Investor Lawyers Blog

Senate Bill 1551 Allows Securities Fraud Lawsuits Against Those Accused of Aiding and Abetting Primary Violators

Published on: March 23, 2010 | by Shepherd Smith Edwards & Kantas, LLP

Our stockbroker fraud law firm is hoping that Senate Bill 1551, introduced last July by Senator Arlen Specter, will resurface in the upcoming regulatory reform bill. If passed into law, the “Liability for Aiding and Abetting Securities Violations Act of 2009” would allow secondary actors that aided and abetted the primary violators of securities laws to also be sued for securities fraud.

The bill is trying to overturn the US Supreme Court rulings Stoneridge Investment Partners v. Scientific-Atlanta and Central Bank of Denver v. First Interstate Bank. Both decisions held that a private plaintiff cannot file a securities fraud claim against secondary actors. Under current law, only the US Congress has the sole authority to bring such claims with the US Securities and Exchange Commission.

With Senate Bill 1551, the Securities Exchange Act of 1934’s Section 20 would be amended so that anyone that recklessly or knowingly gave substantial help to a party that violated securities law could be held liable through a civil lawsuit to the same extent as the primary actor. Accountants, securities analysts, investment banks, law firms, credit rating agencies, and private companies are some of the possible secondary actors that could be sued as securities fraud defendants.

Related Web Resources:
Liability for Aiding and Abetting Securities Violations Act of 2009, Govtrack.us
Securities Exchange Act of 1934 (PDF)

Stoneridge Investment Partners v. Scientific-Atlanta, Oyez.org
Central Bank of Denver v. First Interstate Bank
Continue Reading ›

Claims for Losses at Lehman Brothers and in Investments into Lehman Brothers Financial Instruments Gain New Life as Court Uncovers Stunning New Evidence

Published on: March 21, 2010 | by Shepherd Smith Edwards & Kantas, LLP

Lehman Brothers filed for bankruptcy protection in 2008. Now, a report by a court-appointed examiner provides 2,200 pages of details on the investment firms demise, as well as more leads into further inquiries that may need to be made. (The US Justice Department assigns examiners to bankruptcy cases to probe allegations of misconduct and wrongdoing. The examiners are there to help determine whether creditors can recover more funds and if additional regulatory action needs to occur.) Already, a number of top Lehman officials have been named defendants in securities fraud lawsuits over their alleged misconduct.

For example, examiner Anton R. Valukas appears to have found evidence of “actionable balance sheet manipulation, including use of Repo 105, an aggressive accounting practice that allowed Lehman to conceal the full extent of its financial problems. While no US law firm would sign off on this practice, Linklaters, a British law firm, did.

According to Valukas, as long as the repos took place in London through the bank’s European arm and the firm did what was necessary to make the transactions look as if they were sales, then regulatory disapproval was unlikely. Also, even after a whistleblower warned that accounting improprieties were occurring at at Lehman, Valukas says that Ernst & Young continued to certify Lehman’s financial statements.

If your account at Lehman Brothers was mismanaged or if you invested into Lehman Brothers stocks, hedge funds, notes, or other Lehman financial products that were sold by other firms, please contact our stockbroker fraud law firm immediately. Shepherd Smith Edwards & Kantas, LLP is committed to helping investment fraud victims throughout the US recoup their financial losses.

Related Web Resources:
Findings on Lehman Take Even Experts by Surprise, NY Times, March 10, 2010
Read the Examiner Report (PDF)
Continue Reading ›

LC Wegard Clients that Purchased Relevant Securities May Be Entitled to Distribution from Litigation Estate

Published on: March 18, 2010 | by Shepherd Smith Edwards & Kantas, LLP

If you are a LC Wegard & Co, Inc. customer who bought any of the securities listed below from the firm between October 1, 1991 and September 30, 1994, you may be entitled to distribution from the Litigation Estate.

Relevant Securities (includes Common Stock, Zero Coupon Subordinated Debentures, Warrants, Subordinated Pay in Kind Debentures, Subordinated Convertible Debentures):

• Chefs International Inc.
• AGP & Co.
• Diamond Entertainment Corp.
• Consolidated Technology Group, Ltd.
• Futurebiotics, Inc.
• Great American Recreation, Inc.
• Gates/FA Distributing Inc.
• Gentner Communications Corp.
• Immunotherapies Corp.
• Linkon Corp.
• Lafayette Industries Inc.
• Metalclad Corp.
• Primedex Health Systems Inc.
• Nacoma Cosolidated Industries, Inc.
• Officeland Inc.
• Non-Invasive Monitoring Systems Inc.
• PDK Lambs, Inc.
• Process Equipment, Inc.
• US Transportation Systems, Inc.
• Sanyo Industries, Inc.
• Site Holdings, Inc.

