Investor Lawyers Blog

Wedbush Securities Ordered by FINRA to Pay $2.8M in Senior Financial Fraud Case Over Variable Annuities

Published on: August 31, 2011 | by Shepherd Smith Edwards & Kantas, LLP

A FINRA arbitration panel has fined Wedbush Securities Incorporated, founder Edward Wedbush, and broker Debbie Michelle Saleh to pay $2,865,885 in damages. The victim of this securities case was Rick Cooper, an elderly investor. His securities claim alleged breach of fiduciary duty, fraud, negligent misrepresentation, failure to supervise, intentional misrepresentation and omissions, unauthorized transaction, unsuitable transactions, emotional abuse, elder abuse, and churning related to transactions of unspecified variable annuities.

Cooper’s securities fraud lawyers claim that Saleh sent him bogus monthly account statements, forged his signature, and conducted transactions that he hadn’t authorized, including the buying and selling of annuities and other financial products that were not suitable for him.

While Cooper’s account balances went down to one-third of $1.86 million, Saleh is accused of making money from fees and commissions that she charged him. The FINRA panel found that Saleh purposely misrepresented information about Cooper’s investments and she did make unauthorized transactions. The panel believes that Saleh of acting intentionally to defraud her clients. They said her actions either bordered on or actually were acts of “criminal misconduct.”

Of the $2.9 million, Saleh must pay $500,000 plus $1 million in punitive damages. Wedbush and its founder have to pay $500,000. Saleh, Wedbush, and Edward Wedbush also have to pay 10% annual interest on the damages, Cooper’s legal fees, and his other costs. Wedbush has to pay 100% of the arbitration forum fees, which is about $33,300. Two years ago, Saleh, who is no longer with Wedbush, has been permanently barred from the securities by FINRA.

Cooper is not the only person to file a securities claim against Saleh accusing her of misconduct. She is at the center of 4 investigations and 10 client complaints.

Wedbush has been named in at least 53 regulatory events and 52 arbitrations. Failure to supervise was a common complaint.

Failure to Supervise
Our securities fraud lawyers cannot stress how important it is for broker-dealers and investment advisers to properly supervise their brokers, advisers, other employees, and independent contractors. Not only must appropriate supervision take place, but also procedures of supervision have to be designed, implemented, and executed. Also, an employee assigned a supervisory role must complete specialized training to receiver a supervisor license from the National Association of Securities Dealers (NASD).

In the event that the broker engages in any type of misconduct or other wrongdoing, his/her supervisor and the financial firm can be held liable for allowing the alleged acts to take place-even if the employee that actually engaged in the wrongdoing isn’t found liable. You will want to work with a securities fraud law firm that knows how to prove that failure to supervise occurred.

FINRA Panel Orders Wedbush, Former Broker to Pay Investor $2.9M, OnWallStreet.com, August 31, 2011
FINRA Arbitrators Award Millions in Elder Abuse Case, Forbes, September 1, 2011

More Blog Posts:
FINRA Panel Orders Wedbush Securities to Pay $233,000 in Securities Fraud Damages, Stockbroker Fraud Blog, March 28, 2011
Wedbush Ordered By FINRA Panel To Pay $3.5M to Trader Over Withheld Compensation, Institutional Investor Securities Blog, July 16, 2011
SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees, Stockbroker Fraud Blog, August 29, 2011 Continue Reading ›

Whistleblower Claims SEC is Illegally Destroying Records of Closed Enforcement Cases

Published on: August 31, 2011 | by Shepherd Smith Edwards & Kantas, LLP

According to SEC employee Darcy Flynn, the Securities and Exchange Commission is continuing to get rid of records from closed enforcement cases. If this is true, then the SEC may be breaking the law. Darcy Flynn has brought a whistleblower case over his allegations.

Flynn has been an attorney with the SEC’s enforcement division. The Washington Post quotes him as claiming that “standing orders to direct the destruction of records” were given to him.

Flynn contends that the agency has been getting rid of certain records for the last 17 years even though this violates federal law. He is also accusing the SEC of misleading government officials about the alleged misconduct. Flynn’s lawyer says that with these records now destroyed it will be much more difficult to hold the SEC for any wrongdoing.

Per the “Records Retention Schedule” investigative case files have to be kept for 25 years. Other documents have to be kept until the National Archives say that they can be destroyed.

In 2010, after Flynn put at an alert over this possible issue, the National Archives and Records Administration asked the SEC to explain. The SEC responded that it would preserve the records until the issue was resolved. Flynn’s concerns at the time were focused on “matters under inquiry” documents. MUIs are preliminary investigative records.

