Investor Lawyers Blog

JPMorgan To Pay $2.6B in Penalties in Bernard Madoff Ponzi Scam Settlements

Published on: January 7, 2014 | by Shepherd Smith Edwards & Kantas, LLP

JPMorgan Chase & Co. (JPM) will pay around $2.6 billion in penalties to settle criminal and civil allegations accusing the bank of failing to warn that Bernard L. Madoff was engaged in a multibillion-dollar Ponzi scam. $2.24 billion will go toward compensating the scheme’s victims-$1.7 billion will be forfeited via the US Department of Justice and $543 million will go to the bankruptcy trustee who is collecting funds for plaintiffs and other Madoff victims. $350 million will settle U.S. Office of the Comptroller of the Currency (OCC) claims.

The penalties are just the latest in the numerous securities settlements that JPMorgan has agreed to pay. The bank recently resolved cases over mortgage bond sales and the “London Whale” trading debacle, among other matters. This latest deal over the Madoff scam would up the total that the firm has paid to resolve government probes to $20 billion in the last year.

Federal prosecutors and the FBI had been trying to determine whether JPMorgan failed to notify regulators about Madoff’s activities even though there were a number of red flags. For example, why did the bank not formally raise worries about Madoff here when it submitted such a complaint in the UK? (The former financial manager kept primary checking accounts at JPMorgan for years.) This, even though US law mandates that banks turn in a SAR (suspicious activity report) when they detect that their might be suspected or definite activities violating federal law.

RBS Securities’ Japan Unit to Pay $50M Criminal Fine Over Libor Manipulation

Published on: January 7, 2014 | by Shepherd Smith Edwards & Kantas, LLP

A US judge has ordered Royal Bank of Scotland Group Plc’s (RBS) banking unit in Japan to pay a $50 million fine over its involvement in manipulating LIBOR. RBS Securities Japan Ltd. entered a guilty plea to wire fraud as part of its parent company’s $612 million securities settlements to resolve civil and criminal charges over the rate manipulation.

On December 31, RBS Securities Japan and the US government turned in a joint court filing stating that from at least between 2006 and 2010 some of the bank’s traders tried to move Libor in a manner that would benefit their positions. The attempted manipulation of over a hundred Yen Libor submissions was reportedly involved.

Authorities say that as a result traders profited at counterparties’ expense. The filing noted that investigations uncovered wrongful behavior involving Libor submission for the yen and another currency and that about 20 RBS traders, including four at the RBS unit in Japan were involved.

SEC Stops Texas Securities Scam Involving Oil and Gas Investments

Published on: January 6, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission has filed securities charges and ordered an asset freeze against Janniece S. Kaelin and Robert A. Helms, who are both accused of running a Texas-based Ponzi scam involving purported investments in oil and gas projects. The regulator contends that Kaelin and Helms misled investors about their industry experience, even as they raised close to $18 million for what was supposed to be royalty interests in oil and gas. The SEC says that the two of them used most of the money to run a Ponzi scam and pay for business costs and personal spending.

Per the Commission’s complaint, Helms and Kaelin started offering investments through Vendetta Royalty Partners in 2011. They brought in at least 80 investors from numerous states.

In offering documents, they promised that over 99% of investment proceeds would be used to obtain a solid portfolio filled with oil and gas royalty interests. Instead, claims the regulator, the Kaelin and Helms put in only 10% of this money in the projects. The result was very small returns.

FINRA to Go After Rogue Brokers, & Includes REITs, Municipal Bonds, & Frontier Markets Among Its Enforcement Priorities for 2014

Published on: January 3, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is setting up a team made up of six members to look at stockbrokers with long records of investor complaints and violations, as well as those that engage in “cockroaching”-which involves brokers moving among beleaguered firms. The crack down comes amidst pressure from lawmakers on Capitol Hill.

According to an analysis of state securities records by The Wall Street Journal last year, between 2005 and 2012 there were over 5,000 licensed securities brokers who had worked with at least or more firms that had been expelled by FINRA. The analysis also revealed that there were brokers who, even in the wake of being targeted by numerous arbitration claims or having declared bankruptcy more than once, have managed to keep working in the industry.

FINRA announced this new initiative this week in a letter to approximately 4,180 broker-dealers that are registered with the SRO. It said it would use the Broker Migration model, a computerized analytic system, to look at brokers who have gone from an expelled brokerage firm to other firms.

