Securities Fraud Attorney & Investment Fraud Case Blog

Elderly Victim Speaks Out after Alleged Ponzi Scheme

Sat, 04 Feb 2012 08:00:00 EST

Although news of investment fraud and Ponzi schemes makes the news as investigations get under way, trials proceed, and convictions are handed down, it is somewhat rare that we see the stories of the financial fraud’s victims. However, as victims took the stand in the case against Joseph Mazella, an investment advisor accused of luring in the elderly with promises of high returns, we got a sad glimpse into the real-life effects of these kinds of scams. Many of the alleged victims were in tears as they told their side of the story.

Gloria Migliore was one of Mazella's alleged victims. An 82-year-old widow, Magliore became interested in the investment opportunity while trying to supplement her Social Security income. Magliore recounts budgeting, scrimping, and saving after the early death of her husband, and she was still working at Costco at the age of 74. She had hoped Mazella’s investment offer would grant her a little extra income.

Migliore explains that the money she used to invest had been left to her after her husband's death, and she says that it was all she had. She was tearful recounting her interactions with Mazella, saying "He told me he would treat me like his mother." She said that, initially, the monthly checks for $684 were coming regularly, but eventually those payments stopped. By the time Magliore found out that the money was gone, her daughter was being treated for cancer, bills were coming in, and she recounts telling Mazella that "I need the money. I can't even buy food."

Mazella has been accused of operating a Ponzi scheme and is facing charges of wire fraud, money laundering, and securities fraud.

The securities fraud lawyers with the Law Firm of Meyer Wilson help harmed investors all over the nation recover their losses after investment scams, Ponzi schemes, and stock scams.

Bank Owes Financial Fraud Victims after Rothstein Ponzi Scheme

Wed, 01 Feb 2012 08:00:00 EST

TD Bank, based in Toronto, must pay out $67 million to harmed investors related to a Ponzi scheme that has been called one of the largest Ponzi schemes in South Florida history. The decision came from a federal jury on January 18^th as the result of a lawsuit by Coquina Investments, which is based in Texas.

Scott Rothstein, who we have reported on previously, is already serving a sentence for the alleged Ponzi scheme, and at least seven additional people have been charged. Rothstein has reportedly been cooperative with officials as the additional allegations have come down.

The bank's involvement in the South Florida Ponzi scheme is said to have been integral to the life of the scam. Apparently, Rothstein and his alleged co-conspirators used a TD Bank account to perpetuate the fraud, and some of the accused are said to have been pretending to be employees of TD Bank. Additionally, at least one person in the scheme allegedly set up a fake website that appeared to be a legitimate TD Bank site giving account balances.

Prosecutors have alleged that the bank was aware of the financial scam, actively assisted in it, and that Rothstein had paid a sizable sum to the bank’s president to turn a blind eye to the fraudulent activities.

If you have lost money in a Ponzi scheme, stock scam, or other form of securities fraud, don't wait to speak with an expert investment fraud attorney about your options for recovery. The Law Firm of Meyer Wilson is devoted to helping investors recover their losses through mediation, arbitration, and litigation.

Connecticut Man Pleads Guilty to 1 point 9 Million Dollar Investment Fraud Scheme

Mon, 30 Jan 2012 08:00:00 EST

Last Thursday, Christopher Plummer, of Lyme, Connecticut, admitted to an investment scheme that defrauded investors out of approximately $1.9 million. Total victim losses were around $1.7 million.

According to a Jan. 27 U.S. Attorney’s Office press release, Plummer told investors and potential investors that he was an “Authorized Member” of New England Resorts, LLC, and that he (in various manners) owned hundreds of acres of land in Lakeshore, Mississippi. that were zoned for the development of casinos, a medical facility, and numerous residential properties. He also said that the partners of New England Resorts, LLC had invested several hundred million dollars of their own money in land in Lakeshore. Plummer and a co-conspirator also sent emails to investors that were meant to convince investors that major Wall Street firms were partnering in the Lakeshore project.

None of Plummer’s representations were true. Further, according to the press release, Plummer and his co-conspirator never invested any of the funds as represented, but instead took a significant portion of the funds for their own use and benefit.
During his plea, Plummer also admitted to a second investment scheme in which he represented himself as a “managing member” of Madison and Wall Investments LLC to gain access to a victim’s funds. Plummer told the investor that he could invest his funds in a firm that used a computer-based trading system to render returns of 100 percent within two years. The victim lost $179,000 in the investment fraud.

