Investor Lawyers Blog

Bear Stearns Sold to JP Morgan – One Firm’s Trash Is Another Firm’s Treasure!

Published on: March 17, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Yesterday – Sunday – it was reported that JP Morgan bailed-out Bear Stearns by paying its shareholders a measly quarter of a billion dollars. One question plaguing Wall Street is how many other victims of sub-prime mortgages will emerge? Below we assess the winners and losers of this deal and also report some good news: Claims by investors who had accounts at Bear Stearns are not dead!

Winners and Losers?

A year ago, BSC’s stock sold for $150 per share. Last Friday BSC’s shares fell from 57 to 30. Reportedly, as government big-wigs and financial moguls met on Saturday to attempt to salvage BSC, there were discussions with several firms to pay around $15 per share but on Sunday only JP Morgan was left – offering $2 per share. Although BSC faced certain bankruptcy if nothing were done, Bear Stearns shareholders say they are the big losers.

A.G. Edwards & Sons Stockbrokers Ordered to Pay $750,000 Fine for Market-Timing Scam

Published on: March 16, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Three A.G. Edwards & Sons Inc. brokers are being ordered to pay $750,000 in fines for their participation in a market-timing scam that involved mutual funds that benefited certain customers.

The brokers, Thomas Bridge, James Edge, and Jeffrey Robles, were also ordered to serve suspensions from the securities industries. Bridge, a former registered representative in the firm’s Boca Raton, Florida office, must also disgorge $39,808.53. Edge was the branch manager at the same office. Robles worked as a branch manager at Edwards’ Back Bay office.

Securities and Exchange Commission Chief Administrative Law Judge Brenda Murray ordered the sanctions. The market-timing scam occurred from the Edwards’ branch offices in Lake Worth, Boca Raton, and Boston.

Ex-UBS Executive Pleads Guilty to Insider Trading And Could Spent 90 Years in Prison

Published on: March 13, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Former UBS Executive Mitchel Guttenberg is looking at a possible 90 years in prison. Guttenberg recently pled guilty to two counts of conspiracy and four counts of securities fraud for his involvement in an insider trading scam.

Prosecutors had accused Guttenberg of selling nonpublic data from UBS stock analysts about potential downgrades and upgrades to trader to David Tavdy. Tavdy then allegedly used this private information to illegally make at least $15 million for hedge funds and $10 million by trading on his own account.

According to the U.S. Justice Department, Guttenberg repeatedly sold insider information to Tavdy over a nearly five-year period.

Countrywide Financial, Merrill Lynch, and Citigroup Executives Defend Their Hefty Compensations Following Subprime Mortgage Crisis

Published on: March 12, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Appearing before the U.S. Congress last week, Countrywide Financial CEO and founder Angelo Mozilo, Ex-Citigroup CEO Charles Prince, and Ex-Merrill Lynch Chairman and CEO Stanley O’Neil gave their testimonies to the House Committee on Government and Oversight Reform.

The three men say that reports about their compensation are “grossly exaggerated” and that they too have lost millions of dollars from the mortgage debacle. On Thursday, the Congressional issued a report stating that the three men earned $460 million between 2002 and 2006.

All three men say their income from the firms are tied to the profits that the companies made in the years prior to the mortgage crisis and that their company stock has dropped dramatically since then.

Holston, Young, Parker & Associates Operator Pleads Guilty to $6.5 Million Forex Investor Scam

Published on: March 10, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Holston, Young, Parker & Associates Operator Boris Shuster has pled guilty to 14 counts of wire fraud and 13 counts of mail fraud in a foreign currency exchange scam that cost approximately $6.5 million and affected over 200 investors.

Shuster, also known as “Robert,” was sentenced to 12 years and six months in prison and ordered to pay $6.432 million in restitution, a $10,000 fine, and $7.895 million in disgorgement. New York prosecutors had tried to obtain a sentence of 20 to 25 years in prison for Shuster. He had already been sentenced to five years in prison for a different forex scheme.

According to prosecutors, Holston, Young, Parker & Associates is a fraudulent forex firm. The other owners and employees have also pled guilty to criminal charges related to the scam.

Fidelity To Pay $8 Million Fine To Settle SEC Charges Regarding Traders’ Improper Gift Taking

Published on: March 6, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Fidelity Investments has agreed to pay an $8 million fine to settle Securities and Exchange Commission charges that the company failed to properly supervise its stock traders that had improperly received gifts. 13 current and ex-Fidelity employees are targeted in the SEC investigation.

