Investor Lawyers Blog

Money Laundering Charges Filed Against of Houston Criminal Defense Lawyer Accused of Defrauding Defendants of Over $1M

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

Abraham Moses Fisch, a Texas criminal defense attorney, has been arrested and charged with money laundering, conspiracy to commit money laundering, obstruction of justice, and conspiracy. According to prosecutors, Fisch and Lloyd Glen Williams, who is Houston used car financier, allegedly ran a scam that fooled criminal defendants into thinking they could get the charges against them dropped if they were willing to pay money. Since 2008, the two men have allegedly bilked $1.48 million from a number of defendants through their Houston financial fraud.

For example, per the Houston Chronicle, in 2006, Fisch told accused convinced that cocaine trafficker Edilberto “Beto” Portillo that he could get him released from prison for $1 million. At the time, Portillo was charged with money laundering and drug trafficking. He agreed to pay this amount to Fisch’s friend, who turned out to be Williams. Although Williams wasn’t a lawyer, he was presented was someone who had high level contacts and could resolve criminal cases, get charges dismissed, or have prison sentences reduced.

Another defendant that the two men bilked was Umawa Oke Imo. The Houston physical therapy agency owner just went to prison for a $45 million Medicare/Medicaid fraud scheme.

Prosecutors say that the two co-conspirators would mislead their clients about the process of working with the government. The two men also allegedly lied to some, telling them that government officials had accepted the funds as bribes. Not only did the scheme cost those charged with crimes money, but it also prevented them from reaching legitimate plea agreements and caused them to wrongly think that the cases against them would be dropped.

Per the indictment against Fisch and Williams, the two men money laundered the money they made from the fraud. Fisch is also charged with failing to submit his tax returns in a timely manner every year that he received money for the financial scam. If convicted, he faces 10 years/each of the obstruction of justice counts, 5 years for conspiracy, 10 years for each money laundering charge, 1 year for each failure to file tax return count ((between 2006 and 2010), and 10 years for conspiracy to commit money laundering. Meantime, Williams just pleaded guilty to filing a false tax return and obstruction of justice. He faces up to three years behind bars for the bogus filing, five years max for conspiracy, and a $250,000 fine.

Also arrested was Fisch’s wife, Monica Bertman, who allegedly assisted with her husband’s financial scam. If convicted, she faces up to 10 years for obstruction of justice, up to five years for conspiracy, and also a $250,000 fine.

Feds say Houston lawyer bilked more than $1 million, Chron.com, October 28, 2011
Local Defense Attorney and Others Arrested in Connection with Scheme to Obstruct Justice, FBI, October 28, 2011

Dallas Mavericks Owner Mark Cuban’s Allegations of Misconduct Against the SEC Enforcement Staff are Without Merit, Says Inspector General’s Report, Stockbroker Fraud Blog, October 18, 2011
Houston Judge Overturns $9.2M Securities Fraud Ruling Against Morgan Keegan, Stockbroker Fraud Blog, October 11, 2011
Merrill Lynch Faces $1M FINRA Fine Over Texas Ponzi Scam by Former Registered Representative, Stockbroker Fraud Blog, October 10, 2011 Continue Reading ›

Boogie Investment Group Inc. Fails Because of Fraudulent Private Placements by Provident Royalties LLC and Medical Capital Holdings Inc.

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

Boogie Investment Group Inc. has submitted its withdrawal request to the Financial Industry Regulatory Authority. The small broker-dealer is the 20th financial firm that sold Provident Royalties private placements to either leave the brokerage business or announce its intentions to depart. According to Investment News, that’s nearly 40% of independent broker-dealers. Just this year alone, 11 broker-dealers that sold the private placements closed shop. Provident’s bankruptcy receiver reports on its Web site that 52 broker-dealers sold the shares.

Boogie sold about $410K in private placements. Its revenue at the end of the fiscal year was $422K-a definite reduction from the $1.2M of three years back. One of the reasons Boogie decided to bow out of the industry is because of the litigation expenses stemming from the failed private placements. Not only is Boogie contending with a class action lawsuit, but also, it is faced with a securities case filed by investors that purchased Provident’s Shale Royalties products and other arbitration cases not related to Provident private placements.

