Investor Lawyers Blog

M & T Bank Settle Fraud Case for $64M

Published on: May 18, 2016 | by Shepherd Smith Edwards & Kantas, LLP

M & T Bank (MTB) will pay the U.S. government $64M to resolve a lawsuit about housing loans. The case stems from a whistleblower case filed by an ex-M & T underwriter accusing the bank of underwriting fraud. Following its investigation, the Department of Justice said that M & T had awarded loans that failed to meet certain Federal Housing Administration (FHA) requirements.

As part of the deal reached, M & T Bank admitted that between 1/07 and 12/11, it certified mortgage loans that were insured by the FHA even though they did not satisfy the Department of Housing and Urban Development’s (HUD) underwriting requirements and failed to adhere to the federal government’s quality control requirements. M & T Bank also admitted that before 2010, it did not preview every Early Payment Default loan, which are loan that become 60 days past due during the first six months of repayment, nor did it review an adequate FHA loan sample between ’06 and ’11 even though this was an HUD requirement.

M & T also established a quality control process that let it generate preliminary major errors that were much lower than what that rate would have been if the preliminary major error rate were determined more appropriately. The bank did not abide by HUD’s self-reporting requirements even after identifying that a number of FHA insured loans had these “major errors.” It wasn’t until 2008 that it began to self-report loans with errors.

Securities Fraud Cases: Ex-Head of MICG Investment Management Firm Faces 13 New Charges, SEC Accuses Unregistered Brokers of Bilking Investors in $6M Scam, and $250M Pump-And-Dump Case Leads to Guilty Plea

Published on: May 18, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Government Charges Convicted Broker with More Fraud Charges
Jeffrey Martinovich is charged with 13 new counts of fraud. He is is ex-head of MICG Investment Management and was convicted of 17 fraud charges three years ago.

Martinovich is accused of improperly moving over $700K from a company hedge fund in 2010. According to prosecutors, he spent $170K of the funds for his legal defense fees and at least $59K on his personal expenses. He also purportedly took out over $147K more from the hedge fund account.

It was in 2011 that the Financial Industry Regulatory Authority expelled Martinovich and his firm for securities fraud, improperly using client money, and causing false statements to be sent to investors related to the MICG Venture Strategies LLC, a proprietary hedge fund. The self-regulatory organization said that Martinovich and MICG improperly assigned asset values that were excessive to two non-public securities.

FINRA said that the assets’ value were inflated so that incentive and management fee could be increased.

Offshore Broker Pleads Guilty in $250M Pump-and-Dump Scam
Gregg Mulholland has pleaded guilty to conspiracy for operating a pump-and-dump-scam that manipulated shares of over 40 companies in the U.S. One company, Cynk Technology, saw its share price increase by 24,000%.

Wells Fargo to Pay UBS $1M Over Broker Departure

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

A FINRA arbitration panel has ordered Wells Fargo Advisors LLC (WFC) to pay UBS Financial Services Inc. $1.1M to resolve a claim involving financial adviser David Kinnear who went to work for the Wells Fargo & Co. brokerage arm after leaving the UBS Group AG (UBS) unit. UBS claims that Kinnear stole thousands of client and business records, as well as proprietary information, after resigning from the firm.

The Wall Street Journal reports that according to a source, Kinnear downloaded the data and distributed it to clients. UBS contends that the compensation Kinnear received at Wells Fargo was related to his ability to successfully bring UBS clients with him. UBS also claims that Kinnear owes it promissory notes.

Wells Fargo denies UBS’s allegations. It submitted a counterclaim accusing the firm of unfair completion, including preventing clients from moving from UBS to Wells Forgo.

Under the Protocol for Broker Recruiting, brokers are only allowed to bring the names and contact information of clients that they serviced while having worked at a firm when moving to another brokerage firm.

Texas Fraud Cases: Houston Municipal Employees Pension System Sues BOFl, Dallas Police and Fire Pension System Accuses Financial Adviser of Fraud, and SEC Accuses Two Attorneys of $13M Escrow Scheme

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

Houston Pension Fund Accuses Bank of Fraud
In the U.S. District Court Southern District of California, the Houston Municipal Employees Pension System has filed a securities fraud case against Bofl Holding (BOFI) Inc. The pension fund claims that the bank employed illegal lending practices and depended on off-balance-sheet entities to enhance profits.

According to the plaintiff, Bofl did not disclose its use of off-balance-sheet entities to buy lottery receivables, failed to put into place a healthy compliance system, and gave loans to foreign nationals even though they had suspect or criminal histories. The Houston pension fund also believes that Bofl did not fully disclose to investors that it had been subject to regulatory and government subpoenas or that there were pending federal probes against it.