Deutsche Bank AG Settles Shareholder Lawsuit Over Mortgage Debt

Published on: January 2, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Deutsche Bank AG (DB) has settled a securities lawsuit filed by shareholders accusing the financial institution of misrepresenting the degree of risk it could manage related to mortgage debt before the financial crisis of 2008. The deal, of which the terms have not yet been revealed, were disclosed in a filing made by the firm’s lawyers in the U.S. District Court in Manhattan.

Shareholders, including two mutual funds and the Building Trades United Pension Trust Fund of Elm Grove, claim Deutsche Bank misled them about the management of risk and the underwriting on the mortgage debt that it put together and sold. They also contend that the firm was too slow to take write-downs. They believe that this resulted in an 87% decline in the bank’s share price between May 2007 and January 2009.

They also claim that Deutsche Bank maximized its profit at risk to investors, even as it failed to appraise these customers of the risks they were taking on. When the financial markets failed, it was investors that ended up paying the price.

Barclays to Pay $3.75M FINRA Fine for E-mail Retention and Record Preservation Violations

Published on: December 30, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority said it is fining Barclays Capital Inc. (ADR) $3.75 million for systemic failures that prevented it from making sure certain instant messages, emails, and electronic records are preserved in the way they are required be for at least a decade. The financial institution is settling without denying or admitting to the findings. It has, however, agreed to an entry of the SRO’s findings.

According to FINRA, between 2002 and 2012, Barclays did not preserve a lot of records and electronic books in WORM format, per regulator mandate. This included trade confirmations, trade information, order and trade ticket data, blotters, accounting records, and other records. WORM (Write-Once, Read-Many) Format is the non-erasable, non-rewriteable format that business-related electronic records are supposed to be kept in-per FINRA rules and federal securities laws. The Securities and Exchange Commission says that this format and the preservation of records are essential in protecting investors and ensuring that compliance with securities laws is taking place.

In regards to Barclays over this matter, FINRA says that the issues were widespread and affected all of the firm’s business. It said that because of this, Barclays couldn’t determine whether all of its e-books and records were kept in an a manner that was unalterable. Also, Barclays is accused of not properly keeping certain attachments to Bloomberg emails and not properly keeping about 3.3 million Bloomberg instant messages. Also, Barclays purportedly did not set up and maintain a proper system and written procedures so it could comply with FINRA, SEC, and NASD regulations and rules involving the requirements noted in the violations.

Bank of America’s Countrywide to Pay $17.3M RMBS Settlement to Massachusetts

Published on: December 30, 2013 | by Shepherd Smith Edwards & Kantas, LLP

According to Massachusetts Attorney General Martha Coakley, Countrywide Securities Corp. (CFC) will pay $17 million to settle residential mortgage backed securities claims. The settlement includes $6 million to be paid to the Commonwealth and $11.3 million to investors with the Pension Reserves Investment Management Board. Countrywide is a Bank of America (BAC) unit.

Coakley’s office was the first in the US to start probing and pursuing Wall Street securitization firms for their involvement in the subprime mortgage crisis. Other RMBS settlements Massachusetts has reached include: $34M from JPMorgan Chase & Co. (JPM), $36M from Barclays Bank (ADR), $52 million from Royal Bank of Scotland (RBS), $102 million from Morgan Stanley (MS), and $60 million from Goldman Sachs. (GS).

Meantime, a federal judge is expected to rule soon on how much Bank of America will pay in a securities fraud verdict related to the faulty mortgages that Countrywide sold investors. A jury had found the bank and ex-Countrywide executive Rebecca Mairone liable for defrauding Freddie Mac and Fannie Mae via the sale of loans through that banking unit. The US government wants Bank of America to pay $863.6 million in damages. Mairone denies any wrongdoing.

FINRA Arbitration Panel Says Wells Fargo Must Repurchase $94M of Auction-Rate Securities from Investors

Published on: December 29, 2013 | by Shepherd Smith Edwards & Kantas, LLP

A Wells Fargo & Co. (WFC) brokerage unit must buy back almost $94 million in auction rate securities from the family who said their adviser misrepresented the investments. The claimants are the relatives of deceased newsstand magnate Robert B. Cohen, who founded the chain Hudson News. Cohen died in 2012.