The Financial Industry Regulatory Authority has been tough on the financial firms and individuals that sold interests in private placements while allegedly failing to thoroughly investigate these products or even have reasonable grounds to believe that placements were suitable for clients. The failure to do the appropriate due diligence resulted in the firms being unable to know what were the risks involved. FINRA also says that the principals it has sanctioned lacked a reasonable basis for allowing their financial firms’ registered representatives to keep selling the offerings.

Retirement Fund’s CDO Lawsuit Against Morgan Stanley is Dismissed by District Court

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

A district court judge has dismissed a securities fraud lawsuit filed by the Employees’ Retirement System of the Government of the Virgin Islands against Morgan Stanley (MS). The investor complaint, submitted in 2009, accused the financial firm of defrauding investors.

The pension fund had purchased the notes as part of a CDO that was marketed and set up by Morgan Stanley. The plaintiffs believe that the financial firm worked with Standard & Poor’s and Moody’s Investor Services to set up “false and misleading Triple-A credit ratings” for the notes. Because the high ratings, the plaintiffs bought the notes at a price that was inflated. The fund contends that the financial firm knew that in fact Morgan Stanley had insider information that the MBS underlying the notes were a lot riskier than they were led to believe and came from lenders that employed flawed underwriting standards. Many of notes were downgraded to junk by the end of 2007. The plaintiffs said the firm purposely got investors to get behind the CDO because it was taking a short position on underlying assets.

The portfolio, which was 92% residential mortgage-backed securities and was backed by $1.2 billion in assets, was exposed to $100 million from New Century Mortgage Corp. and over $130 million in loans from Option One Mortgage Corp. According to the retirement fund, the two homebuyers had poor credit scores. The Libertas collateralized debt obligation went into credit-default swaps, which referenced specific residential MBS.

Per U.S. District Court for the Southern District of New York, the Virgin Islands government pension fund did not adequately plead that Morgan Stanley misled it about the quality of the MBS that were underlying the Libertas CDO. Judge Barbara S. Jones, said the plaintiffs failed to state a fraud claim because its pleadings were not successful in alleging that Morgan Stanley made misstatements about the credit ratings of notes based on the underlying mortgage-backed securities. Also, the court noted that it wasn’t Morgan Stanley that issued the ratings or the statements in the CDO’s operating memorandum disclosures. Because of this, the court said that the plaintiff could not allege that Morgan Stanley had issued to it a materially false statement.

Shepherd Smith Edwards and Kantas founder and securities fraud attorney William Shepherd said, “Our law firm has been successful in maintaining similar cases in arbitration or state courts. I am curious as to just how and why this case was filed, or otherwise ended-up, in a federal court. Pleading requirements under federal securities laws are problematic, and there are a number of other hurdles one must overcome in federal court proceedings. There is no private right of action available under New York’s securities statute (The Martin Act). Other types of claims may be pursued under NY state law.”

Morgan Stanley Wins Dismissal of Virgin Islands Pension Fund’s CDO Lawsuit, Bloomberg, September 30, 2011

More Blog Posts:

Stifel, Nicolaus & Co. and Former Executive Faces SEC Charges Over Sale of CDOs to Five Wisconsin School Districts, Stockbroker Fraud Blog, August 10, 2011

Ex-Goldman Sachs Director Rajat Gupta Pleads Not Guilty to Insider Trading Charges

Published on: October 26, 2011 | by Shepherd Smith Edwards & Kantas, LLP

After surrendering to federal authorities today, Rajat Gupta has entered a not guilty plea to the criminal charges against him involving insider trading. Gupta, who was a former Proctor and Gamble and Goldman Sachs director, is accused of multiple counts of securities fraud and one count of conspiracy to commit securities fraud. He allegedly gave Galleon Group cofounder Raj Rajaratnam corporate secrets about Goldman. Our stockbroker fraud law firm has been following Rajaratnam’s criminal case on our blog site. (See below.) Earlier this month, he was sentenced to 11 years in prison over an insider trading scam that illegally garnered $63.8 million.

