Investor Lawyers Blog

US Appeals Court Revives JPMorgan Whistleblower’s Lawsuit

Published on: September 22, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The 2nd U.S. Circuit Court of Appeals has revived the lawsuit brought by a whistleblower who accused JPMorgan Chase & Co. (JPM) of firing her for cautioning that a client might be engaging in money laundering and fraud. Jennifer Sharkey was a private wealth manager and vice president at the firm when she was let go in August 2009.

Sharkey claims that she was terminated a week after telling JPMorgan that they needed to pay attention to “red flags” and let go of the client who was responsible for about $600K of yearly billings. She sued her former employer after she was fired.

Last year, U.S. District Judge Robert Sweet in Manhattan threw out the case. Sweet said that the firm may have let Sharkey go for other reasons, including allegations that she lied about communications with another client or her performance was poor. Sharkey has countered that she did not lie.

Hedge Fund Manager Faces SEC Charges For Insider Trading

Published on: September 21, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The SEC has filed insider trading civil charges against Leon G. Cooperman and his Omega Advisors. According to the regulator, the hedge fund manager made illicit profits when he bought Atlas Pipeline Partners securities right before it sold its natural gas processing facility in Oklahoma.

Cooperman is accused of using his position as one of Atlas Pipeline’s biggest shareholder to obtain confidential information about the upcoming sale. This, even after Cooperman and his firm had agreed not to to make trades using the information he was given. When the sale of the facility, for $682 million, was announced publicly, Atlas Pipeline’s stock price went up by over 31%.

The SEC, in its complaint, said that when Cooperman’s firm was sent a subpoena regarding its trading involving Atlas Pipeline securities, Cooperman allegedly spoke to the executive who had given him the nonpublic information and attempted to make up a story about the trading. The executive was reportedly upset to find out that Cooperman had traded before the announcement of the sale.

Broker Who Stood To Inherit 91-Year-Old Customer’s Condo is Barred by FINRA

Published on: September 20, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred ex-broker Douglas Wayne Studer after it was discovered that he was named to inherit a 91-year-old customer’s Florida waterfront condominium. FINRA’s investigation, which began last year, sought to determine whether he violated his ex-employer’s policy by being named in the estate documents belonging to the elderly investor.

Without denying or admitting to FINRA’s allegations Studer agreed to the sanction. Until July, Studer had worked for Kovack Advisors Inc. since last October.

SEC Cases: Blank Check Maker is Accused of Fraud, Alleged Scam Involving Company That Makes Containers to Grow Marijuana Faces Civil Charges, & Retail CEO and Promoter Accused of Fraudulent Marketing Campaigns

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

Florida Man Implicated in Scam Involving Black Check Companies’ Stocks

The U.S. Securities and Exchange Commission has filed civil fraud charges against Sheldon R. Rose. The Florida man established over a dozen blank check companies, which the SEC contends are worthless and have no operations despite that they are registered to sell stock.

According to the regulator, Rose appointed relatives and friends as figurehead officers and shareholders but concealed that he was the one controlling the entities and their securities. Although corporate filings made it seem as if the companies were legitimate startups, the SEC contends that this was only so that reverse mergers could be conducted, the securities could be sold, and Rose and others could profit illicitly.

In addition to settling the civil charges, Rose is barred from engaging in penny stock offerings in the future or working as a director/officer of a public company. He also faces criminal charges.

Rose’s civil case is connected to the one that the SEC filed last year against 10 individuals in a penny stock scam involving blank check companies headed for reverse mergers.

SEC Awards Whistleblower $4M

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

The U.S. Securities and Exchange Commission is awarding over $4M to a whistleblower for providing original information that led to a successful fraud case. This is individual is the 34th whistleblower that the SEC’s program has awarded since 2011, upping the total amount granted in such awards to over $111M.

In what was the second biggest award issued by the regulator to date, he SEC awarded $22M to an to an ex- Monsanto Co. financial executive last month. The individual had reported alleged accounting violations involving Roundup, the company’s weed killer. According to media reports, Monsanto offered distributor rebates to raise sales but moved the costs into the following fiscal year. As a result, the company moved up its revenue while postponing the reduction that resulted from the costs.

Under the SEC Whistleblower program, individuals who voluntarily give the regulator unique information that leads to a successful enforcement case are entitled to 10-30% of the sanctions collected when that amount is over $1M. Since the program’s inception five years ago, the Commission has received over 14,000 tips.

Deutsche Bank and DOJ Still In Negotiations Over Mortgage-Backed Securities Case

Published on: September 16, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Deutsche Bank (DB) and the U.S. Department of Justice have yet to reach a settlement over allegations about the way that the German lender packaged toxic mortgages leading up to the 2008 financial crisis. According to The Wall Street Journal, The DOJ wants the bank to pay $14B. Deutsche Bank, however, said it has no plans to pay “anywhere near the number cited” and sees that figure as a starting point in negotiations.

