Archive for the ‘Fraud’ Category
Friday, April 16th, 2010
Today, the SEC brought a securities fraud action against Goldman Sachs (NYSE: GS) for “making materially misleading statements and omissions in connection with” a CDO called ABACUS 2007-AC1 (“ABACUS”). Goldman Sachs structured and marketed ABACUS to investors.
According to the SEC, “Goldman Sachs failed to disclose to investors vital information about [ABACUS], in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against [ABACUS].” “The product was new and complex but the deception and conflicts are old and simple,” said Robert Khuzami, Director of the Division of Enforcement of the SEC. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,” added Khuzami. Investors in ABACUS lost over $1 billion.
Presently, K&T is prosecuting numerous arbitration claims on behalf of aggrieved investors to recover losses sustained in mortgage-backed securities and structured asset-backed securities. These claims have been filed with FINRA Dispute Resolution. Retail and institutional investors who have sustained losses in the ABACUS CDO can contact K&T to explore their legal rights and options.
Posted in Enforcement, Fraud, Goldman Sachs, Misrepresentation, Mortgage-backed securities, Omission, SEC, Structured Asset-Backed Securities, Subprime | No Comments »
Wednesday, April 7th, 2010
The Securities Law Firm of Klayman & Toskes, P.A. announced today that the SEC and FINRA have charged Morgan Keegan in connection with the Regions Morgan Keegan (“RMK”) Bond Funds. Morgan Keegan is owned by Regions Financial Corp. (NYSE: RF). The SEC specifically alleged that Morgan Keegan perpetrated a “fraudulent scheme”, and “failed to employ reasonable procedures to price the Funds’ portfolio securities and, as a result of that failure, did not calculate accurate NAVs for the Funds.” The SEC goes on to state that “despite these failures, Morgan Keegan recklessly published daily NAVs of the Funds which it could not know were accurate and, as distributor of the Funds’ shares, sold shares to investors based on those NAVs.”
According to FINRA, Morgan Keegan “market[ed] and [sold the RMK Bond Funds] to investors using false and misleading sales materials – costing investors well over $1 billion.” FINRA’s Complaint alleges that “the misleading sales materials, combined with the firm’s misleading and deficient internal guidance and failure to train its brokers about the risks, led Morgan Keegan’s brokers to make material misrepresentations to investors.” FINRA further states that “Morgan Keegan failed to establish, maintain and enforce an adequate supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with the federal securities laws and FINRA rules.”
Presently, K&T is prosecuting numerous arbitration claims against Morgan Keegan on behalf of investors of the RMK Bond Funds before FINRA Dispute Resolution. Retail and institutional investors who have sustained investment losses in the RMK Bond Funds can contact K&T to explore their legal rights and options. If you wish to discuss this announcement or have investment losses of $100,000 or more in the RMK Bond Funds, please contact our law firm.
Posted in Arbitration, Enforcement, FINRA, Failure to Supervise, Fraud, General, Legal Rights and Options, Misrepresentation, Morgan Keegan, RMK Bond Funds, SEC | No Comments »
Tuesday, March 30th, 2010
FINRA has expelled Provident Asset Management, LLC, a Dallas-based broker-dealer, for marketing a series of fraudulent private placements offered by its affiliate, Provident Royalties, LLC, in a massive Ponzi scheme.
The expulsion of Provident Asset Management is the first produced by a FINRA initiative involving active examinations and investigations of broker-dealers involved in retail sales of private placement interests, as well as broker-dealers affiliated with private placement issuers. FINRA is looking at firms’ compliance with suitability, supervision and advertising rules, as well as potential instances of fraud. The initiative was undertaken in response to an increase in investor complaints involving private placements and Securities and Exchange Commission actions halting sales of certain private placement offerings.
Provident Asset Management misrepresented to investors that the funds raised through the offerings would be used to purchase interests in the oil and gas business, including exploration activity and the acquisition of real estate, oil and gas leases and mineral rights. In fact, investors’ funds were commingled and used by an affiliated issuer to make dividend and principal payments to other investors. In addition, the firm acted as the agent in an oil and gas private placement offering but failed to establish an escrow account for investors’ funds during the contingency period of the offering.
“Provident facilitated the sale of a series of fraudulent private placements that were marketed to unsuspecting customers as income-producing investments, when it was simply using new investors’ money to pay previous investors the promised dividends – a classic Ponzi scheme,” said Susan L. Merrill, FINRA Executive Vice President and Chief of Enforcement. “While the private placement market is an important source of capital for many companies, the market is also one in which investors have been subject to unsuitable or abusive sales tactics.”
FINRA found that from September 2006 through January 2009, Provident Asset Management marketed and sold preferred stock and limited partnership interests in a series of 23 private placements offered by Provident Royalties, LLC. Provident Asset Management’s only business line was acting as the wholesaling broker-dealer for the Provident Royalties’ offerings, which were sold to customers through more than 50 retail broker-dealers nationwide, raising over $480 million through approximately 7,700 individual investments made by thousands of investors.