Gupta, who also once was a global head at McKinsey & Co., came under close scrutiny during Rajaratnam’s trial when he was brought up in testimony and phone conversations that were recorded in secret. He is also now facing civil charges with the Securities and Exchange Commission, which contends that he provided Rajaratnam with illegal tips about both Proctor and Gamble and Goldman Sachs’ quarterly earnings and an approximately $5 billion investment that Berkshire Hathaway was planning to make in the financial firm. Based on Gupta’s tips, Rajaratnam avoided losses of/made illegal profits of over $23 million. Rajaratnam made over 800,000 in illegal profits from the Berkshire Hathaway tip when, after first having Galleon funds buy over 215,000 Goldman shares, he ordered the liquidation of the Goldman holdings a day after the information and Goldman’s public equity offering became public.

Rajaratnam also made over $18.5 million in illegal profits for Galleon funds after Gupta allegedly told him that Goldman had positive 2008 second quarter financial results. Rajaratnam then had the hedge fund buy Goldman securities but liquidated them when Goldman made news of its earnings for that quarter public. Other charges stem from Gupta allegedly notifying Rajaratnam that fourth quarter results for that same year were negative. The Goldman holdings were sold off, allowing Rajaratnam to avoid over $3 million in losses. When Gupta allegedly tipped him about P & G’s 2008 4th quarter earnings, Rajaratnam had Galleon funds sell short about 180,000 P & G shares, generating over $570,000 in illicit profits.

According to the SEC, Gupta got his confidential information from board conversations while serving as director at both companies. At the time, Gupta had numerous business ties with Rajaratnam and was seeking to strengthen that relationship. Not only had Gupta invested in Rajaratnam’s hedge funds, but they also began a number of financial ventures together.

The SEC had recently dropped its previous administrative action against Gupta over the insider trading allegations. Following that move, he vowed to drop his lawsuit claiming that the regulatory proceeding had violated his constitutional rights.

Of the 56 people that the government has charged with its crackdown on insider trading, 51 either were convicted or pleaded guilty.

With Gupta’s Arrest, Insider Inquiry Goes Beyond Wall St., Dealbook, October 26, 2011
SEC Files Insider Trading Charges against Rajat Gupta, SEC, October 26, 2011
Rajat Gupta, SEC Agree to Drop Galleon-Related Suit, Administrative Action, Bloomberg, August 5, 2011

More Blog Posts:
Galleon Group LLC Co-Founder Raj Rajaratnam Sentenced to 11 Years in Prison Over Insider Trading Scam, Stockbroker Fraud Blog, October 13, 2011
Ex-Goldman Sachs Board Member Accused of Insider Trading with Galleon Group Co-Founder Seeks to Have SEC Administrative Case Against Him Dropped, Institutional Investor Securities Blog, April 19, 2011
Dallas Mavericks Owner Mark Cuban’s Allegations of Misconduct Against the SEC Enforcement Staff are Without Merit, Says Inspector General’s Report, Stockbroker Fraud Blog, October 18, 2011 Continue Reading ›

UBS Fined $12M for Supervisory Failures and Regulation SHO Violations in Securities Short Sales

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

UBS Securities has agreed to pay FINRA a $12 million fine over violations that led to millions of short sale orders of securities being mismarked or entered into the market even though there was no reasonable basis for thinking that they could be delivered or borrowed. FINRA says that UBS did not properly supervise the short sales and violated Regulation SHO. In settling, the financial firm is not denying or admitting to the charges. UBS has, however, agreed to an entry of FINRA’s findings.

Per Reg SHO, a broker must have reason to believe that a security can be delivered or borrowed before allowing a short sale order. Financial firms have to document this “locate information” prior to the sale happening so as to decrease the amount of potential failed deliveries. Broker-dealers also are supposed to designate an equity securities sale as either short or long.

Short sales involve sellers that don’t own the security that they are selling. To deliver the security, the short seller has to either borrow or buy it.

FINRA says that UBS had a flawed Reg SHO supervisory system when it came to locates and marking sale orders and that this resulted in supervisory failure, which played a role in serious regulation failures showing up throughout the investment bank’s equities trading business. In addition to putting into the marketplace millions of short order sales without locates (involving supervisory and trading systems, accounts, desks, strategies, the financial firm’s technology operations, and procedures), millions of sale orders were also mismarked—many of them as “long” —which led to more Reg SHO violations. FINRA also claims that “significant deficiencies” involving UBS’s aggregation units could have played a role in more locate violations and significant order-marking.

Because of UBS’s alleged supervisory failures, many of the violations weren’t fixed or detected until after the FINRA probe prompted the financial firm to evaluate its systems and procedures. UBS has since taken steps to upgrade these in an effort to have stricter Reg SHO controls.