All LC Wegard clients that bought any of these securities during the Relevant Period have to submit the original, signed proof of claim and any supporting or accompanying documents to:

Claims Administration C/O Donald F. Conway Receiver PO Box 8329 Princeton, New Jersey 08543-8329
Deadline: The Claims administration must receive your claim by 5pm EST on May 4, 2010. Failure to meet this deadline will result in a perpetual bar from receiving any distribution.

Our stockbroker fraud attorneys represent investment fraud victims throughout the US.

Related Web Resource:
Proof of Claim Form (PDF)
Continue Reading ›

Five Years Later Ex- Knight Securities Supervisors are Exonerated? Just Call it “Par for the Course.”

Published on: March 16, 2010 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority’s National Adjudicatory Council has dismissed the charges against former Knight Securities, L.P. CEO Ken Pasternak and John Leighton, the investment firm’s ex- Institutional Sales Desk head. The two men were accused of supervisory failures over allegedly fraudulent sales. Specifically, they allegedly inadequately supervised Leighton’s brother Joseph Leighton, who, at the time, was the firm’s top institutional sales trader. Regulators had accused Joseph of inflating the price of securities when selling them to institutional clients and keeping the extra profit.

The National Association of Securities Dealers found that the two former executives failed to take reasonable steps to make sure that Joseph was in compliance with industry standards. He settled with NASD and the Securities and Exchange Commission in 2005.

A lower FINRA panel had also ruled against two men. Pasternak was suspended from supervisory positions for two years and John was barred from supervisory roles. Both men were each ordered to pay $100,000.

Now, however, NAC is disagreeing with the lower panel, claiming that FINRA failed to establish that Joseph Leighton violated regulatory and market standards. The council also found that John Leighton did enforce Knight’s compliance procedures and that there was evidence that does not support allegations accusing Pasternak of not responding properly to “red flags” that surfaced over the way that Joseph handled his institutional client orders. However, institutional clients have come forward to testify that the pricing they received was fair. Also, in 2008, a federal judge threw out similar charges that the SEC filed against Pasternak and Joseph Leighton.

“This is another case at FINRA of the soldiers getting punished while the officers in charge ultimately get a walk,” said Shepherd Smith Edwards and Kantas founder and securities fraud lawyer William Shepherd. “The primary regulator of brokerage firms may have recently changed its name to the ‘Financial Industry Regulatory Authority’ but it remains a ‘National Association of Securities Dealers’ – a non-profit private corporation (similar to a country club) with a vested interest in seeing to it that favored members do not have to answer for misdeeds. After all, a precedent of fines or sanctions for the bosses might affect the treatment of other bosses in the future.”

Related Web Resources:
COMPLIANCE WATCH: Complying As Your Brother’s Keeper, The Wall Street Journal, March 5, 2010
National Adjudicatory Council, FINRA Continue Reading ›

Protect Yourself from Texas Securities Fraud by Making Sure that the Company or Agent that Sells You Annuities Has a Valid Insurance License

Published on: March 13, 2010 | by Shepherd Smith Edwards & Kantas, LLP

If you are going to buy annuities in Texas, it is important that you make sure that your agent is licensed with the state and also has a Financial Industry Regulatory Authority license. You should also make sure that the annuity you purchased is legitimate and in compliance with Texas standards and laws.

If you buy an unauthorized annuity, you may pay an inadequate return or put your money at risk. You can also become the victim of Texas securities fraud.

What is an Annuity?
This financial insurance contract can grow in value and provide constant income over an extended time period. They are good for growing your retirement, saving for your children’s schooling, setting up a trust fund, or bequeathing money to loved ones. Texas Department of Insurance regulates annuities and keeps an update list of companies and agents that are allowed to sell them in the state.

Three Kinds of Annuities:
Variable Annuities: Higher risk than fixed annuities, variable annuities rely on the stock market’s performance. They usually invest in different financial instruments, including money market funds, equity indexes, mutual funds, and government securities. These annuities let buyers decide how to distribute their accumulated value within the contract’s selected investments.

This kind of annuity doesn’t come with any guarantee of earnings and you can lose your original investment. Because variable annuities rely so much on the stock market, the Securities and Exchange Commission considers them securities.

