Oppenheimer & Company is the brokerage subsidiary of Oppenheimer Holdings, Inc. a Canadian Company. Its history is confused by its name. The present company was founded in 1977 as Goldale Investments Ltd., later changed to E. A. Viner Holdings Ltd., then Fahnestock Viner Holdings, Inc. before becoming Oppenheimer.
The company traces its roots to E. A. Fahnestock who, it claims, was a financial advisor to Abraham Lincoln before forming an investment firm bearing his name in 1881. The firm remained independent for more than 100 years before being purchased by Viner Holdings in 1988.
Meanwhile, Oppenheimer & Company was a brokerage firm founded in the early 1950’s, which later formed a mutual fund and an institutional advisory division. In 1982, the firm was bought by bought by British firm, but three years later Oppenheimer’s management bought the firm. The mutual fund division was sold separately and, after ownership changes, the Oppenheimer mutual funds are now run by Massachusetts Mutual Life Insurance Company and have no connection to the brokerage firm.
In 1997, the Oppenheimer management partners made a hefty profit by first selling the advisory firm, then selling the brokerage operation to Canadian Imperial Bank of Commerce (CIBC) for over a half-billion dollars. The name was changed to CIBC Oppenheimer and it was merged with Wood Gundy, another U.S. investment firm the bank purchased. Bad investments, mismanagement and scandal soon hit CIBC resulting in large losses. Thus, in 2003 it sold the Oppenheimer operation to Fahnestock Viner Holdings for about $300 million. Fahnestock decided to use the name Oppenheimer.
Oppenheimer Holdings, Inc. is listed on the New York Stock Exchange and claims almost 3,000 total employees in regional offices throughout North andSouth America. It has market capitalization of approximately $750 million, and reports annual revenues about the same amount, with earnings of $44 million.
Our law firm represents institutional and individual investors nationwide who have lost a substantial portion of retirement or other assets. Our attorneys and staff have more than 100 years of combined experience in the securities industry and in securities law. Several of our lawyers served for years as Vice President or Compliance Officer of brokerage firms.
Each lawyer and staff member of our firm is devoted to assisting investors to recover losses caused by unsuitability, over-concentration, fraud, misrepresentation, self-dealing, unauthorized trades or other wrongful acts, whether intentional or negligent. We have handled thousands of cases against hundreds of large and small investment firms, including claims against CIBC Oppenheimer and Oppenheimer & Company.
Call us at (800) 259-9010 or contact us through our website to arrange a free confidential consultation with an attorney to discuss your or your company’s experiences with an investment advisor which led to losses in accounts.
In July 2007, Oppenheimer & Co. was fined a million dollars by Massachusetts regulators for claims of supervisory failures as a widow and her dying husband were being victimized by an Oppenheimer broker. The firm also paid more than a million to the widow, including an earlier settlement.
Oppenheimer was charged with failing to supervise its broker as that broker allegedly engaged in theft, fraud, churning and unauthorized trading in the account of an elderly couple. The firm consented to the order without admitting or denying the claims. The broker is currently under indictment for securities fraud.
Yet, abuse of the widow reportedly did not end with Oppenheimer’s failure to supervise. After personnel at her bank persuaded the widow to go to Oppenheimer’s management, the firm apparently minimized the problem, which included $350,000 in forged checks, and allowed to broker remain at the firm for a year until he resigned. During the investigation, Oppenheimer was also accused of making “false and misleading” statements and withholding emails from the state regulators.
Meanwhile, to recover her losses, the widow hired an attorney to file claims in arbitration, which were later for less than was lost, but the state required Oppenheimer to pay her the difference. In its answer to the arbitration claims Oppenheimer responded that she “only has herself to blame for any losses or other injury she may have suffered.”
“I guess the message is that anybody stupid enough to invest with Oppenheimer & Co. gets what they deserve,” said Massachusetts’ head regulator. “That’s the only way to read a statement like that.”
CIBC and its world markets division agreed to pay $125 million to resolve charges by regulators in its role in a widespread scandal involving after hours trades in shares of mutual funds. The firm paid $25 million in fines to the SEC and NY Attorney General’s Office and made $100 million available to reimburse victims, including other owners of the mutual fund shares. The bank neither admitted nor denied the allegations.
“By knowingly financing customers’ late trading and market timing, as well as providing financing in amounts far greater than the law allows, CIHI and World Markets boosted their customers’ trading profits at the expense of long-term mutual fund shareholders,” said the SEC’s Director of Enforcement.
NY Attorney General Elliott Spitzer exposed the scandal when he arrested a CIBC executive for stealing more than $1 million from mutual funds by participating in the late-trading scheme. The SEC followed with civil charges. This was the first case in what would become one of the largest scandals in the history of Wall Street.
The late trading was accomplished by entering trades in mutual fund shares at that day’s closing price of the funds, but after the market closed. This gave traders the advantage of knowing of events and after-hours trading prices on shares owned by the funds. A billion dollars was reportedly made available to hedge funds, along with the means to make the illegal transactions and disguise these from the fund managers.
During its sale of Oppenheimer, CIBC was fighting Securities and Exchange Commission charges of fraud in its dealings with Enron. Just after the sale, CIBC settled with the SEC paying an $80 million fine. CIBC and others had been charged with helping Enron to defraud its shareholders by falsifying the company’s earnings.