Per FINRA Chief of Enforcement Brad Bennett, financial firms are responsible for making sure that they have the proper supervisory and trading systems so that naked short selling that is “potentially abusive” doesn’t happen. He noted that the violations committed by UBS could have hurt the market’s integrity.

Supervisory failures is a type of broker misconduct. It is a brokerage firm’s responsibility to create and execute written procedure that do the job of monitoring its employees’ activities so securities fraud and mistakes don’t happen that can cause investors to suffer losses and/or the market to go into chaos.

FINRA Fines UBS Securities $12 Million for Regulation SHO Violations and Supervisory Failures, FINRA, October 25, 2011

More Blog Posts:
UBS Trader Charged with Fraud Related to $2B Trading Loss, Stockbroker Fraud Blog, September 23, 2011

Citigroup Global Markets Inc. Sues Two Saudi Investors in an Attempt to Block Their FINRA Arbitration Claim Over $383M in Losses

Published on: October 22, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Citigroup Global Markets Inc. (C) is suing Abdullah and Ghazi Abbar. The Saudi investors have filed a FINRA arbitration claim against the Citigroup unit seeking to recover the $383 million that they say the bank lost their family’s money. The Abbars, who are father and son, are accusing Citigroup Global Markets of mismanaging their family’s savings.

Citigroup, which wants injunctive relief, says that the entities that took care of the the Abbars’ private-equity loan and leveraged option transactions are located abroad and therefore not under FINRA’s jurisdiction for arbitration. The financial firm also says that father, son, and their investment entities are not CGMI clients and their claims are not activities related it. The investment bank has noted that the Abbars chose to pursue it rather than the non-U.S. parties that they actually had agreements with that completed the transactions. The Abbars, however, say that those overseeing the Citigroup entities that took party in the daily management of their credit deal are personnel that are registered with FINRA.

Says Shepherd Smith Edwards and Kantas Founder and Stockbroker Fraud Lawyer William Shepherd, “The financial industry has created its own securities arbitration forum to resolve disputes and claims between and against its members. It is ironic when claims are filed that they often go to court to beg to get out of arbitration, their self-imposed fate. While courts in New York seem to operate to accommodate Wall Street’s wishes, the law for decades has held that decisions regarding the liability of securities firms are for the arbitrators, not the courts. If these investors have properly alleged any wrongdoing by the U.S. securities firm, the court has no business intervening. Such wrongdoing can be simply ‘control person liability,’ which is the failure to control or properly supervise the behavior or operations of a subordinate or subsidiary.”

CGMI placed $343 million of the Abbars money in hedge funds that were included in a leveraged option swap transaction. In their FINRA arbitration claim, the Abbars argue that leading CGMI officers, including ex- global wealth management chief Sallie Krawcheck and Chief Executive Officer Vikram Pandit, pursued them.

Father and son contend that because of alleged “gross misconduct” by CGMI, their wealth was lost. They say that the bank’s failure to monitor the investments properly led to their total collapse during the height of the economic collapse in 2008. The Abbars also believe that lendings related to the Citigroup investments played a role in the losses. The Abbars says that Citigroup, which then started managing the positions that remained in the portfolio while implementing a program to redeem it, will “unjustly benefit” by about $70 million from the redemption of these investments.

Citigroup Sues to Block Arbitration of Saudi Investors’ Claim, Bloomberg/Businessweek, October 6, 2011
Citigroup Aims to Stop Arbitration From Proceeding, OnWallStreet, October 7, 2011

More Blog Posts:
Citigroup Global Markets Fined $500,000 by FINRA for Inadequate Supervision of Broker Accused of Bilking Sick and Elderly Investors, Stockbroker Fraud Blog, August 16, 2011
Citigroup Ordered by FINRA to Pay $54.1M to Two Investors Over Municipal Bond Fund Losses, Stockbroker Fraud Blog, April 13, 2011
Citigroup to Pay $285M to Settle SEC Lawsuit Alleging SecuritiesFraud in $1B Derivatives Deal, Institutional Investors Securities Blog, October 20, 2011 Continue Reading ›

California Investigating Whether Bank of America & Countrywide Financial Used False Pretenses to Sell Mortgage-Backed Securities to Investors

Published on: October 22, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Not long after bowing out of talks over a possible $25 billion dollar settlement between state and federal officials and the country’s largest banks (including Bank of America Corp, Citigroup, and JP Morgan Chase & Co.) over alleged foreclosure abuses, California’s Attorney General’s office has subpoenaed BofA as part of its investigation into whether it and subsidiary Countrywide Financial employed false pretenses to get private and institutional investors to purchase risky mortgage-backed securities. By walking out of the negotiations on the grounds that the banks weren’t offering a big enough settlement, the state of California has given itself the option of arriving at a larger settlement.