Now, however, Flynn is alleging that it isn’t just MUIs that the SEC is wrongfully destroying. He is claiming that documents from formal investigations, including closed probes, are also being eliminated. Flynn believes that not only are these alleged actions impairing the regulator’s ability to resolve certain securities fraud cases, but they are also adversely affecting its ability to regulate any influence peddling by attorneys that have left the SEC to go work at hedge funds, banks, and other firms under its oversight.

In July 2011, Flynn’s attorney reported the allegations his client made to Sen. Charles E. Grassley (R-Iowa), who has since gone public with them. The lawyer also invoked whistleblower protection on his client’s behalf.

<strong>Per the letter to Grassley, the SEC is accused of:

• Ordering the improper destruction documents related to “matters of inquiry” when the initial probe didn’t lead to an official investigation and files were then closed.

• Retaining an enforcement division policy that leads to 75% of documents obtained in formal investigations and generated by the staff getting tossed out when all but 5% of that should be kept on record.

• Giving staff permission to get rid of internal emails after investigations are concluded.

• Destroying the majority of most staff-generated case documents unless the paperwork falls under a category called ‘formal memoranda.”

Last month, the SEC wrote a letter to the National Archives and Records Administration saying staff had been ordered to keep “all MUI records” and acknowledged that this new protocol is a recent change in policy.

This isn’t the first time that Flynn has acted as a whistleblower. He received about $2.7 million over alleged Medicare fraud in 1993. At the time, Flynn was an insurance-claims auditor. In that whistleblower complaint, he claimed under the False Claims act that the insurer turned in false records related to audits of Medicare payments to hospitals and, as a result, cheated the Medicare program. Without admitting/denying wrongdoing, Medicare consented to pay the government $27.6 million to settle the claims.

SEC still destroying records illegally, whistleblower says, Washington Post, September 6, 2011

More Blog Posts:
Whistleblowers to Be Awarded from $453 Million SEC Fund, Institutional Investors Securities Blog, July 28, 2011

New Bill Calls for Whistleblowers to Notify Financial Firms of Alleged Violations, Institutional Investors Securities Blog, July 23, 2011

Whistleblower Lawsuit Claims Taxpayers Were Defrauded When Federal Government Bailed Out Houston-Based American International Group in 2008, Stockbroker Fraud Blog, May 5, 2011

FDIC Objects to Bank of America’s Proposed $8.5B Settlement Over Mortgage-Backed Securities

Published on: August 30, 2011 | by Shepherd Smith Edwards & Kantas, LLP

In the State Supreme Court of New York, the Federal Deposit Insurance Corp. has fled an objection to Bank of America proposed $8.5 billion mortgage-backed securities settlement. The FDIC, which is the receiver for failed banks and owns the securities that the settlement is supposed to cover, says it doesn’t have sufficient information to assess the settlement.

Per the agreement, Bank of America would pay to resolve claims brought by investors of mortgage bonds from Countrywide Financial Corp., which the investment bank acquired in 2008 for $4 billion. Already, the claims related to the Countrywide MBS has cost Bank of America over $30 billion.

The $8.5 billion securities settlement with Bank of America is over $424 billion in mortgages from Countrywide and was reached with 22 institutional investors, including:

Ex-Bank of America Employee Pleads Guilty to Mortgage Fraud Scam Using Stolen Identities to Buy Homes Not For Sale

Published on: August 30, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Venedie Roberto Valencia, a former Bank of America employee, is now sentenced to 15 months in federal prison for a mortgage scam he was involved in that used stolen identities to buy homes in Southern California that weren’t being sold. The sentence comes after Valencia, 27, pleaded guilty and admitted that he forged a document linked to bogus bank accounts. As part of his penalty, Valencia must pay $51,688 in restitution.

Valencia’s sentence comes two years after co-conspirator licensed real estate agent Felix Pichardo was sentenced to eight years over the same mortgage scam. Pichardo was asked to pay $770,000 in restitution. Per court documents, the latter used bogus identities on loan applications to buy mortgages on real estate properties that weren’t for sale.

After pleading guilty in 2009, Pichardo admitted that he used to people’s identities to gain access to mortgage loans for properties even though their owners weren’t selling.. Pichardo then cause separate loan applications for $360,000 and $417,000 to be sent to AmTrust bank. The applications were turned in without the consent of the property owner. Pichardo and another conspirator, Latrice Shaunte Borders pocketed the loan proceeds.