FINRA’s broader investigation into broker-dealers that sold the Provident and other troubled private placement offerings is continuing.
The Provident Royalties private placement memoranda promised investors returns of up to 18 percent per year and said the funds raised through each offering would be used to purchase interests in all aspects of the oil and gas business.
In an effort to market the Provident Royalties offerings, the firm falsely represented that: investors’ funds would be used by each individual Provident Royalties offering to purchase interests in the oil and gas business for that offering; the subscription proceeds of each offering would be deposited into an account for that offering and become assets for that offering; approximately 86 percent of the subscription proceeds would be allocated to acquiring interests in the oil and gas business; and, dividends paid to investors would be derived from revenues, primarily from the sale of oil and gas assets.
In fact, Provident Royalties deposited the investors’ funds from each offering into a separate bank account. Then, in the fashion of a classic Ponzi scheme, the money was either moved freely from one account to another or was swept into one of Provident Royalties’ operating accounts and used to pay dividends and principal to earlier investors.
On July 2, 2009, the SEC filed a civil injunction action in the Northern District of Texas naming Provident Asset Management, Provident Royalties and others, seeking a temporary restraining order and an emergency asset freeze and appointment of a federal equity receiver to take control of the entities and preserve their assets for the benefit of the defrauded investors.
In concluding this settlement, Provident Asset Management neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
Posted in Arbitration, Enforcement, FINRA, Fraud, Private Placements, Provident Royalties/Shale Royalties | No Comments »
Thursday, March 11th, 2010
Rhonda Breard (”Breard”) has been charged by federal prosecutors with mail fraud and accused of stealing from investors. On March 10, 2010, Breard appeared in U.S. District Court in Seattle as prosecutors spelled out the charges against her. If convicted, Breard faces up to 20 years in prison and a $1,000,000 fine.
According to the government, Breard accepted millions of dollars from at least 20 investors. Instead of placing the money in insurance and financial products, Breard used the money “for her own expenses, and mailed phony statements to these customers,” prosecutors said in a statement. The government added that the alleged scheme had been going on since 2007.
Mark Bartlett, first assistant U.S. attorney, said that the FBI is continuing a “very active” independent criminal investigation, looking for others who might have been involved in the fraud and attempting to “identify any and all assets to try to make her victims as whole as possible.” Judge James Donohoe, a U.S. Magistrate, released Breard but prohibited Breard from selling any assets, and required her to obtain court approval for expenditures exceeding $500. Reportedly, Breard had attempted to sell large amounts of jewelry to a local jewelry shop. When the shop owner learned who she was, he refused to buy the jewelry.
Klayman & Toskes is investigating claims against ING Financial Partners (”ING”), the brokerage firm where Breard was registered since 2002. Under NASD Rules, ING was obligated to properly supervise the practices and activities of Breard during the time that she was registered with the firm. Accordingly, ING may be liable for failing to supervise Breard’s activities and responsible for compensating investors who lost money investing with Breard. As such, Klayman & Toskes plans to assist victims of Breard and ING Financial Partners in securities arbitration claims before the Financial Industry Regulatory Authority (FINRA).
Posted in Arbitration, FINRA, Fraud, General, ING Financial Partners, Ponzi Scheme, Rhonda Breard | No Comments »
Wednesday, March 3rd, 2010
The Washington State Department of Financial Institutions (”WSDFI”) has reported that it has been receiving calls and complaints from customers of Rhonda Breard who have learned their brokerage firm or insurance company has no record of brokerage accounts or annuities they thought they had purchased through Rhonda Breard and Breard & Associates Wealth Management. Customers have told the WSDFI stories similar to the following:
- The customer made an investment or rolled over an investment by writing a check or endorsing a check to Breard & Associates rather than to the broker-dealer or insurance company that is supposed to provide the investment.
- The broker-dealer or insurance company has no record of the customer’s investment.
- It appears that the customer’s money was not transmitted to the broker-dealer or insurance company.
Breard was a licensed broker in Arizona, Michigan, Nevada, New Mexico, North Carolina, Oregon, Washington, West Virginia, and Wyoming, and accordingly the alleged fraud committed by Breard may have widespread implications. If you or someone you know is a victim of Rhonda Breard, it is important to contact qualified, experienced counsel to learn your legal rights and options. Victims of Rhonda Breard have reported that ING has requested from them various documents and information. It is important, however, that former customers of Breard contact counsel before speaking with ING or submitting any documents or information. In our experience, aggrieved investors should contact counsel before agreeing to speak with the brokerage firm. If litigation against ING ensues, ING may attempt to use the materials submitted by former customers of Breard against them as to why they are not entitled to recover their money. Before you file any written complaint with ING or a securities regulator, please contact our law office to discuss your legal rights and options.