California Attorney General Kamala D. Harris has called the proposed settlement “inadequate” for the homeowners in her state. She has also has set up a mortgage fraud strike force tasked with investigating all areas of mortgage fraud.

Countrywide is credited with playing a role in the housing boom and its later collapse because of subprime loans it gave clients with poor/no credit histories, mortgages that let borrowers pay such a small amount that their loan balances went up instead of down, and “liar” loans that were issued without assets and income being confirmed. Also, a lot of the most high-risk loans were bundled up to support private-label securities that became highly toxic for investors and banks.

Meantime, Federal and state officials are trying to get California to rejoin the larger talks. Just this week, they presented the possibility of helping troubled creditworthy owners refinance their loans. California’s involvement is key for any deal because the state so many borrowers that owe more than the value of their homes, are in foreclosure, or are running behind on mortgages.

New York, too, has backed out of the group—a move that proved to be another blow for negotiations, as well as for the Obama Administration. Officials from other states, such as Nevada, Delaware, Minnesota, Massachusetts, and Kentucky, have also expressed worry about the breadth of the settlement and whether all potential misconduct has been investigated.

With its acquisition of Countrywide in 2008, BofA has sustained high losses over settlements as a result of its subsidiary’s loans. According to the Los Angeles Times, these settlements include:

• A promise to forgive up to $3 billion in principal for Massachusetts Countrywide borrowers
• $600 million to former Countrywide shareholders
• Billions of dollars to Freddie Mac and Fannie Mae over buybacks of bad home loans
• $8.5 billion to institutional investors over the repurchase of Countrywide mortgage-backed bonds
• $5.5 billion reserved for mortgage bond investors with similar claims

California reportedly subpoenas BofA over toxic securities, Los Angeles Times, October 20, 2011

California Pulls Out of Foreclosure Talks, Wall Street Journal, October 1, 2011

More Blog Posts:
$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, Institutional Investor Securities Blog, August 29, 2011

Federal Home Loan Banks Say Countrywide Financial Corp Mortgage Bond Investors May Be Owed Way More than What $8.5B Securities Settlement with Bank of America Corp. is Offering, Institutional Investor Securities Blog, July 22, 2011

Bank of America and Countrywide Financial Sued by Allstate over $700M in Bad Mortgaged-Backed Securities, Stockbroker Fraud Blog, December 29, 2010

Citigroup to Pay $285M to Settle SEC Lawsuit Alleging Securities Fraud in $1B Derivatives Deal

Published on: October 20, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Citigroup has consented to pay $285 million to settle a Securities and Exchange Commission complaint accusing the bank of misleading investors in a $1 billion derivatives deal—a collateralized debt obligation called Class V Funding III. It was Citigroup that chose the assets for the portfolio that it then bet against. Investors were not told that Citigroup’s interests were contrary to theirs. The $285 million will go to the deal’s investors.

According to the SEC, Citigroup had significant influence over the $500 million of portfolio assets that were selected. It then took a short position against the assets, standing to profit if they dropped in value. All 15 investors were not made aware of any of this and practically all of their investments (in the hundreds of millions of dollars) were lost when the CDO defaulted in under 9 months after it closed on February 28, 2007. Credit ratings agencies had downgraded over 80% of the portfolio.

Financial instrument insurer Ambac, which was the deal’s biggest investor and had taken on the role of assuming the credit risk, was forced to pay those who bet against the bonds. In 2009, Ambac sought bankruptcy protection.

Meantime, Citigroup made about $126 million in profits from the short position and earned about $34 million in fees. S.E.C.’s division of enforcement director Robert Khuzami says that under the law, Citigroup was required to give these CDO investors “more care and candor.”