His family contends that Wells Fargo Advisors and one of its advisors made misleading and fraudulent statements about municipal auction-securities. They are alleging breach of fiduciary duty, negligence, and fraud in their municipal auction-rate securities fraud claim.

Now, the firm must buy back at face value the municipal ARS it helped Cohen, his family, and affiliated business purchase. The transactions started beginning March 2008.

Wells Fargo Reaches $591 Million Mortgage Deal with Fannie Mae

Published on: December 29, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Wells Fargo & Co. (WFC) has arrived at a $591 million mortgage settlement with Fannie Mae (FNMA). The arrangement resolves claims that the banking institution sold faulty mortgages to the government run-home loan financier and covers loans that Wells Fargo originated more than four years ago.

Fannie Mae and Freddie Mac (FMCC) were taken over by the US government five years ago as they stood poised to fail due to faulty loans they bought from Wells Fargo and other banks. The two mortgage companies had bundled the mortgages with securities.

With this deal, Wells Fargo will pay $541 million in cash to Fannie Mae while the rest will be taken care of in credits from previous buy backs.

It was just a couple of months ago that Wells Fargo settled its disputes over faulty loans it sold to Freddie Mac with an $869 million mortgage buyback deal. According to Compass Point Research and Trading LLC, between 2005 and 2008, Wells Fargo sold $345 billion of mortgages to Freddie Mac. Compass says the bank sold another $126 billion to Freddie in 2009.

Also settling with Freddie Mac today is Flagstar Bank (FBC) for $10.8M over loans it sold to the mortgage company between 2000 and 2008. That agreement comes following Flagstar and Fannie Mae settling mortgage claims for $93 million over loans the former sold to the latter between January 2000 and December 31, 2008.

Fannie Mae and Freddie Mac have been trying to get banks to repurchase these trouble loans for some time now. In light of this latest settlement with Wells Fargo, Fannie Mae has reached settlements of about $6.5 billion over loan buy backs, including a $3.6 billion deal with Bank of America Corp. (BAC) and Countrywide Financial Corp. and $968 million with Citigroup (C). Earlier this month, Deutsche Bank (DB) consented to pay $1.9 billion to the Federal Housing Finance Agency over claims that it misled Freddie and Fannie about the mortgage backed securities that the latter two purchased from the bank. https://www.securities-fraud-attorneys.com/lawyer-attorney-1835405

Wells Fargo agrees to $541 million loan settlement, Reuters, December 30, 2013

Wells Fargo in $869 Million Settlement With Freddie Mac, Bloomberg News, October 1, 2013

More Blog Posts:
FINRA Arbitration Panel Says Wells Fargo Must Repurchase $94M of Auction-Rate Securities from Investors, Stockbroker Fraud Blog, December 29, 2013

Credit Suisse Must Face ARS Lawsuit Over Subsidiary Brokerage’s Alleged Misconduct, Says District Court, Stockbroker Fraud Blog, January 11, 2013

UBS Bank USA No Longer to Offer Loans Collateralized with Puerto Rico Securities

Published on: December 28, 2013 | by Shepherd Smith Edwards & Kantas, LLP

UBS Bank USA, the Utah affiliate of UBS AG (UBS), will no longer be granting or offering loans collateralized by Puerto Rico securities. According to the media outlet El Nuevo Dia, UBS Bank USA has agreed to sell approximately $562 million in loans made to Puerto Rican investors to another UBS AG affiliate, UBS Financial Services of Puerto Rico (UBS PR). Additionally, UBS Bank USA has agreed to no longer offer loans to Puerto Rican residents.

As reported, UBS Bank USA signed an agreement with the Office of the Commissioner of Financial Institutions after an investigation was opened concerning the ability of UBS Bank USA to have issued such loans. Per the agreement, the loans transfer was to be completed by around December 20, while the new lending ban in Puerto Rico would go into effect after that date.

Thousands of investors have lost some if not all of their assets in the wake of the drop in value of Puerto Rico bonds and closed-end bond funds that invested in Puerto Rico bonds. This spurred UBS to liquidate millions of dollars from investors because the values guaranteed borrowings with UBS Bank USA. (UBS Bank USA had previously told El Nuevo Dia that it did not have to be licensed in Puerto Rico to lend there.)