Posted in Arbitration, FINRA, Fraud, General, ING Financial Partners, Legal Rights and Options, Ponzi Scheme, Rhonda Breard | No Comments »
Monday, March 1st, 2010
Klayman & Toskes announced that it is investigating potential claims against ING Financial Partners on behalf of victims of Rhonda Breard and Breard & Associates Wealth Management. Rhonda Breard, who was registered with ING Financial Partners (NYSE: ING) until February 10, 2010, is alleged to have vanished along with millions of dollars of her clients’ money. Breard was a licensed broker in Arizona, Michigan, Nevada, New Mexico, North Carolina, Oregon, Washington, West Virginia, and Wyoming. It has been reported that securities regulators and other agencies are investigating Breard’s practices. A review of Breard’s securities license reveals a history of several customer complaints as well as regulatory actions. These are all potential “red flags” under the law. Under NASD Rules, ING Financial Partners was obligated to properly supervise the practices and activities of Breard during the time that she was registered with the firm. Breard had been registered with ING Financial Partners since February of 2002. Accordingly, the firm may be liable for failing to supervise Breard’s activities and responsible for compensating investors who lost money investing with Breard.
As such, Klayman & Toskes plans to assist victims of Breard and ING Financial Partners in securities arbitration claims before the Financial Industry Regulatory Authority (FINRA).
Posted in Arbitration, FINRA, Fraud, General, ING Financial Partners, Ponzi Scheme, Rhonda Breard | No Comments »
Wednesday, February 3rd, 2010
The U.S. Securities and Exchange Commission (”SEC”) suffered a setback in its efforts to go after a firm that marketed Bernard Madoff’s investments. A federal court judge dismissed the majority of the SEC’s complaint for securities fraud against Cohmad Securities Corp. and its top executives Robert Jaffe, Maurice Cohn, and Marcia Cohn who was Cohmad Securities’ chief operating officer.
The SEC had alleged that Cohmad Securities, Jaffe and the Cohns were part of the $65 billion Ponzi-scheme that Bernard Madoff perpetuated for more than 20 years.
According to Judge Louis Stanton, although Cohmad Securities was in the same building as Madoff’s firm, Madoff successfully pulled the wool over his marketer’s eyes, just as he fooled regulators and investors.
Judge Stanton’s Order was signed on February 1, less than six months after lawyers for Bernard Madoff’s friend Robert Jaffe had asked the Manhattan federal court to dismiss the four counts in the SEC’s civil fraud suit. “The claims for securities fraud are dismissed as against all defendants,” Stanton wrote in his ruling. Judge Stanton did, however, allow the SEC to refile the complaint within 30 days.
“There is nothing fraudulent about referring customers to an investment adviser for fees, and the complaint does not allege statements or omissions by defendants that are fraudulent absent awareness or notice that Madoff’s investment advisory business was a sham,” Stanton wrote.
The case is captioned SEC v. Cohmad Securities Corp., et al., U.S. District Court, (S.D.N.Y.), No. 09-5680.
Posted in Cohmad Securities, Fraud, Madoff, SEC, Southern District of New York | No Comments »
Wednesday, January 27th, 2010
Yesterday, at the federal courthouse in Brooklyn, United States District Judge Jack B. Weinstein sentenced Eric Butler, a former Credit Suisse broker, to five years’ imprisonment, three years of supervised release, $5 million fine, and forfeiture of $250,000 for securities fraud, conspiracy to commit securities fraud, and conspiracy to commit wire fraud. Butler was convicted following a three-week jury trial in August 2009.
The sentencing proceeding was announced by Benton J. Campbell, United States Attorney for the Eastern District of New York.
The evidence at trial established that Butler and Julian Tzolov, another former Credit Suisse Broker, defrauded their clients in order to obtain higher sales commissions.
Butler and Tzolov sold auction rate securities (“ARS”) backed by mortgages to Credit Suisse clients who, in fact, had placed orders to buy ARS backed by government-guaranteed student loans. Butler and Tzolov told their clients that student loan-backed ARS were very low-risk investments guaranteed by the United States government and that the market for the securities was very liquid. As a result, a number of the companies agreed to invest money in these ARS. However, without the knowledge or consent of the companies, Butler and Tzolov began to use the companies’ funds to purchase riskier higher-yield, mortgage-backed collateralized debt obligations, or “CDOs,” which paid Butler and Tzolov higher commissions. CDOs are asset-backed products built from a portfolio of fixed-income assets, including mortgages, subprime mortgages, and second mortgages, many of which were not guaranteed by the government. Butler and Tzolov concealed their scheme by falsifying the names of the ARS the clients bought and otherwise misleading the clients into believing they had bought ARS backed by student loans. In approximately August 2007, the scheme was discovered when the market for the mortgage-backed CDOs purchased by the companies collapsed and various auctions for CDO-ARS began to fail.
“The defendant’s fraud scheme aimed at enriching himself at the expense of his investors, who suffered staggering losses,” stated United States Attorney Campbell. “Those who engage in these schemes will be investigated and prosecuted to the full extent of the law.” Mr. Campbell expressed his grateful appreciation to the Federal Bureau of Investigation and the United States Securities & Exchange Commission for their assistance during the trial.
Posted in Auction Rate Securities, Collateralized Debt Obligations, Fraud, Mortgage-backed securities, Subprime | No Comments »
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