Per the SEC’s civil action, Citigroup employee Brian Stoker is the one that mainly put the deal together, while Credit Suisse portfolio manager Samir H. Bhatt was primarily in charge of the transaction. Credit Suisse was the CDO transaction’s collateral manager.

Stoker is fighting the SEC’s case against him. Meantime, Bhatt has settled the SEC’s charges by agreeing to pay $50,000. He has also been suspended from associating with any investment adviser for six months. Credit Suisse Group AG settled for $2.5 million.

As part of this settlement, Citigroup will pay a $95 million fine. It was just last year that the financial firm agreed to pay $75 million over federal claims that it purposely didn’t let investor know that their subprime mortgage investments were losing value during the financial crisis. Citigroup has said that since then, it has revamped its risk management function and gone back to banking basics.

Last year, Goldman Sachs Group Inc. agreed to settle for $550 million allegations that it did tell investors that the hedge fund that helped choose a CDO’s assets also was betting against it. JPMorgan Chase & Co. settled similar allegations earlier this year for $153.6 million.

Citigroup to Pay Millions to Close Fraud Complaint, NY Times, October 19, 2011

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

JPMorgan Chase to Pay $211M to Settle Charges It Rigged Municipal Bond Transaction Bidding Competitions, Stockbroker Fraud Blog, July 9, 2011

Ex-Lehman Brothers Holdings Chief Executive Defends Request that Insurance Fund Pay Legal Bills

Published on: October 19, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Once again, former Lehman Brothers Holdings Inc. executives want an insurance fund to cover their expenses stemming from securities-related misconduct they are accused of committing. This time, they want to use the money to cover their legal bills. On Monday, former Lehman Chief Executive Richard Fuld and other ex-executives submitted a filing in US Bankruptcy Court to responded to an objection made by the former owners of Maher Terminal Holdings Corp. objecting to this fund use.

Basil Maher and M. Brian Maher claim that the paperwork submitted by the former executives doesn’t support use of the insurance monies. The brothers have been in opposition with Lehman since the investment bank filed for bankruptcy in 2008. The Mahers contend that in 2007 when they wired $600 million for their sale of Maher Terminal Holdings Corp. to Lehman, the financial firm allegedly placed their money in investments that were riskier than what they had wanted. The Mahers are still trying to recoup their losses form Lehman.

The former Lehman executives want the court to give them access to a diminishing $250 million insurance fund. They say that not only would this prevent a protracted court battle with local governments that they’ve already settled with, but also, they don’t believe this will impact the investment bank’s creditors. The ex-executives had settled for $1.05 million a dispute with six California municipalities that had invested $35 million into Lehman in the two years before it failed. The municipalities later filed their securities case accusing Lehman of making misrepresentation and omissions in their offering documents, which is what the governments used as reference when making the decision to invest in the financial firm.

The former Lehman executives just recently made another request to use $90 million from the insurance fund to settle a securities lawsuit filed by Lehman shareholders. They also have asked the bankruptcy court for $8.25 million in insurance money to settle a securities case filed by the state of New Jersey.

Should the bankruptcy judge grant the ex-Lehman officials’ requests, then Fuld and the others won’t have to put out any out-of-pocket expenses for their alleged misconduct. Apparently, it is not unusual for insurance money to cover corporate officers and directors that are the target of shareholder lawsuits.

Says Shepherd Smith Edwards & Kantas LTD LLP founder and securities fraud attorney William Shepherd, “Amazing that those who put Lehman into bankruptcy can now use the first dollars available to pay their own legal bills rather than to pay their victims, including investors and the subordinates they led down the garden path to disaster. Apparently, it is again nice to be part of the ‘one-percent’ on Wall Street.”

Fuld Leads Ex-Lehman Officials in Defending Insurance Use, The Wall Street Journal, October 17, 2011
Ex-Lehman Officials to Pay $90 Million to Settle Suit, NY Times, August 25, 2011
Fuld, Lehman Executives Settle Lawsuit by California Cities, Businessweek, September 28, 2011

More Blog Posts:
Lehman Brothers’ “Structured Products” Investigated by Stockbroker Fraud Law Firm Shepherd Smith Edwards & Kantas LTD LLP, Stockbroker Fraud Blog, September 30, 2008
FINRA Orders UBS Financial Services to Pay $8.25M for Misleading Investors About Security of Lehman Brothers Principal Protected Notes, Stockbroker Fraud Blog, April 15, 2011
European Leaders Work to Get a Grip on Debt Crisis, Institutional Investors Securities Blog, October 19, 2011 Continue Reading ›