Borders also pleaded guilty to criminal charges (for bank fraud) in 2009. She too was ordered to pay $ restitution.

Mortgage Scams
Unfortunately, mortgage fraud occurs more often than we’d like to think. In the process, lenders and borrowers are being bilked of millions of dollars.

Last year, the owners of Premier One Lending Group were indicted for allegedly securing over $30 million in loans through the use of hundreds of loan applications that upped the actual assets and income of the borrowers. Bogus bank documents and income verification documents were also given to lenders. Also last year, more than a dozen people were arrested in connection with a mortgage scheme in Ventura County, California that resulted in the loss of millions of dollars when the homes foreclosed.

In a separate mortgage fraud case, prosecutors filed a civil lawsuit accusing a number of real estate professionals over their involvement in an alleged scam to get unqualified buyers mortgage loans that were insured by the government. Bank statements, pay stubs, government agency letters over benefits that didn’t exist, and other documents were allegedly fabricated.

Meantime, in an unrelated case, mortgage brokerage firm owner Mikhail Kosachevich and his loan processor Jeffrey Gerken were sentenced to 33 months and six months in prison, respectively, over a mortgage scam that cost lenders at least $7 million.

Recently, three mortgage professionals and a title agent were accused of scamming senior citizens. Using the 1st Continental Mortgage Company in Florida, in 2009 and 2010, they allegedly processed 14 reverse mortgages and secured $2.5 million in reverse mortgage loans that the Federal Housing Administration had insured. The money wasn’t used to pay for existing loans and about $1 million in illegal loan proceeds were said to have been pocketed.

Former Bank of America employee sentenced in mortgage fraud scheme, Los Angeles Times, August 29, 2011

LANCASTER REAL ESTATE AGENT SENTENCED TO EIGHT YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD SCHEME, Justice.com, December 14, 2009

More Blog Posts:

Securities Lawsuits Expected to Reach Record High in ’11, Says Advisen Ltd. Report, Institutional Investor Securities Blog, April 23, 2011

SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees

Published on: August 29, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission has filed securities charges against James Davis Risher and Daniel Joseph Sebastian. The two men are accused of running a Ponzi scam that raised over $22 million from over 100 investors. Many of the victims were Florida retirees and teachers that entrusted the two men with their life savings.

Charges against Sebastian and Risher include two counts of fraud in the sale or offer of securities, unregistered securities sales, fraud related to the sale or purchase of securities, investment adviser fraud, and violations of aiding and abetting. This would include alleged violations of the Securities Act of 1933, the Investment Advisers Act of 1940, and the Securities Exchange Act of 1934.

According to the SEC, the two men ran a bogus private equity fund and lured people in by promising 14-124% investment gains. The fake account was called “The Preservation of Principal Fund.” Investors fake bogus account statements claiming high returns. Also, money being brought in from new investors was used to pay the older investors. The names that Sebastian and Risher used to market the fund were Safe Harbor Private Equity Fund, Preservation of Principal Fund, and Managed Capital Fund.

From January 2007 through July 2010, Sebastian allegedly gave out materials to potential investors. $100,000 was the supposed minimum that one could invest. Even though only $3.8 million of the money they raised was actually invested, the two men allegedly paid themselves more than $16 million in bogus performance and management fees.

RIsher, who is accused of spending over $140,000 of the money on designer jewelry, cars, and artwork, allegedly told investors that he was experienced in wealth and asset management and trading equities when, in fact, he did not have this experience and had spent 11 years of the last two decades behind bars.

Meantime, Sebastian allegedly approached former customers that he worked with when he was an insurance broker. In addition to seniors and teachers, he also targeted church members, as well as investors outside Florida and in Canada.

The SEC is accusing the two men of making misrepresentations and omissions to clients about the fund’s investment strategy, returns, risks involved, audited financial statements, and Risher’s criminal past. Sebastian allegedly even told investors that they couldn’t lose their principal investments and gave some of them written guarantees that any losses would be reimbursed.

The FBI, the IRS, the Florida Department of Law Enforcement, the US Postal Inspection Service, and the State of Florida Office of Financial Regulation all investigated this Florida financial scam. In the related criminal case, Risher has pleaded guilty to money laundering and mail fraud. He faces up to 50 years in prison. However, because he cooperated with federal authorities on this case, his punishment may not be so severe.

Risher also has prior criminal convictions for securities fraud, mail fraud, and money laundering. In 1990, he pleaded guilty to violating Georgia’s securities act, as well as multiple counts of theft.

