith Edwards & Kantas, LLP

Fannie Mae dropped 39% to 56 cents and Freddie Mac went down 38% to 75 cents when the mortgage firm delisted their preferred and common shares from the New York Stock Exchange at the request of the Federal Housing Finance Agency. The moves were ordered after the NYSE told Fannie Mae that its shares did not meet listing standards any longer because over the last 30 days its closing price had dropped under $1. The voluntary delistings will go into effect in early July. The companies are expected to trade on the Over-the-Counter Bulletin Board.

The two mortgage companies, which are 80% owned by US taxpayers, guarantee or own nearly half of the US’s $11 trillion mortgage market. Shareholders include Blackrock Inc., Vanguard Group, California’s state pension fund, and Kinetics Asset Management.

The two firms have been at risk of delisting since September 2008 when they were seized by regulators and their share prices dropped. The US Treasury has infused about $145 billion ($61.3 billion into Freddie Mac and $83.6 billion into Fannie Mae) into the companies since then to keep them afloat despite defaults of mortgages and foreclosures. Taxpayer aid could end up reaching the hundreds of billions of dollars. The US government has promised to keep financially supporting the mortgage firms while Congress deliberates over overhauling the country’s mortgage finance system. The two firms are still a key source of funding for mortgage lenders and banks.

“This is more insult to the injury sustained by those who were sold shares, especially preferred shares, of Fannie Mae and Freddie Mac,” says Securities Fraud Attorney William Shepherd. “Most investors were told that these were very safe investments. Many were told that these were as safe as government bonds. It is not too late to seek damages for such misrepresentations.”

Related Web Resources:
Fannie, Freddie Plunge After Moving to Delist Shares, Bloomberg, June 16, 2010
Fannie Mae, Freddie Mac to delist from NYSE, CNN, June 16, 2010 Continue Reading ›