In a statement, the firm said that it expected the final figure to be much lower and closer to what other banks have paid over similar allegations. InvestmentNews reports that it has not been uncommon for the DOJ in its investigation into MBSs to first put forward higher penalties than the eventual settlement that is reached.

Other firms and their deals over their mortgage lending activities include Bank of America (BAC) for $16.7B, Citigroup (C) for $7B, JPMorgan Chase (JPM) for $9B, Goldman Sachs (GS) for $5.1B, and Morgan Stanley (MS) for $3.2B. Goldman Sachs admitted to wrongdoing when it settled claims that it did not properly vet MBS before selling them as quality debt to investors.

Man Who Ran Pump-And-Dump Scam Linked to Notre Dame’s “Rudy” Gets Prison Term

Published on: September 15, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Chad Peter Smanjak has been sentenced to a year and a day in prison. Smanjak admitted to operating a pump-and-dump scam linked to a company founded by Daniel Ruettiger, also known as Rudy. Ruettiger’s time playing football at Notre Dame was retold in the movie “Rudy.”

Smanjak is accused of targeting over 250 investors in his penny stock scam, which made at least $5M in profits. Although he had co-conspirators, Smanjak was the only person indicted in this securities case.

The penny stock in the scam was issued by Rudy Nutrition, which Ruettiger founded. The sports drink company claimed it was selling health conscious drinks.

Voya Sued in 401(K) Lawsuit, is Accused of Partaking of Investment Advice Fee Charge

Published on: September 14, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Voya Financial Inc. (VOYA) is the defendant in a 401(k) lawsuit alleging excessive fees. According to a Nestle 401(k) Savings Plan participant, Voya and managed-account provider Financial Engines came up with an arrangement that allowed Voya to collect excessive fees for service related to investment advice, but without disclosing that this was part of their deal. In Patrico v. Voya Financial, Inc. et al., the plaintiff is claiming breach of fiduciary duty under ERISA.

The proposed class action lawsuit contends that Voya offered participants an advice program via the Voya Retirement Advisers but subcontracted to have Financial Engines give the advice. The plaintiff contends that even though Voya didn’t provide “material services” related to the advice that participants were given through the program, the company collected a fee to which it purportedly had no right. Voya allegedly keeps a “substantial” part of the fee, while giving some of the fee to Financial Engines.

Voya denies any wrongdoing.

Ameriprise Ordered to Pay $85OK After One of Its Brokers Bilked His Family

Published on: September 14, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is ordering Ameriprise Financial Services (AMP) to pay $50K for failing to properly supervise and notice that one of its brokers was bilking his own family members. According to the self-regulatory organization, the registered representative took over $370K from five firm customers, which included his domestic partner, mother, grandparents, and stepfather.

From 10/11 to 9/13, the broker moved the funds to a business account. The transfers went undetected for two years because Ameriprise purportedly neglected to adequately supervise the moving of customer funds to third parties. It wasn’t until 9/13 that evidence was found that the broker had been practicing the signature of a family member.

The Ameriprise broker turned in forms to move the money from the brokerage accounts of customers into a business bank account. The transfer was under the guise of making investments. Instead, said FINRA, the broker allegedly used the money to pay himself commissions and an additional salary.

UBS Ordered To Pay Three Investors $750K in Puerto Rico Bond Fraud Case

Published on: September 13, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority announced that UBS Financial Services and its Puerto Rico subsidiary (UBS) must collectively pay three investors $750,000 in damages for losses they sustained from investing in UBS’s proprietary Puerto Rico closed-end bond funds and Puerto Rico bonds. The claimants are Jenny Robles Adorno, Desarrollos Jarra SE, and Jose A. Rivera.

The investors accused UBS of recklessness, fraud, and negligence. They sought compensatory damages, punitive damages, and reimbursement of commissions that they said were unlawful. In San Juan, the FINRA arbitration panel awarded Rivera $562,500, Robles $30,000 and Jarra $157,500. UBS said it was “disappointed” with the panel’s decision to award any damages to the claimants.

This is not the first Puerto Rico bond fraud arbitration case in which UBS has been ordered to pay investors. Just this March, the firm had to pay over $470,000 to three investors who said their accounts were over-concentrated in the same Puerto Rico focused investments. The claimants in that particular case alleged negligent supervision and fraud. Similarly, UBS was ordered to pay a former television executive over $1,400,000 in the fall of 2015 for over-concentrating the former customer in UBS’s proprietary funds and misrepresenting the risks of those investments.