Related Web Resources:
SEC Charges Two Florida Men in Ponzi Scheme Defrauding Teachers and Retirees, SEC, August 29, 2011
James Risher pleads guilty in $21 million Florida Ponzi scheme, WTSP, August 30, 2011
Two named in $22 mil. ponzi scheme case, News Chief, August 31, 2011

More Blog Posts:
Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions, Stockbroker Fraud Blog, August 22, 2011
Even as Ponzi Schemers Serve Time Behind Bars, Investors Are Left Coping with Millions in Financial Losses, Stockbroker Fraud Blog, January 25, 2011
Madoff Trustee Files Securities Lawsuit Against Safra National Bank of New York Seeking to Recover Almost $111.7M for Ponzi Scam Investors, Stockbroker Fraud Blog, May 12, 2011 Continue Reading ›

$63 Million Mortgage-Backed Securities Lawsuit Against Bank of America is Second One Filed by Western and Southern Life Insurance Co. Against the Financial Firm

Published on: August 29, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Once again, Western and Southern Life Insurance Co. is suing Bank of America Corporation for the alleged misrepresentation of mortgage-backed securities that the financial firm sold to the insurer. This time, the plaintiff is seeking $63 million. Western and Southern Life’s first MBS lawsuit against BofA sought $225 million in losses over securities it bought through Countrywide Financial Corp. (Bank of America acquired Countrywide in 2008.)

In this latest ARS lawsuit, Western and Southern Life says that it purchased $134 million in MBS from Bank of America between 2006 and 2008. The company contends that the securities would go on to lose 47% of their value. Western and Southern Life claims that the financial firm disregarded its own underwriting procedures and that a lot of the loans, which had AAA-ratings when they were purchased, have since foreclosed or defaulted. The insurer is also accusing Bank of America of failing to properly examine documents pertaining to the loans, which it says were based on erroneous information (including inflated appraisals, overstated incomes, and false employment verifications).

It was just last month that Western and Southern Life filed two other MBS lawsuits. In its securities case against Morgan Stanley & Co., the insurer is seeking $68.1 million for losses it claims it sustained because the financial firm allegedly misrepresented the MBS. The insurer says that in 2006 and 2007 it bought $179 million in mortgage-backed securities from Morgan Stanley.

Also in July, Western and Southern Life sued Credit Suisse Securities over the alleged loss of $107 million in MBS that the financial firm underwrote and one of its units sold. As with its securities cases against Bank of America, Western and Southern Life claims that Credit Suisse and Morgan Stanley disregarded their standards when accepting the loans. The insurer says that between 2005 and 2008 it bought $276 million in MBS from Credit Suisse.

Although Bank of America’s agreement to settle mortgage-back securities claims by 22 private investors that purchased 530 MBS valued at $424 billion covers Countrywide loans, Western and Southern Life was not part of this arrangement. Among the institutional investors to benefit from the settlement are BlackRock, Inc., PIMCO, Metlife, Inc., the Federal Reserve Bank of New York, and Goldman Sachs.

Per that settlement, Bank of America will give $8.5 billion to Bank of New York Mellon, which, as bondholder trustee, will distribute the funds to investors. However, if the court approves this settlement, investors will still be at a disadvantage because only some 2 or 3 centers on the dollar would be represented for those that suffered financial losses.

Bank of America agrees to $8.5B Countrywide settlement, Biz Journals, June 29, 2011

Western & Southern sues over investments, Business Courier, July 29, 2011

Texas Securities Fraud: FINRA Fines Bluechip Securities for Ex-Employee’s Alleged Churning of Public Customer Accounts

Published on: August 28, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has fined Bluechip Securities Incorporated for Texas securities fraud over the alleged churning of public customer accounts by principal Muhammad Akram Khan. The fine against the Houston-based financial firm is $15,000. Khan, who was fined $385,000, has been suspended from associating with any FINRA firm for 18 months. Bluechip and Khan agreed to the securities settlement without admitting to or denying the findings.

According to FINRA, Khan executed or caused to be effected options transactions at unfair prices and that the commissions he charged were excessive. The SRO claims that Khan made about $380,296 in commission charges from theses transactions that he effected, while the accounts sustained losses of about $399,000.