Plummer pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum penalty of 20 years in prison. Plummer’s sentencing has been scheduled for April 13.

About our law firm:
The law firm of Meyer Wilson represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

Operation Broken Trust Leads to 52-Month Sentence for Michigan Woman in One Million dollar Ponzi Scheme Case

Mon, 30 Jan 2012 08:00:00 EST

Last week, Candice Campbell, of Canton, Michigan, received a 52-month prison sentence for her role in a Ponzi scheme that defrauded investors out of more than $1 million. She also was ordered to pay more than $700,000 in restitution and to forfeit numerous items purchased with ill-gotten gains.
According to the FBI, Campbell represented herself as CEO of a sham investment firm, CJ’s Financial (CJF), and solicited investments from investors through a number of false promises and false representations. With co-conspirator, Jessie A. Wozniak, Campbell “lured approximately 80 individuals located in Michigan, New York, Arizona, Connecticut, and Colorado to invest almost $1,150,000 with CJF.” Investors were told that Campbell was a licensed financial planner, and that she would invest their funds in the stock market.
The criminal charges were nearly identical to the charges laid out by the SEC in an Aug. 2010 Complaint. In the Complaint, the SEC alleged that Campbell and CJF obtained a little over $1 million from more than 60 investors over a 13-month period. According to the SEC, Campbell told investors their funds would be invested through a guaranteed trading program, but then invested less than 10 percent of the proceeds. Instead, she used most of the money for her personal purposes.
The SEC’s Complaint further alleged that Campbell and CJF specifically promised investors a “guaranteed” 10% monthly return, that their initial investments would “NEVER go down in value," and that CJF would pay their capital gains taxes.
Campbell was arrested on Dec. 2, 2010. For more information about the case, obtain the SEC’s original Complaint here.
About our law firm:
The law firm of Meyer Wilson represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

Retired NBA All-Star Loses Nearly $86M in Alleged Investment Fraud

Fri, 27 Jan 2012 08:00:00 EST

Retired NBA All-Star Vincent Baker has filed a lawsuit against Donald S. Brodeur Jr. and Connecticut-based Brodeur & Co. Certified Public Accountants ("B&C") that accuses both parties of negligence, misrepresentation, fraudulent transfer, breach of contract, and breach of fiduciary duty.

According to a recent Courthouse News Service article, Baker hired Donald S. Brodeur Jr. and B&C in 1997 – two years before Baker signed a seven-year, $86.6 million contract with the Seattle SuperSonics. Baker hired the firm, which advertises its "Athlete Accounting, Tax & Advisory Services" on its website, to manage his money, investments, and financial activities.

The Complaint alleges that despite assurances and "overt representations" from Brodeur and B&C to Baker concerning the appropriateness and sufficiency of their services, between 1997 and 2009, Baker "was forced to liquidate substantial assets for little or no value, leaving him without resources to meet his financial obligations and living expenses."

The lawsuit further alleges that nearly all of Baker’s assets were spent or rendered virtually worthless due to the negligent and/or fraudulent management of Brodeur and B&C. According to the Complaint, Brodeur and B&C, through "at least five series of transactions" breached their duties to Baker by failing to provide adequate oversight of his accounts, by failing to provide adequate accounting and reporting, by mismanaging his assets, and by commingling his funds with their accounts.

According to statements quoted in the Jan. 25 Courthouse News Service article, Brodeur has asserted that both he and B&C are innocent. For additional information, read the complete article here.

About our law firm:

The law firm of Meyer Wilson represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

Illinois Man Sentenced to More Than 5 Years in Prison for $9 Million Dollar Ponzi Scheme