In 2004, Enron shareholders filed civil suits against CIBC and other banking firms claiming these banks assisted Enron to manipulate its earnings. After losing several motions to dismiss, CIBC agreed to settle its part in the case for $2.4 billion. Just prior to going to trial, the case was dismissed on technicalities by an appellate court and is now pending before the U. S. Supreme Court.
Prior to the surfacing of the Enron scandal, with CIBC Oppenheimer center-stage, claims were filed in a New York court alleging that firm had previously assisted another firm to falsify its books and therefore defrauding purchasers of securities of the company.
The complaint alleged that CIBC entered into a transaction with Livent, a theatrical production company. The transaction was purported to be a bona fide purchase by CIBC of production and royalty rights in certain Livent shows, in exchange for a “non-refundable” fee of $4 million. However, a secret side letter contradicted the investment agreement, requiring Livent to repay the $4.6 million within six months, with interest.
Instead of a debt, Livent treated the $4.6 million payment as income on its financial statements, hiding that the proceeds were actually a loan. Meanwhile the firm sold notes to others who say they relied on the company’s falsified financial reports. Livent soon went defunct and the noteholders then sued CIBC.
CIBC moved to dismiss the case, which was denied by the judge. The parties later settled the matter so the allegations were never proved.
According to Bloomberg.com, in the wake of Puerto Rico’s default on July 1 of $911 million of bond payments it owes creditors—including $779 million of general obligation bonds—Ameriprise Financial Inc. (AMP) is recommending that clients sell their OppenheimerFunds (OPY) municipal bond funds that are holding any of the island’s debt. In a report this week, Ameriprise senior research analyst Jeffrey Lindell said that with the acceleration of Puerto Rico bond defaults—as the island tries to lower its $70 billion debt via bondholder losses—mutual funds holding these bonds could end up having to “cut dividend rates.” He also wrote that as Puerto Rico bonds respond to “speculation and news,” the mutual funds’ net asset value could turn “volatile.”
In its recent article, Bloomberg provided data from Morningstar Inc., which reports that as of the end of March, Oppenheimer held $3.5 billion of Puerto Rico securities in 19 funds, which is more than anyone else. Now, Ameriprise wants clients to look at investment options that are not as risky as the funds holding Puerto Rico municipal bonds. The firm is suggesting that clients sell investments involving 16 Oppenheimer muni funds. Included in the recommendation to sell are a number of state specific municipal bond funds, including the:
· Oppenheimer Rochester Virginia Municipal (ORVAX)
· Oppenheimer Rochester Pennsylvania Municipal (OVPAX)
· Oppenheimer Rochester Maryland Municipal (ORMDX)
· Oppenheimer Rochester North Carolina Municipal (OPNCX) and
· Oppenheimer Rochester Arizona Municipal (ORAZX)
Several days after the July 1 default, credit rating agency Standard & Poor’s (SP) reduced the U.S. territory’s credit rating to “default” status. The default was not the first time Puerto Rico was unable to cover debt payments that were due—although it was the first default involving Puerto Rico’s general obligation debt, which was supposed to have a constitutional guarantee.
It was in May that NY City Council Speaker Melissa Mark-Viverito asked the SEC to investigate whether OppenheimerFunds played a part in causing Puerto Rico’s financial crisis to worsen. Mark-Viverito believes that banks, hedge funds, and other investors who bought into Puerto Rico utility debt and general obligation bonds contributed to the territory’s debt woes.
She said OppenheimerFunds increased its investments in Puerto Rico debt by $500 million over a several-month period. Meantime, according to Bloomberg, as the financial firm’s 20 municipal mutual funds have seen a decline of approximately $1 billion, OppenheimerFunds sought to meet investor redemptions by selling non-Puerto Rico bonds, thereby raising the percentage of what it has allocated in Puerto Rico.
Mark-Viverto was not the only one asking the SEC to conduct a probe into Oppenheimer Funds Inc. and its involvement in Puerto Rican bond holdings. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) also pressed the regulator to look at whether the financial firm and Franklin Templeton Resources properly valued their bond holdings as the financial situation grew worse on the island.
Last month, seven Democratic US Senators wrote a letter to the Commission asking them to investigate whether there was possible misconduct related to Puerto Rico bonds that contributed to the territory accruing so much debt. For the last three years, our Puerto Rico bond attorneys and Puerto Rico bond fund fraud lawyers have been helping investors recoup their losses sustained because brokerage firms such as Banco Popular, Banco Santander (SAN) and UBS Puerto Rico (UBS-PR) recommended investors buy large percentages of Puerto Rico bonds or, even, each firms’ own proprietary Puerto Rico bond funds. Many investors were encouraged to invest more than they could afford and were not apprised of the risks. A lot of investors lost everything. Contact Shepherd Smith Edwards and Kantas, LTD LLP today for a free, no obligation consultation.
Sell Oppenheimer Funds on Puerto Rico Risk, Ameriprise Says, Bloomberg, July 19, 2016
S & P cuts Puerto Rico rating to default, MSN/AFP, July 7, 2016
AFL-CIO Wants SEC to Probe Firms Invested in Puerto Rico Bonds, Morning Consult, May 23, 2016
NY City Council Speaker Wants SEC to Investigate Oppenheimer Funds Over Puerto Rico Debt Crisis, Stockbroker Fraud Blog, May 9, 2016