Fixed Annuities: The most conservative type of annuity. They make earnings at an annually set current interest rate. Although the rate can change, a guaranteed minimum rate must be established. These annuity contracts usually invest in non-stock market, conservative investments. Buyers usually don’t have any say in how the funds are managed.

Equity-Indexed Annuities: EIA’s have traits that can be found in both variable annuities and fixed annuities. They pose a greater risk than fixed annuities and are less risky than variable annuities. Their returns are affected by changes in money, bond, and stock markets, and they come with a guaranteed minimum interest rate.

It is important to remember that annuities are not the best investment for everyone-especially if your financial goals are in the short-term. Your agent should apprise you of any risks and make sure that if you do choose to buy annuities, that they are the right choice for you.

Related Web Resources:
Understanding Annuities, Texas Department of Insurance
SEC Tips for Preventing Annuities Fraud, SEC.gov Continue Reading ›

Stifel, Nicolaus, and Co. to Pay Back $78,000 to Missouri Investors for Broker Fraud

Published on: March 11, 2010 | by Shepherd Smith Edwards & Kantas, LLP

Stifel, Nicolaus and Co. Inc. has reached an agreement with Missouri Secretary of State Robin Carnahan over the broker fraud committed by former Stifel securities broker Girard Munsch. As part of the deal, the three Missouri investors will get back $78,000 in commissions that they paid and the broker-dealer will pay over $130,000 in payments, penalties, and costs.
Over three years, Munsch made over 500 trades in accounts owned by three Missouri investors. He has admitted that during some of the transactions, he was the only one to benefit. One investor, Marie Ganninger, says that she started investing with the former Stifel broker after her husband passed away. She chose to go with Munsch because he was the broker of one of her relatives. She will be getting back the commissions she paid.
The state of Missouri went after Stifel for failing to properly supervise Munsch and neglecting to notice or take action when he made unsuitable recommendations and excessive trades.
In 2007, the former Stifel broker entered into a consent order. He was ordered to pay $50,000 in investor restitution for broker misconduct, and his license was suspended. He retired and can no longer work as a broker in Missouri.
Please do not despair if you lost money because of broker fraud. There are legal remedies available that can allow you to recoup your investment losses.
Stifel to return $78,000 to investors, pay $130,000 in penalties, St. Louis Business, March 11, 2010
Consent order in the matter of Girard Augustus Munsch, Jr., State of Missouri Continue Reading ›

“America’s Prophet” Psychic Accused of Multimillion-Dollar Investment Fraud

Published on: March 10, 2010 | by Shepherd Smith Edwards & Kantas, LLP

According to the US Securities and Exchange Commission, Sean David Morton has bilked more than 100 investors of over six million dollars as the mastermind of an alleged offering fraud scheme. The man who calls himself “America’s Prophet” never professed to have a financial background. However, he is accused of promising prospective investors that he would use his psychic gifts to predict the movements of the stock market and advise his investing team.

The SEC claims Morton told investors he would use their funds to trade in foreign currencies and that profits would be distributed pro rata among them. The federal agency says that Morton, who describes himself as an intuitive consultant and trained Remote Viewer, lied to these investors about having a successful track record for being able to predict when the market will rise and crash. He also allegedly lied about how their money would be used, fund liquidity, and that profits were audited and certified.

Morton allegedly invested only half of the investors’ money in foreign currency trading firms. He is accused of diverting the rest, including at least $240,000 into his Prophecy Research Institute, a nonprofit religious group. Morton also allegedly commingled investors’ funds among the different entity accounts. The SEC contends that the defendant did not seek accreditation status from Delphi Investment Group investors.

Morton, Vajra Productions LLC, Magic Eight Ball Distributing, Inc., 27 Investments LLC, and Delphi Investment Group are the defendants in the SEC’s investment fraud lawsuit. Morton’s wife, Melissa, and Prophecy Research Institute are named relief defendants. The Mortons controls the entity defendants.

Federal regulators continue to warn investors that they must make sure that anyone they entrust with investing their funds is properly licensed. Unfortunately, many people are misled into investing in securities scams that end up costing them their hard-earned money and financial security.

Related Web Resources:
Investment ‘Psychic’ Accused of Financial Fraud, ABC News, March 8, 2010
Read the SEC Complaint, SEC.gov Continue Reading ›

Securities Fraud Law Firm Shepherd Smith Edwards & Kantas LTD LLP Warns Investors Against Affinity Fraud

Published on: March 8, 2010 | by Shepherd Smith Edwards & Kantas, LLP

Affinity fraud involves investment schemes that target specific groups, such as the elderly, those belonging to identifiable ethnic or religious communities or members of professional groups. Fraudsters seek to gain the trust of members of the group by either belonging to the group or pretending they belong. One tactic is to seek to fool group leaders into thinking the investments are legitimate so that they will assist in promoting the fraud. This is often accomplished by generating false profits for formal or informal leaders of the group at the beginning.

