Investor Lawyers Blog

$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

California Insider Trading Charges Filed by SEC Against Ex-Investment Fund Associate Accused of Making 3000% Profit on Marvel Call Options in Disney Acquisition

Published on: August 23, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission has filed insider trading charges against Toby G. Scammell, who is accused of making more than $192,000 from insider trading information he received from his girlfriend about Walt Disney Company’s impending acquisition of Marvel Entertainment. Scammell, a 26-year-old ex-investment fund associate, made a more than 3000% profit in less than a month after he bought highly speculative Marvel call options for under $5500 and then sold them after the announcement of the acquisition was made on August 31, 2009 and Marvel’s stock price went up by more than 25%.

According to the SEC, Scammell’s girlfriend, who worked on the Marvel deal as an extern with Disney, found out confidential information about the deal, including when it would be announced and that Disney would pay $50/Marvel share. The Commission, however, doesn’t believe that Scammell’s girlfriend ever intended to give him insider tips or that she knew what he was doing with the information. Although the couple would talk about the acquisition as a subject of her business school application, she did not give him specific details. He also allegedly obtained information from confidential documents that he read off her Blackberry and from conversations he overheard regarding Marvel.

Scammell bought Marvel call options at $45 and $50 strike prices even though the highest that Marvel had ever traded at was $41.74. The SEC says that the Marvel options that Scammell bought were scheduled to expire soon after the Disney deal was announced and that in many cases the purchase of options represented 100% of the market. Scammell used his brother’s money to buy most of the Marvel call options. He did not, however, tell him about the alleged insider trading activities. Scammell’s brother had given him authority over his finances before going with the US army to Iraq.

The SEC says that before making the trades, Scammell used his computer to search for the terms “material non-public information,” “insider trading”, and “Rule 10b-5.” The Commission claims that Scammell not only used the insider information to garner an “unfair and illegal” advantage over others in the markets but that he exploited his romantic relationship with his girlfriend. The SEC says that after dating her exclusively for two years, he owed her a fiduciary duty, which he breached. He also allegedly acted with Scienter when he made the trades while having knowledge of the material, nonpublic data. The SEC says that when questioned, Scammell was unable to provide a believable explanation for his Marvell call options purchases.

The SEC is accusing Scammell of violating the Securities Exchange Act of 1934 (Section 10(b)) and Rule 10b-5 thereunder. It is seeking disgorgement of ill-gotten gains, a permanent injunction, prejudgment interest, and civil penalties.

SEC CHARGES FORMER INVESTMENT FUND ASSOCIATE WITH INSIDER TRADING, SEC, August 11, 2011
Read the SEC Complaint (PDF)

SEC Sues 26-Year Old On Charges He Made $200,000 Insider Trading Off Ex-Girlfriend’s Work Project, Business Insider, August 15, 2011

More Blog Posts:
Janney Montgomery Scott LLC to Pay $850K to Settle Securities Charges Over Alleged Failure to Prevent Inside Trading, Stockbroker Fraud Blog, July 21, 2011
“Poohster” Consultant Found Guilty of Insider Trading, Stockbroker Fraud Blog, June 23, 2011
Insider Trading: Former FrontPoint Partners Hedge Fund Manager Pleads Guilty to Criminal Charges, Institutional Investor Securities Blog, August 20, 2011 Continue Reading ›

NCUA Sues Goldman Sachs for $491M Over $1.2B of Mortgage-Back Securities Sales That Caused Credit Unions’ Failure

Published on: August 23, 2011 | by Shepherd Smith Edwards & Kantas, LLP

In its fifth MBS lawsuit seeking what is now totaling to be nearly $2 billion in compensatory damages for wholesale credit union members, the National Credit Union Administration (NCUA) wants $491 million in compensatory damages from Goldman Sachs. NCUA is accusing the financial firm of misrepresenting the MBS that were sold to member credit unions that then sustained huge losses that led to their failure.

Goldman Sachs allegedly misrepresented material facts in prospectuses, marketing collaterals, and when selling the MBS. Because of this, NCUA says that the credit unions thought that the risk of loss for their investments was low.

NCUA filed its securities complaint against Goldman Sachs in California district court. NCUA is serving as the liquidating agent for the corporate credit unions that failed. It has filed other securities lawsuits seeking nearly $2 billion in compensatory damages. Two of the other defendants that NCUA is suing are RBS Securities and JPMorgan. Both, and others, are accused of underestimating the risks involved with the MBS.

