Investor Lawyers Blog

Ameriprise Broker Arrested for Defrauding Investors – Clients Say He Cashed Checks Made Out to Ameriprise.

Published on: July 10, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Authorities in Knoxville have arrested an Ameriprise Financial Services broker who is accused of defrauding Tennessee residents. The charges include theft and forgery. At least five alleged victims have come forward claiming losses of almost $1 million. A client in another state claims damages of more than a million dollars and detectives are seeking to learn of more victims.

Delbert Forster Blount III worked out of an Ameriprise office in Knoxville and another in Morristown, Tennessee. It is reported that Blount received checks from clients made out to his firm but deposited these into his personal account rather than his clients’ investment accounts.

According to the latest disclosures made by Ameriprise, fifteen complaints have been lodged against Blount by his clients alleging damages totaling more than $2.5 million. Many of those complaining are reported to have provided Ameriprise with copies of cancelled checks made out to the investment firm which were instead deposited into an account opened by Blount.

Government Tightens Noose on Top Securities Class Action Attorneys

Published on: July 9, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Enemies of Wall Street learned even before the recent Alberto Gonzales affair that indictments by U.S. Prosecutors can be in their future.

King of securities class action suits was the law firm of Milberg Weiss & Bershad LLP. Federal prosecutors indicted the firm last year on charges of paying kickbacks to clients to serve as lead plaintiffs in class-action lawsuits.

The government probe of the firm began just after the Bush Administration entered the White House promising to curtail law suits. After the firm pleaded not guilty, prosecutors went after the firm’s partners. With little headway seemingly made, prosecutors were criticized that the case must lack legs.

Morgan Stanley Fined By State Regulator for Failure to Supervise Mutal Fund Sales

Published on: July 9, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Morgan Stanley & Co. Inc. agreed to pay a $250,000 civil penalty to end claims by Rhode Island Regulators that it failed to supervise sales representatives who engaged in unethical and dishonest practices in the sale of mutual funds and variable annuities.

According to the director of the Rhode Island Department of Business Regulation, the practices in question took place in Morgan Stanley’s Providence office. Morgan Stanley agreed to the penalty and will undertake a comprehensive review of the practices of the two sales representatives involved to ensure that there are no other violations of the securities statutes and rules involving other clients.

The state’s superintendent of securities said the investigation uncovered securities laws violations that occurred over a three-year period and involved a lack of supervision and oversight of the sales representatives. “Morgan Stanley failed to ensure that there were adequate procedures in place reasonably designed to prevent these unlawful practices,” she said.

Wall Street Wars, Part VI: After Losing “Merrill Rule” Case, SEC is Exploring Changes in Investment Advisors Act – BEWARE!

Published on: July 9, 2007 | by Shepherd Smith Edwards & Kantas, LLP

First, a recap: The Investment Advisors Act of 1940 states that investment advisors have a fiduciary duty to clients. Stock Brokerage firms have worked for decades attempting to escape any fiduciary duty to their clients. When they decided that, in addition to being brokerage firms, becoming investment advisors was also lucrative, what were they to do?

Simple, use their political influence at the SEC. While the SEC’s job is to protect investors, as political appointees, its Commissioners are political (the present SEC Chairman is a former activist Republican Congressman). To accommodate Wall Street, the SEC simply said Wall Street firms were exempt from the Investment Advisors Act.

Crying foul, the Financial Planning Association, those who are not stock brokers, sued the SEC – and, two months ago, they won! Stinging from the defeat, the SEC decided not to appeal. (After all, how can the SEC exempt anyone from laws written by Congress?) Wounded, Wall Street then asked for and was granted several months to decide what to do.

Some Brookstreet Brokers Become Wedbush Morgan Brokers

Published on: July 9, 2007 | by Shepherd Smith Edwards & Kantas, LLP

As we reported in June: Brookstreet Securities Corp. reported severe problems with CMO securities and soon announced its closing. Scott Brooks (son of Stan Brooks, founder of Brookstreet) left for Wedbush Morgan Securities Inc. of Los Angeles, inviting Brookstreet’s representatives to join him.

Brookstreet operated using independent contractors almost exclusively and Wedbush reportedly plans to sign the Brookstreet representatives to similar agreements. Wedbush Morgan had about 40 independent contractor reps of 260 total brokers, said Ed Wedbush, that firm’s CEO. About 100 of the 650 Brookstreet brokers have so-far followed Scott Brooks, according to Ed Wedbush. “We’re recruiting, like other firms, some of their brokers and bond traders,” he said.

Many Brookstreet reps don’t know much about Wedbush, said Larry Papike, a San Diego-based recruiter, “So I think brokers really started looking around for other solutions,” he said. Securities America Inc. and J.P. Turner & Co. have picked up a number of Brookstreet reps, Mr. Papike said.