FINRA says that Khan recommended to clients the opening of certain options transactions even though there was no reason to think that these recommendations were appropriate for the customers. FINRA also says that Khan had no reasonable grounds to believe that these clients were capable of assessing for themselves the risks involved in these transactions or that they could financially handle the chances that he was having them take. The SRO claims says that Khan executed these options transactions in clients’ accounts even though none of them had given him or Bluechip Securities the written authorization to take such actions.

Churning
Churning involves excessive trading in an account with the goal of making commissions. To be able to churn, a broker has to be able to take charge of investment decisions in your account.

That said, churning is prohibited by the major self-regulatory organizations and it is an illegal activity. It also may be a violation of SEC Rule 15c1-7, FINRA Rules 2310-2(b)(2) and 2310, NYSE Rules 476(a)(6) and NYSE Rule 408(c), and other securities laws.

Our Houston securities fraud lawyers represent clients that have suffered financial losses because a broker engaged in churning. We know how to prove that a client’s account was subject to excessive trading whether for purposes of commission or otherwise. Possible ways of assessing whether you’ve been the victim of churning is calculating the yearly rate of return that would be required so that the commissions charged to you are covered, assessing how many times your account’s equity is turned over to buy securities, and determining how much sale and purchase trading activity occurs in your account.

It is not uncommon for a broker engaged in churning to claim the purpose of the buying and selling of securities in your account was so that you could make a quick profit.

Bluechip Securities, Inc. (CRD® #45726, Houston, Texas) and Muhammad Akram Khan, (CRD #1400089, Registered Principal, Houston, Texas), FINRA (PDF)

More Blog Posts:
Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions, Stockbroker Fraud Blog, August 22, 2011
CapWest Loses $940,000 Dallas Securities Case in FINRA Arbitration, Stockbroker Fraud Blog, August 15, 2011
Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M, Stockbroker Fraud Blog, August 9, 2011 Continue Reading ›

Raymond James Settles Auction-Rate Securities Case with Indiana Securities Division for $31M

Published on: August 27, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Raymond James has agreed to return $31,240,000 to Indiana investors to settle allegations that it misled them about the risks involved in the auction-rate securities market. In addition to repurchasing ARS that have been frozen since the market failed in 2008, the financial firm will also pay a $63,000 civil penalty.

When the ARS market froze, investors that had thought their investments were liquid like cash were left in the lurch because they were not able to retrieve their funds. The Indiana Securities Division has been at the helm of the efforts to investigated Raymond James and work out a settlement for all state securities regulators. Over the last few years, the states have worked hard to get all of the financial firms accused of not fully apprising investors about the ARS risks to buy back the securities.

Auction-Rate Securities
ARS are long-term investments with dividends or interest rates paid that are frequently reset through auctions that take place at specific intervals. The auctions are supposed to give a source of liquidity to investors wanting to sell their ARS.

Unfortunately, when the ARS market collapsed in early 2008, many of the auctions started to fail and investors could not get rid of their ARS holdings. This proved a problem for those that managed their ARS as a way to get easy access to cash.

While some ARS issuers did say they would redeem shares-usually at par value-some could not redeem all of their investors’ shares, which left the latter with holdings that could not be liquidated.

ARS and Hoosier Investors
The state of Indiana has also reached ARS settlements with other securities firms that allegedly misled Hoosier investors. In April of last year, 12 financial firms agreed to buyback over $370 million in ARS from these investors, while also consenting to pay over $3.5 million in fines. Financial firms that reached settlements then include:

• Goldman Sachs • Banc of America • Credit Suisse • Citigroup • JP Morgan • Deutsch Bank
• Morgan Stanley • Merrill Lynch • RBC • UBS • Stifel Nicolaus & Co.
• Wachovia
These financial firms have also reached settlements with other US states. However, millions of dollars in ARS remain frozen and there is still more to be done to help investors regain access to their frozen funds. Our stockbroker fraud law firm continues to work hard to help recoup our clients’ money from their ARS that turned illiquid.

Securities Fraud
Investors rely on brokers and investment advisers for advice on where they should place their money. When a financial adviser misleads a client, causing the latter to put their money in investments that are inappropriate, it is the investor who loses out and has to live with the consequences of a failed investment.