Dallas Pension Fund Files Lawsuit Against CDK Realty Advisors
The Dallas Police and Fire Pension System is suing CDK Realty Advisors. The Texas pension fund claims that the advisory firm directed it toward risky deals while making excessively high fees and garnering other benefits. The plaintiff is seeking to recover millions of dollars.

CDK Realty Advisors once managed over $700M for the Dallas pension fund. Now, the latter is claiming multiple breaches of fiduciary duty. It is also claiming write-downs and losses of over $320M because of the risky investments. The Dallas Police and Fire Pension System says that CDK should have done a better job of protecting the fund’s members.

HSBC Settles Yen Libor Rigging Lawsuits With Investors

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

Investors and HSBC Holdings PLC (HSBC) and HSBC Bank PLC have settled two proposed anti- trust class action lawsuits accusing the banks of fixing yen-denominated Libor rates. The first lawsuit, which was filed in 2012, contends that lead plaintiff Jeffrey Laydon lost thousands of dollars in 2006 while shorting derivatives involving the Euroyen Tokyo Interbank Offered Rate. Laydon said that the banks on the Tibor and London Interbank Offered Rate Panel, including Deutsche Bank (DB), JPMorgan (JPM), and Mizuho Bank, conspired together to rig the rates through the submission of estimates that they had agreed upon.

A district court judge dismissed the antitrust, vicarious liability, and unjust enrichment allegations but allowed for the claims accusing the banks of violating the Commodity Exchange Act through price manipulation. Last year, the judge dismissed ICAP PLC (IAP), Resona Bank Ltd., and Mizuho as defendants of the case after finding that they and the markets operator lacked sufficient contact with the Second Circuit or the U.S. Laydon was then allowed to add Tullet Prebon PLC (TLPR), Lloyds Banking Group PLC (LYG), ICAP Europe LTD., and Martin Brokers UK Ltd. as defendants. In an amendment to the complaint, Laydon said he was asserting antitrust, CEA, RICO, unjust enrichment, and vicarious liability claims against the added defendants.

The second lawsuit also names several banks as defendant. Sonterra Capital Master Fund ltd. is claiming that HSBC and others manipulated the Tibor, Yen Libor, and derivatives that are Euroyen-based.

Oppenheimer Shuts Down Its Commodity Strategy Total Return Fund

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

After nearly twenty years, Oppenheimer (OPY) is liquidating its Commodity Strategy Total Return Fund (QRAAX) in mid-July. The reason for the shut down is underperformance.

According to the company’s website, the Oppenheimer Commodity Strategy Total Return Fund lost 49% since it was created in 1997, and average yearly returns have consistently declined by the double digits. The Wall Street Journal reported that the commodity fund has lost money annually since hitting an 8.5% return in 2010. It’s also been up 7.19% since the beginning of 2016. However InvestmentNews reports, the fund’s performance has been poor over the last five years. The Oppenheimer fund’s assets under management is down to $269M from over $2B in 2011.

While Oppenheimer said that it continues to believe in the value of its investment strategy, the firm is now saying that investors would benefit more from a multi-asset portfolio. The Commodity Strategy Total Return Fund is most heavily involved in energy, with agriculture and precious industrial metals also big presences. The decline in their prices have played a factor in the fund’s decline.

Oppenheimer has also been in the spotlight of late because a lawmaker has asked the SEC to look into OppenheimerFunds and whether the firm has complied with securities laws when dealing with Puerto Rico bond investments. NY City Council Speaker Melissa Mark-Viverto believes that the firm helped to make the U.S. territory’s financial crisis worse. OppenheimerFunds is heavily invested in Puerto Rico. The Island owes more than $70B in debt.

Oppenheimer Shuts Down Its Commodity Strategy Total Return Fund, The Wall Street Journal, May 11, 2016

NY City Council Speaker Wants SEC to Investigate Oppenheimer Funds Over Puerto Rico Debt Crisis, Stockbroker Fraud Blog, May 9, 2016

Securities News: $5.95B RMBS Lawsuit Against Moody’s is Reinstated, Barclays Traders Remain on Trial, And Former Bank CEO Enters Guilty Plea to Fraud Charges

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

1st Circuit Reinstates Lawsuit Against Moody’s
The First Circuit Court of Appeals has reinstated the $5.9 billion residential mortgage-backed securities fraud case brought by the Federal Home Loan Bank of Boston against Moody’s Investor’s Service, Inc. and Moody’s Corp. The bank claims that the credit rating agency knowingly issued false ratings on certain RMBSs that it had purchased.

A district court judge in Massachusetts had dismissed the lawsuit citing lack of personal jurisdiction. The judge also held that the court could not move the lawsuit to a different court where jurisdiction would be proper because cases dismissed for lack of jurisdiction could only be transferred if the dismissal was for lack of subject matter jurisdiction, not personal jurisdiction.

Now the First Circuit has vacated that ruling and found that transferring a case that has dismissed for lack of personal jurisdiction is also allowed. It is moving the RMBS case to the district court, which will decide whether to move the case to New York.