European Leaders Work to Get a Grip on Debt Crisis

Published on: October 19, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Leaders from all over Europe will meet this Sunday with the intention of coming up with a plan to overcome the sovereign debt crisis. 17 nations, who all share the euro currency, are trying to reach a deal to strengthen its EFSF (European Financial Stability Facility) fund (which has already assisted in bailing out Ireland and Portugal), present a strategy to bolster European banks, and agree on a new aid package for Greece, which is in financial trouble.

This is not the first time euro zone leaders have gathered in the last year and a half to try to solve the debt problem. During their last effort in July, they reached a deal to give Greece about 110 billion euros and aid while the nation’s private creditors were to sustain an approximately 20% loss on their bond holdings. That deal, however, has since fallen apart, which is why there is a summit in Brussels this Sunday. Meantime, in an attempt to make the Sunday gathering a success, Euro-area leaders are meeting in Frankfurt meeting now to try to resolve certain disagreements in advance.

According to the Washington Post, the specter of the Lehman Brothers bankruptcy has been hanging over European leaders, who are committed to not making the same mistakes made by the Federal Reserve and the Bush Administration that led to the US’s economic crisis in 2008. Although that was a domestic emergency here, the ripples were felt globally and the Europeans don’t want that to happen again this time around. Per the Post, when European Central Bank President Jean-Claude Trichet warned US officials against letting Lehman file for bankruptcy, he’d cautioned that doing so would be “something…exceptionally grave.”

Reverberations soon followed. For example, after one market mutual fund’s shares dropped to under $1 because it had invested heavily in short-term loans to Lehman, others then pulled their investments out of money market funds. Because no one knew what other banks might be at risk of failing, lending between them stopped. Global markets then went into upheaval.

US leaders have learned much from the 2008 economic crisis. The Washington Post says that now it is the Obama Administration’s that is pressing Europe to take aggressive action to solve its debt crisis. If Greece fails, Portugal, Ireland, Spain, and France may follow. Who knows what would happen next.

Shepherd Smith Edwards & Kantas LTD LLP founder and Stockbroker Fraud Attorney William Shepherd offers this analysis:

After the financial crash of 1929, U.S. legislation was passed, including securities laws and regulations and the Glass Steagall Act (banks, brokerage and insurance companies were separated). Barriers were enforced to prevent unfair trade acts and policies. For the next seven decades the U.S. economy boomed and our financial system became the envy of the world.

Those changes made in the 1930’s were implemented despite cries that such legislation, regulation and protection for our economy would doom capitalism. Generation after generation of so-called “free-traders” and “free marketers” continued their drones to return to yesteryear – an era in which globalists could do as they pleased in their race to the bottom for the sake of profit for the few at the expense of the rest of us.

By the 1990’s, billions financed a lopsided body of “thought” that a return to the 1920’s would cure world problems and lead us into a new and better future. Wise folks screamed that a return to “deregulation” of the financial system and instantly forcing Western World workers into competition with near-slave labor in third-world nations would lead to dire consequences. But true wisdom was overwhelmed by the bought-and-paid-for-voices that occupied major political parties.

Reversal to the 1920’s … fait accompli. The result was both predictable and predicted. Welcome back the 1930’s … except, where is an “FDR” who can reverse the insanity of the last decade?

Ghost of Lehman Brothers haunts European politicians and bankers, Washington Post, October 18, 2011

Europe’s leaders take another swing at debt crisis, Reuters, October 19, 2011

More Blog Posts:
UBS to Pay $2.2M to CNA Financial Head for Lehman Brothers Structured Product Losses, Stockbroker Fraud Blog, January 4, 2011

Lehman Brothers Lawsuit Claims Its Bankruptcy Was In Part Due to JP Morgan Chase’s Seizure of $8.6 Billion in Cash Reserves, Stockbroker Fraud Blog, June 14, 2010

Claims for Losses at Lehman Brothers and in Investments into Lehman Brothers Financial Instruments Gain New Life as Court Uncovers Stunning New Evidence, Stockbroker Fraud Blog, March 21, 2010