State Announces $31 Million Securities Settlement, Inside Indiana Business, August 24, 2011
State finalizes auction-rate securities settlements, Indianapolis Business Journal, April 29, 2010
Auction Rate Securities: What Happens When Auctions Fail, FINRA

More Blog Posts:
Auction-Rate Securities Investigations by SEC and NY Attorney General Are Ongoing, Stockbroker Fraud Blog, April 21, 2011
Class Auction-Rate Securities Lawsuit Against Raymond James Financial Survives Dismissal, Stockbroker Fraud Blog, September 27, 2010
Credit Suisse Ordered to Pay STMicroelectronics N.V. $404M Over Improper ARS Investment, Institutional Investor Securities Blog, June 15, 2011 Continue Reading ›

Financial Industry Regulatory Authority Alerts Investors About Gold Stock Scams

Published on: August 25, 2011 | by Shepherd Smith Edwards & Kantas, LLP

FINRA has put out an alert warning investors about financial scams touting gold stocks. The name of the investor alert is “Gold” Stocks-Some Investments Mine Your Pocketbook. The caution comes as the cost of bullion reaches level highs and the increase in the number of websites, blogs, Tweets, and YouTube videos about investing in gold.

How to Detect a “Gold” Stock Scam

Unfortunately, some of these “golden” opportunities and stocks that are being marketed don’t have a lot of value or may be scams. Gold-related investment scams usually involve exploration companies’ and/or gold mining companies’ stock with a value that is usually based on gold reserves are challenging to accurately assess. Some statements made by stock promoters are purposely misleading.

Goldman Sachs CEO Hires Prominent Defense Attorney in the Wake of Justice Department Probe into Mortgage-Backed Securities

Published on: August 24, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Now that the Justice Department is investigating Goldman Sachs (GS), Lloyd C. Blankfein, the broker-dealer’s chief executive, has retained the services of a prominent defense attorney. This move comes following allegations by the Senate Permanent Subcommittee on Investigations accusing firm executives of misleading investors and Congress about mortgage-backed securities. News of Reid Weingarten’s hiring caused Goldman Sachs’ shares to drop almost 5%. On Tuesday, Goldman Sachs lost almost $2.7 billion in market value.

The Senate panel issued a report claiming that Goldman Sachs misled investors when it failed to disclose that it was betting against securities that they were buying from the financial firm. The report also accuses the financial firm’s CEO of lying under oath when making the claim that the financial firm did not have a massive short position against the housing market.

Weingarten is a leading criminal defense attorney at Steptoe & Johnson. He previously represented ex-Enron accounting officer Richard Causey, ex-WorldCom chief executive Bernard Ebbers, ex-Duane Reade chief executive Anthony Cuity, and ex-Tyco International general counsel Mark Belnick.

The senate panel’s report, which is 639 pages long, comes after a 2-year bipartisan investigation. The subcommittee found that traders and executives tried to eliminate their exposure to the subprime mortgage market while shorting the market to make a profit.

The panel accused Goldman of misleading clients when it didn’t tell them that it was betting or shorting against their investments. In 2007, Goldman’s mortgage department made a $1.2 billion profit.

Goldman Sachs’s latest quarterly filing with the SEC reveals that the financial is under scrutiny for a number of issues, including its role as a clearing broker and its compliance with the US Foreign Corrupt Practices Act. The investment bank is also be under investigation at the state, federal, and local levels and is the recipient of subpoenas. In 2010, Goldman Sachs agreed to settle for $550 million charges by the SEC that it misled clients about a synthetic collateralized debt obligation (CDO) when the housing market was collapsing.

Recently, Allstate (ALL) sued Goldman Sachs Group for the over $123 million in MBS that it says that the financial firm fraudulently sold it. Allstate claims that Goldman issued misstatements and made omissions about the mortgages. The National Credit Union Administration also just filed its securities fraud case seeking $491 million from Goldman for the purchase of more than $1.2 billion in MBS sales. NCUA blames Goldman and other financial firms, including JPMorgan and RBS Securities, for the failure of five wholesale credit unions. NCUA says that because of the way Goldman handled the mortgage-backed securities sales, the credit unions did not know they were taking on such huge risks when they made those investments.

Why Goldman Investors Are Overreacting, New York Times, August 23, 2011

Goldman confirms Blankfein and other execs hired outside lawyers, Efinancial News, August 23, 2011

More Blog Posts:
NCUA’s Sues Goldman Sachs for $491M Over $1.2B of Mortgage-Back Securities Sales That Caused Credit Unions’ Failure, Institutional Investor Securities Blog, August 23, 2011

Goldman Sachs Settles SEC Subprime Mortgage-CDO Related Charges for $550 Million, Stockbroker Fraud Blog, July 30, 2010

Goldman Sachs Group Made Money From Financial Crisis When it Bet Against the Subprime Mortgage Market, Says US Senate Panel, Institutional Investors Securities Blog, April 15, 2011