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

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

Kurt Branham Barton, the former CEO, president, and founder of Triton Financial, has been convicted of running a $50 million Ponzi scam that bilked over 300 investors across the country, including former Heisman Trophy winners Ty Detmer, Chris Weinke, and Earl Campbell, NFL Kicker David Akers, and ex-NFL quarterback Jeff Blake. Barton could be sentenced to life in prison for the Texas securities fraud.

A jury convicted Barton on almost 39 criminal counts, including numerous counts of wire fraud, conspiracy to commit wire fraud, making false statements to financial institutions in order to get loans, money laundering, and one count of securities fraud. The Ponzi scam ran for four years through 2009.

According to prosecutors, Barton lied to investors, including relatives, business leaders, pro football players, and Church of Jesus Christ of Latter Day Saints members, when he said that his financial firm was using their money to invest in business, real estate, and short-term business loans. In fact, Barton was taking their funds to cover personal expenses, including luxury football tickets, expensive clothes, and sports cars. He deceived potential investors, commercial lenders, and financial institutions by presenting them with bogus monthly account statements.

Examples of those hit hard by Barton’s Texas securities scam is Detmer, who, during his testimony, admitted that he lost approximately $2 million-that’s the majority of his life savings-in the Ponzi scheme. The former NFL quarterback, who is now a coach in Austin, says he has been forced to liquidate accounts that were supposed to go to his daughters’ college education. He also had to put up his house for sale. Detmer thought Barton was his best friend. The two met at church. Detmer says that he even brought new investors to Barton. Another pro football player, David Akers, now of the San Francisco 49ers, lost over $3 million because of Barton’s scam. There are also many investors that aren’t famous who sustained significant losses because of the Texas Ponzi scam, including Diane Gordon, who lost her husband’s entire life insurance payment of approximately $850,000.

In 2009, the Securities and Exchange Commission filed a securities fraud lawsuit against Barton and two of his businesses. The SEC accused Barton of using famous celebrity athletes, stockbrokers, and others to promote Triton securities to new investors. Without denying or admitting to the SEC’s allegations, all defendants agreed to permanent injunctions from securities fraud violations in the future, appointment of a receiver, prohibition of the destruction of documents, and orders freezing assets.

Ty Detmer testifies at Ponzi fraud trial, UPI, August 9, 2011
Austin investment broker convicted of using NFL stars, churches to defraud clients, The Washington Post, August 17, 2011
The SEC’s Complaint (PDF)

More Blog Posts:
Ex-Triton Financial CEO Accused of Using NFL Contacts to Commit $50M Texas Securities Fraud, Stockbroker Fraud Blog, February 17, 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
Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M, Stockbroker Fraud Blog, August 3, 2011 Continue Reading ›

Insider Trading: Former FrontPoint Partners Hedge Fund Manager Pleads Guilty to Criminal Charges

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

Joseph “Chip” Skowron III, an ex- FrontPoint Partners Hedge Fund manager, has pleaded guilty to criminal charges involving insider trading activities that saved his financial firm more than $30 million in losses. Charges include conspiracy to commit securities fraud and to obstruct a Securities and Exchange Commission probe.

Skowron, 42, admitted that he received confidential information from Yves Benhamou, a French doctor working on clinical trials for a biotechnology company’s hepatitis C drug. After Benhamou notified him that there were certain problems with the medication, in 2008 Skowron had the hedge fund get rid of millions of dollars of shares in the company (the funds’ holdings of Human Genome Sciences Inc. (HGSI)), which is why the more than $30 million loss was averted.

This week, Skowron admitted to directing trades in six FrontPoint health-care funds based on the insider tip. He also said that he lied to the SEC in 2009 about whether Benhamou had given him material, nonpublic information. As part of his plea deal, Skowron will forfeit $5 million. He also could be ordered to serve 5 years behind bars. His sentencing is scheduled for later this year.

A few months ago, FrontPoint paid $33 million to regulators over the related losses that Skowron prevented when he sold the shares. Of the $33 million, $29 million was in disgorgement of avoided losses. The remaining $4 million was for prejudgment interest.

Following the former hedge fund manager’s guilty plea, FrontPoint issued a statement saying that Skowron lied and misled the financial firm’s internal compliance team, the federal government, and the external counsel retained to independently probe his actions. FrontPoint also pointed out that it was never accused of any wrongdoing in this matter.

Over the last two years, 47 hedge fund managers are among those that have pleaded guilty to or been convicted of insider trading. These outcomes are in part because federal government has stepped up its efforts to investigate insider trading on Wall Street.

Earlier this year, Preet Bharara, the United States attorney in Manhattan who has charged dozens of people with insider trading, said the scope of so many allegations indicated that the problem was a “corrupt business model” rather than an “occasional corrupt individual.” He condemned the “prevalence of illegal trading” that has been taking place on Wall Street.