Former Barclays Trader Pleaded Guilty to Libor Rigging
According to prosecutors in the U.K., ex-Barclays Plc. (BARC) trader Peter Johnson pleaded guilty to conspiracy to manipulate the London interbank offered rated in 2014. The government announced the guilty plea this week after lifting a court order that had prevented the plea from being reported until now. The disclosure comes as the criminal trial against five of Johnson’s former Barclays co-workers into related allegations is underway.

The defendants on trial are Jay Merchant, Stylianos Contogoulas, Alex Pabon, Ryan Reich, and Jonathan Matthew. They have pleaded not guilty to the charge of conspiracy to commit fraud. The U.K.’s serious fraud office claims that the men acted dishonestly when they turned in or asked others to submit rates for Libor.

SEC Files Fraud Charges in Native American Tribal Bonds Scam

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

The U.S. Securities and Exchange Commission is charging John Galanis, his son Jason Galanis, and five other people with fraud involving a multimillion-dollar tribal bonds scam. The SEC claims that Jason ran the scheme to obtain a “source of discretionary liquidity.”

He and his father allegedly persuaded a Native American tribal corporation affiliated with the Wakpamni District of the Oglala Sioux Nation to put out limited recourse bonds that the two of them had structured. Jason then acquired two investment advisory firms and appointed officers to coordinate the purchase of $32 million in bonds. He used client money to purchase the bonds.

Investors were told that the bond proceeds would be invested in annuities to make enough money to pay back bondholders and to benefit the tribal corporation. Instead, the money went to a bank account owned by a company that Jason and his associates controlled. The funds were allegedly misappropriated to make luxury purchases and to pay lawyers representing Jason and his dad in a criminal case involving unrelated stock fraud charges.

The SEC wants disgorgement, interest, penalties, and permanent injunctions. Also named in the complaint are Devon Archer, Bevan Cooney, Hugh Dukerley, Gary Hirst, and Michelle Morton. They face charges of violating federal securities laws’ antifraud provisions and other rules.

JPMorgan to Pay $150M to Pension Funds Over London Whale-Related Losses

Published on: May 12, 2016 | by Shepherd Smith Edwards & Kantas, LLP

A U.S. district court judge has approved a settlement reached at the end of last year between JPMorgan Chase & Co. (JPM) and pension funds related to trades made by Bruno Iksil, who earned the nickname “London Whale” because of his huge market-moving positions in credit derivatives. In their class action securities case, the plaintiffs accused the firm of using its chief investment office in London as a secret hedge fund and hiding up to $6.2M in losses.

Even though the office was supposed to be primarily for managing risk, the plaintiffs believe that it was making high-risk trades for profit, including trading in complex credit derivatives. Depositors’ money was purportedly used in secret for making certain trades. Shareholders claim that JPMorgan knew about the increased risks it was taking and hiding them.

JPMorgan has not admitted to wrongdoing by settling this deal. However, it was also fined over $1B by regulators in the U.K. and the U.S. for management deficiencies related to the London Whale scandal.

SandRidge Energy Stock Losses Has Cost Investors Over $7B

Published on: May 12, 2016 | by Shepherd Smith Edwards & Kantas, LLP

A sharp drop in the stock of SandRidge Energy Inc. (SDOC) has led to catastrophic losses of more than $7 billion for investors. Just last week, SandRidge Energy shares traded down at 3.8%, dropping to $0.0654. More than 2.3 million shares of the stock were exchanged. According to DailyPolitical, SandRidge Energy stock hit a 12-month high of $1.56; its low was $.03. This week, SandRidge Energy said it would not be able to file its quarterly results on time.

Unfortunately, brokerage firms and financial advisers may have recommended SandRidge Energy stock to investors as a safe proposition even for those seeking conservative, low risk investments. Instead, for some investors, the losses have been devastating.

SeekingAlpha.com reports that the Oklahoma-based oil and natural gas company is doing so poorly that it could file for Chapter 11 bankruptcy by early next month. According to Reuters, the company is talking to creditors about a possible debt restructuring deal. SandRidge reportedly wants creditors to agree on how debt could be lowered with the hope that this would restrict how much time it has to stay in court should it seek bankruptcy protection.

On December 31, the company had $3.6B in debt. Its market capitalization is $70B. It will owe interest on June 1.

Analyst Ratings Network reports that in a recent research note, Zacks Investment Research downgraded SandRidge Energy Inc. to a “sell” rating from a “hold” one. It was just last March that the company reported $.09 earnings/share for the quarter.

SandRidge Energy Stock Claims
Shepherd Smith Edwards and Kantas, LTD, LLP is investigating claims of investors who have lost money in an investment in SandRidge Energy stock that they bought at the recommendation of a financial advisor. Contact our oil and gas fraud law firm today.