Wed, 25 Jan 2012 08:00:00 EST

Algrid M. Norkus, of Aurora, Illinois, has been sentenced to 63 months in prison and ordered to pay $4.5 million in restitution for mail fraud charges related to the operation of a $9 million Ponzi scheme, according to a Jan. 23 Daily Herald article. Norkus pled guilty to the scheme on March 10, 2011.
According to a U.S. Department of Justice press release, Norkus admitted that he fraudulently offered and sold approximately $9 million of investments in his company, Financial Update, Inc., to a number of investors. He also admitted to misrepresenting the investment’s expected rate of return, risks, and status.
Norkus further admitted that he lied to investors and potential investors when he said their funds would be used to purchase lists of prospective customers for Financial Update. Despite his claims, Norkus said he had no intentions of purchasing any such lists after the beginning of 1998. Instead, he admitted, he planned to misappropriate the money, commingle it with his accounts, and use it for his personal purposes and to make Ponzi payments to earlier investors.
As part of the plea agreement, Norkus also admitted that he provided investors with falsified annual IRS Forms 1099-INT and bad checks to inspire trust and keep them unaware of the Ponzi scheme.
“He [Norkus] provided checks to certain investors drawn on bank accounts that contained insufficient funds to lull them into the belief that their investments had been used as represented, were causing Financial Update to earn money, and that the money earned on the investments was used to pay interest on the investments,” the Assistant U.S. Attorney’s office wrote in the DOJ release.
Norkus, who could have been sentenced to 20 years in prison for the investment scheme, will be required to serve three years of supervised release after his term in prison.
About our law firm:
The law firm of Meyer Wilson represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

Attn Retirees: Are you withdrawing more than 3 percent of your income each year? If so, watch out!

Tue, 24 Jan 2012 08:00:00 EST

Retirees have been told for almost twenty years that withdrawing up to 4 percent of their savings each year is perfectly acceptable. Advisers have long said that 4 percent was the magic number that would ensure retirees could keep up a good standard of living without running out of money during their retirement. According to a recent InvestmentNews article, however, that advice may no longer apply.

The recent financial collapse, the housing bust, and the now long-running volatility in the stock market have all called into question “standard wisdom” about how much money retirees can safely withdraw each year.

“The reason for rethinking the 4% rule is that we believe returns will likely be lower than they were over the last 75 years and that volatility will be higher,” Harold Evensky, president of Evensky & Katz Wealth Management, told InvestmentNews. “There's a strong consensus that forward-looking returns are going to be modest.”

Experts quoted in the article recommend retirees adjust the amount they’re withdrawing when the market is depressed. Factors to consider include:

• How old you are;
• What other assets you have;
• How much you’re paying in fees on your funds’; and
• Whether you’re still working in some capacity.

Additionally, retirees who have lost money in an investment scam or an investment fraud scheme may need to recalculate their withdrawals significantly because their bottom lines are going to be very different than they had planned. If you’ve been a victim of investment fraud or stockbroker misconduct and have lost money you relied on for your retirement, click here to learn what you can do to recover your investment losses.

For more tips on finding the correct withdrawal percentage to make your money last, read the full InvestmentNews article, “4% withdrawal rule called into question,” here.

About our law firm:

The law firm of Meyer Wilson represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

SEC Charges Florida-based Imperiali and Officers with Securities Fraud

Thu, 19 Jan 2012 08:00:00 EST

Last week, the SEC filed civil fraud charges against a Florida-based business development company, its owner, a former officer, and a former auditor in connection to what officials say was a fraudulent disclosure and accounting scheme. Daniel Imperato, Charles Fiscina, Lawrence O’Donnell, and Imperiali, Inc. are the named defendants.
The Complaint alleges that Imperato, from 2005 through 2008, used his company, Imperiali, to defraud Imperiali investors in a securities fraud scheme that misled investors about Imperiali’s financial status. Specifically, the Complaint alleges that Imperato directly solicited investments in Imperiali from approximately 60 investors, and sold a total of $2.5 million in Imperiali stock. He also allegedly hired a sales team to “cold call” potential investors.
According to the Complaint, Imperato and his sales team distributed private-placement memorandums, which contained “numerous untrue and misleading statements,” to potential investors. These documents, the Complaint alleged, contained fictitious statements about Imperiali’s management, organization, and sales projections.
“In documents distributed to investors and in reports filed with the Commission, Imperato, along with Fiscina and O’Donnel, portrayed Imperiali as a thriving, multinational corporation that owned multiple, valuable subsidiaries. In reality, Imperiali was just a shell corporation, having virtually no assets or operations. Its subsidiaries were worthless or, in some cases, even non-existent,” alleged the Complaint.
The Compalint further alleged that the private-placement memorandums distributed to potential investors included statements that the stock-offering proceeds would be used to fund a business development company, which would then invest in other, promising companies. According to the Complaint, none of the stock-offering proceeds was used for this purpose. Instead, Imperato used the money to fund both his personal lifestyle and Imperiali’s operations.
The SEC is seeking permanent injunctions and civil penalties from each defendant, as well as disgorgement with prejudgment interest against Imperiali and Imperato. The Commission further seeks an officer and director bar against Imperato and Fiscina. Fiscina has agreed to settle the charges against him, without admitting or denying the charges, according to a Jan. 11 litigation release.
About our law firm:
The law firm of Meyer Wilson represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