Insider Trading
While legal insider trading, which involves a corporate insider selling stock in the company and reporting these trades to the SEC, does exist and is an acceptable practice, illegal insider trading is against the law. This type of insider trading involves the selling or buying of securities in a manner that uses material, nonpublic information and breaches a fiduciary duty or other relationship of confidence and trust. The person being tipped the insider information, the one tipping the information, or the actual person with the tip making the trade are among those who can be charged with committing illegal insider trading.

Ex-Fund Manager Pleads Guilty to Using Inside Tips, The Wall Street Journal, August 16, 2011

Insider Inquiry Steps Up Its Focus on Hedge Funds, New York Times, February 8, 2011

Former Hedge Fund Portfolio Manager Joseph “Chip” Skowron Pleads Guilty in Manhattan Federal Court to Insider Trading Scheme Involving Clinical Drug Trial, FBI, August 15, 2011

More Blog Posts:
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

44% of Insider Traders Convicted of Insider Trading in New York Manage to Get Out of Jail Before Even Serving Time, Institutional Investor Securities Blog, January 25, 2011

Janney Montgomery Scott LLC to Pay $850K to Settle Securities Charges Over Alleged Failure to Prevent Inside Trading, Stockbroker Fraud Blog, July 21, 2011

Allstate Files Securities Fraud Lawsuit Against Goldman Sachs Over More Than $123M of Mortgage-Backed Securities

Published on: August 18, 2011 | by Shepherd Smith Edwards & Kantas, LLP

According to Allstate Corp., Goldman Sachs Group Inc. committed securities fraud by fraudulently selling the insurer over $123 million of mortgage-backed securities prior to the collapse of the housing market. Allstate is also accusing Goldman of making “untrue statements” and leaving out “material facts” about the mortgages.

Allstate Insurance Corp, a subsidiary of Allstate Corp, filed the securities fraud complaint in New York State Supreme Court this week. The plaintiff is accusing the broker of violating state laws and negligent misrepresentation. Allstate believes that Goldman marketed the MBS as low-risk with strict underwriting criteria even though the latter knew the lenders had stopped abiding by the guidelines and that loans were being produced without the chance of payback.

Goldman has already settled for $550 million similar securities fraud charges filed by the SEC. This was the largest penalty a Wall Street financial firm has ever been ordered to pay. The Commission claimed that Goldman encouraged investors to buy into complex mortgage investments while failing to tell them that a client who was betting against the securities had crafted them. In April, a Senate Report said that in an attempt to move risk away from Goldman and to investors, the broker marketed four complex mortgage securities.

With this latest securities lawsuit against Goldman, Allstate has now filed nine MBS lawsuits since December. The defendants of the other complaints are Countrywide Financial, Bank of America Corp., Morgan Stanley, Merrill Lynch and Co, JPMorgan Chase & Co, Citigroup Inc., Deutsche Bank AG, and Credit Suisse Group:

• The securities lawsuit against Countrywide is over $700 million of toxic MBS that the insurer purchased. Bank of America is named in the complaint because it purchased Countrywide in 2008.

• The complaint against Morgan Stanley is over Allstate’s purchase of over $104 million in residential MBS in six offerings and the broker’s “central role” in creating and selling the securities. Allstate says that Morgan Stanley either knew or “recklessly disregarded” that the lenders involved were putting out risky loans that were not in compliance with underwriting standards.

• Allstate’s lawsuit against Merrill Lynch involves the allegedly fraudulent sale of approximately $167 million of residential mortgage-backed securities.

• The insurer is accusing JP Morgan Chase of misrepresenting the risks involved in over $757 million of mortgage securities that it purchased.

• Allstate bought over $200 million of MBS from the Citigroup defendants and approximately $185 million from the Deutsche bank units. Misrepresentations and omissions related underwriting standards, loan-to-value ratios, and owner occupancy data are among the allegations.

• Allstate’s securities lawsuit against Credit Suisse is over $231 million of MBS. Allstate, which bought the securities from the financial firm, says that the latter did not disclose that the underlying loans were toxic. Allstate is alleging fraudulent inducement, fraud, and negligent misrepresentation.

Our securities fraud attorneys represent investors who have suffered financial losses from investing in mortgage-backed securities.

Allstate sues Goldman over sour mortgage-backed securities, USA Today, August 16, 2011

Allstate Sues Goldman Sachs Over Toxic Mortgage Securities, Insurance Journal, August 17, 2011

More Blog Posts:
Morgan Stanley Reports a Possible $1.7B in Mortgage-Backed Securities Losses, Institutional Investor Securities Blog, August 16, 2011

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

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