As Bear Stearns Hedge Fund Faced Liquidation its Head Manager’s Golf Game Did Not Suffer

Published on: July 9, 2007 | by Shepherd Smith Edwards & Kantas, LLP

As a sub-prime mortgage hedge fund managed by Bear Stearns encountered margin calls and was on the brink of liquidation, the situation apparently did not faze the golfing of its chief executive, John Cayne.

Weather permitting, Mr. Cayne hops a helicopter from Manhattan to a golf club in Ocean Township, N.J., landing on the grounds. According to posting on an online golf database, Cayne continued to golf through the weeks in June as one of his firm’s hedge funds was evaporating.

On June 14, the day Bear Stearns reported a 10 percent drop in its operating earnings for the second quarter, Mr. Cayne played a round of golf, shooting a 96, according to the online database. The next day, he played again.

SEC’s New Terrorism Search Site Is the Latest Target of Fear-Mongering Tactics by Business Community

Published on: July 8, 2007 | by Shepherd Smith Edwards & Kantas, LLP

The SEC has stirred controversy with its new online tool that allows investors to search for companies with ties to countries the State Department has designated as “state sponsors of terrorism.” The official list includes Sudan, Syria, North Korea, Iran and Cuba.

The SEC initiated the online search site on June 25, with its Director saying that “no investor should ever have to wonder whether his or her investments or retirement savings are indirectly subsidizing a terrorist haven or genocidal state.”

However, some in the business community claim that some companies, including Baker Hughes and Immtech Pharmaceuticals, were wrongly placed on the SEC’s so-called terrorism “blacklist.” The list, they say, unfairly portrays a number of internationally-headquartered financial institutions and other corporations in a misleading, negative light and has been compiled without regard to the extent of their dealings, if any, with the five countries.

Update: Do Insurance Companies Use Scam Artists to Sell Unsuitable Annuities to the Elderly?

Published on: July 8, 2007 | by Shepherd Smith Edwards & Kantas, LLP

According to the Government Accounting Office (GAO) Americans over 65 hold more than $15 trillion in assets and, with “Baby Boomers” soon reaching retirement age, that figure will likely balloon. As financial firms, including insurance companies, design products aimed at this pot of gold, scam artists lick their chops for a piece of the action. Unfortunately, their paths cross.

As we very recently reported, a federal judge in Hawaii dismissed a class action suit against Midland National Insurance saying that, because different sales pitches were used by different salespersons, the claims by elderly Hawaiians can not go forward. Meanwhile, regulators warn that scam artists are selling insurance products to the elderly. Thus, it appears that insurance companies can simply look the other way while con artists victimize the elderly using their annuities. [OUR FIRM PURSUES CLAIMS ONE AT A TIME TO AVOID THIS PROBLEM.]

A NY Times article today reports that a Massachusetts insurance agent became a “certified senior adviser” then advertised this and other credentials to retirees. Yet, he did not mention how easily he received that title: He paid $1,095 for a correspondence course, then took a multiple-choice exam with dumbed-down questions. The agent, and over 18,700 other applicants since 1997, passed the course.

Judge Tosses Suit by Elderly Who Claim They were Misled into Annuity Losses

Published on: July 8, 2007 | by Shepherd Smith Edwards & Kantas, LLP

A judge in The U.S. District Court in Honolulu ruled that those who lost in annuities cannot bring a class-action suit against the annuity insurer, despite potential misleading and deceptive actions by the insurance firm. [Yokoyama et al. vs. Midland National Life Insurance Company.]

Lawyers representing the plaintiffs in the case alleged the defendant, Midland National Life Insurance Company, sold elderly Hawaiians inherently unsuitable, deceptive indexed annuity products that were designed to hide the true cost of an early contract cancellation.

The court cited two reasons it denied the class action against Midland. The first was that, whether or not Midland’s actions were misleading or deceptive, different sales pitches by different insurance salespersons were made to those purchasing the annuities, therefore the investors did not have similar claims. The second, said the judge, was that the losses were not caused by the alleged misleading actions, but by changes in the securities market.

SEC Halts Debt Offering by Amerifirst Funding, Alleging Fraud Targeting Elderly Investors

Published on: July 7, 2007 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission filed an emergency action in a Dallas federal court against Amerifirst Funding, Inc. and Amerifirst Acceptance Corporation alleging fraud.

The SEC contends that the offering of securities, known as Secured Debt Obligations (“SDOs”), are notes purportedly secured by automobile financing receivables created or purchased by the defendants. The district court entered temporary restraining orders suspending the offering, freezing the defendants’ assets and requiring an accounting and repatriation of assets.

The court also appointed a receiver to secure assets for investors, and ordered defendants to preserve documents and submit to expedited discovery. The SEC says the ruling has frozen the assets of the investment firm, which it accused of running a scam that targeted senior citizens, mostly in Texas and Florida, since early 2006.