Pyramid schemes and ponzi scams are often employed to commit affinity fraud. In these schemes funds from new investors are used to falsify profits to current investors. This lulls them into believing their investments are turning a profit. as new investors are deceived into believing their investments will also soon grow in value. Inevitably, when there are no more new investors to sign up, the scheme falls apart and investors usually later learn the fraudster has stolen their funds.

However, affinity fraud can often involve abusing trust to lure victims into simply investing into high-risk and/or high-commission investments to generate commissions and fees, or buying and selling (“churning”) invesements to gain multiple comissions.

Oppenheimer Holdings Inc. Settles Massachusetts Auction-Rate Securities Allegations

Published on: March 5, 2010 | by Shepherd Smith Edwards & Kantas, LLP

Oppenheimer Holdings Inc. has settled a securities fraud-related administrative complaint filed against it by the state of Massachusetts for auction-rate securities sales to local residents. The broker-dealer will redeem 60 of the accounts with ARS. The other 10 accounts will be offered “enhanced liquidity.”

According to Massachusetts Secretary of State William Galvin, who had sought to make the investment firm repurchase up to $55.5 million in ARS that were sold in the state, 85% of Oppenheimer’s Massachusetts customer accounts will be completely redeemed over one year.

Galvin contends in his complaint that Oppenheimer misrepresented ARS and the ARS market when marketing to clients. He says that although company’s employees sold their ARS when they found out that the market was collapsing, they failed to notify investors about the unfolding crisis.

Galvin will submit a cease-and-desist order and findings against the broker-dealer over its unethical and dishonest conduct and the failure to properly supervise agents when they marketed and sold ARS. The redemptions will take place in three steps.

Oppenheimer also recently settled its ARS case filed by New York State Attorney General Andrew Cuomo on behalf of investors in his state, as well as throughout the US, for $31 million.

Related Web Resources:
Oppenheimer Settles Massachusetts Auction-Rate Case (Update3), BusinessWeek, February 24, 2010
Oppenheimer, Cuomo reach $31M agreement, LegalNewsline.com
William Francis Galvin, Secretary of the Commonwealth of Massachusetts
Continue Reading ›

Citigroup Ordered to Defend Against Securities Fraud Allegations by Terra Securities of Norway and Several Norwegian Municipalities

Published on: March 3, 2010 | by Shepherd Smith Edwards & Kantas, LLP

A district court judge has denied Citigroup‘s motion that the securities fraud lawsuit filed against it by Terra Securities of Norway and seven Norwegian municipalities be dismissed. The plaintiffs claim that Citi misrepresented the risk involved in the $115 million in securities they bought in May and June 2007. They are seeking over $200 million in compensatory damages.

Judge Victor Morrero rejected Citibank’s claim that the U.S. District Court for the Southern District of New York lacked jurisdiction over the case because the financial losses happened in Norway. The plaintiffs had argued that their securities fraud claims are a result of Citigroup’s conduct in New York.

In their securities fraud complaint, the plaintiffs are claiming that Citigroup sold fund-linked securities as if they were conservative, safe investments. In fact, the notes, which were tied to the Citi Tender Option Bond Fund, are very high risk.
The municipalities bought the derivatives through Terra.

In the months following their purchase, the notes would go on to significantly drop in value. Terra went bankrupt and the municipalities had to reduce funding that was intended for hospitals, libraries, schools, and social services. One of the plaintiffs, the municipality of Narvik, was forced to turn off street and road lights at night. This is an area experiences limited daylight hours during the winter. The other municipalities that are plaintiffs of this securities fraud lawsuit are Bremanger, Hemnes, Hattfjelldal, Rana, Kvinesdal, and Vik.

The plaintiffs’ securities fraud lawyer says that the judge’s ruling affirms foreign plaintiffs’ right to sue Citigroup for alleged fraud that occurred in NY over notes that were marketed abroad. Citigroup, which had pushed to have the case heard in Norway or England, denies any wrongdoing. The investment bank says it will vigorously defend against the charges.

Related Web Resources:
Citigroup Must Defend Norwegians’ Lawsuit Over Notes, BusinessWeek, February 17, 2010

Citigroup Must Defend Suit Over Derivatives Sales In Norway, Wall Street Journal, February 17, 2010 Continue Reading ›