The gifts were given to traders by outside brokers who were soliciting Fidelity’s business. Fidelity has had a policy that prohibits employees from engaging in business transactions influenced by gifts received. Employees are also not allowed to receive gifts valued at more $100 over a one-year period.

The SEC alleges that accepting the gifts affected the Fidelity traders’ ability to obtain the best stock trades for Fidelity’s mutual fund customers.

Oppenheimer & Co. Agrees to Settle FINRA Market Timing Charges for $4.5 Million

Published on: March 5, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Oppenheimer & Co. has settled Financial Industry Regulatory Association charges regarding the market timing of mutual funds. The company has agreed to pay $4.25 million as restitution to five dozen mutual fund companies, as well as a $250,000 fine.

FINRA says that Oppenheimer failed to stop five traders’ engagement in improper, short-term mutual fund trading. The self-regulatory organization noted Oppenheimer’s failure to set up, manage, and enforce systems of supervision to detect and prevent market timing activities.

As a result, FINRA says that Oppenheimer disregarded hundreds of warnings and requests from mutual funds and life insurance companies that they stop making the improper trades. Some 65 mutual funds even warned Oppenheimer that short-term trades were not in the best interests of long-term shareholders.

Former Refco Senior Executives Plead Guilty to $2.4 Billion Fraud-Related Criminal Charges

Published on: March 3, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Former Refco CEO and company co-owner Phillip Bennett has pled guilty to 20 criminal charges related to the $2.4 billion fraud-related downfall of his company. Former CFO Robert Trosten has also pled guilty to five counts stemming from similar criminal activities.

Under Bennett’s supervision, Refco lost millions of dollars while trading in securities and derivatives in the 1990’s. Bennett tried to hide the losses by making them appear as if they were debts owed to Refco by Refco Group Holdings Inc., which is a company that Bennett controlled. Trosten helped direct these fraudulent transfers to the holding company.

The scam came to light after the company was purchased in 2004 and went public. Thomas H. Lee Partners LP had bought a majority interest in Refco. In 2005, Refco announced the discovery that an entity owned by Bennett owed Refco $430 million.

Merrill Lynch, Prudential Securities, Pruco and UBS Must pay $2.4 Million in Fines for Mutual Fund Abuses

Published on: February 28, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) announced today that five major brokerage firms have agreed to pay fines totaling $2.4 million for supervision violations and improper mutual fund sales to thousands of investors. These firms must take remedial steps to prevent such actions in the future and pay amounts estimated to exceed $25 million to their clients because of such practices.

According to FINRA, the violations include sales by these firms of load securities, meaning clients were required to pay commissions, when these investors were eligible to make fund exchanges without paying commissions. FINRA’s press release states that “Class B and Class C mutual fund shares and failure to have supervisory systems designed to provide all eligible investors with the opportunity to purchase Class A mutual fund shares at net asset value (NAV) through NAV transfer programs.”

Prudential Securities must pay an $800,000 fine, UBS Financial Services, Inc. was fined $750,000 and Pruco Securities was hit for $100,000 for improper sales of Class B and Class C mutual fund shares. These firms also agreed to remediation plans that will address over 27,000 fund transactions in the accounts of 5,300 households. Merrill Lynch, Prudential Securities, UBS and Wells Fargo must take steps regarding customers who qualified for but did not receive the benefit of NAV transfer programs. It is estimated that total remediation to fhese firms’ customers will exceed $25 million.

FINRA Says Ex-Morgan Stanley Stockbroker Misappropriated Nearly $400,000 From 97-Year-Old Widow

Published on: February 27, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is charging stockbroker John Mullins with misappropriating nearly $400,000 from an elderly widow and her charitable foundation. Esther Weil, a 97-year-old widow, died earlier this month. She was living in a nursing home. Mullins was her stockbroker for over 20 years.

Mullins allegedly tried to conceal his status with his elderly client’s charitable foundation. John and his wife Kathleen were the trustees of Weil’s nonprofit foundation-a relationship that is prohibited by Morgan Stanley’s firm policies. Morgan Stanley employed the Mullins from 2002-2006. The company fired them after it was discovered that they were violating company policies.

John is accused of allegedly misappropriating funds from his employer for improper expenses, making misstatements on his firm’s yearly compliance questionnaires and Form U4, and accepting an unauthorized $100,000 loan from a client.