North Idaho Man Allegedly Scammed Church Members in Ponzi Scheme

Wed, 18 Jan 2012 08:00:00 EST

A North Idaho man has been sentenced after pleading guilty to wire fraud earlier this year related to a Ponzi scheme that allegedly took more than $2 million from Idaho investors. Dale E. Lowell will serve three years in prison, pay restitution to the alleged investment scam victims in Sandpoint and Coeur d'Alene, and complete community service on release. Lowell's alleged victims included members of the church where he sang and played piano.

Lowell allegedly promised investors returns of 10% - 50% on investments that were supposedly safely backed with certificates of deposit. Unfortunately, Lowell is accused of losing his investors’ cash on the stock market, using some of the cash for his own expenses, and paying off prior investors to keep up the appearance of legitimacy. Lowell, who is a real estate agent, describes starting his investment club in hopes of making it big. Unfortunately, he said that he was unable to acknowledge when he failed and turned to lies to keep afloat.
Although restitution has been ordered in the case, it has been said that the likelihood of it actually being paid is low. Some investors have speculated that Lowell has some of the cash still "hidden" for when he is released, but there has been no known evidence to support that claim.

The investment fraud attorneys with the Law Firm of Meyer Wilson are here to assist investors who have suffered losses due to stockbroker misconduct, Ponzi schemes, and stock scams. We represent investors nationwide in stockbroker mediation, arbitration, and litigation, and we look forward to working with you.

Arraignment Scheduled in California PTA Moms' Alleged Ponzi Scheme Case

Wed, 18 Jan 2012 08:00:00 EST

Arraignment Scheduled in California PTA Moms’ Alleged Ponzi Scheme Case
Last summer, California prosecutors charged three women, Maricela Barajas, Juliana Celeste Menefee, and Eva Perez, with 22 felony counts of theft and securities fraud in connection to an alleged multi-million dollar investment scheme.
This week, the women waived their right to a preliminary hearing in the case. The arraignment has been scheduled for Jan. 26 in Pomona Superior Court.
Barajas, Menefee, and Perez were members of the PTA at Armstrong Elementary School in Diamond Bar, CA. According to prosecutors, they used social functions and school events to solicit more than $14 million in fraudulent investments from approximately 40 people over the course of two years. The women allegedly claimed that they possessed the exclusive right to sell milk from Alta Dena Dairy to Disneyland, Disney-affiliated hotels, and other retailers.
The women allegedly told investors that cash investments would be used to expand the Alta Dena Dairy contract, and that investors could make “extraordinary” returns of up to 100 percent. Prosecutors say the women used their PTA memberships to gain the victims’ trust. The scam allegedly unraveled when the women stopped making Ponzi-style payments to investors.
If convicted, Barajas, Menefee, and Perez each face up to 13 years in prison. Perez is already serving a nine-year prison sentence in San Bernardino County for her role in a similar Ponzi scheme. Both Menefee and Barajas are currently out on bail.
About our law firm:
The law firm of Meyer Wilson represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

Grand Jury Indicts Gilbert Resident for Alleged Investment Scheme

Wed, 18 Jan 2012 08:00:00 EST

A federal grand jury indicted Gilbert, Arizona resident Gerald Lee Kelly on Wednesday for his alleged role in what prosecutors are calling a “significant financial fraud directed against distressed homeowners.”
According to the indictment, Kelly used his business, Cornerstone Financial Holdings, LLC, to defraud at least eight investors out of approximately $855,000. Kelly allegedly told investors that their money would be used to fund short-term, high-interest loans to distressed homeowners. He also allegedly claimed that the investments were secured by promissory notes and various interests in homeowner properties.
The indictment alleges that Kelly knowingly misled investors with these claims. According to the indictment, the promissory notes and homeowner properties were inadequate to protect the investors from loss. Kelly allegedly knew this. The indictment also accuses him of misleading investors about the financial state of his company, and of misappropriating investor funds for his personal use.
Kelly has been charged with four counts of wire fraud, six counts of mail fraud, 10 counts of money laundering, and five counts of structuring financial transactions to avoid federal bank reporting requirements. If convicted, he could face up to 20 years in prison for each count of wire fraud and mail fraud, up to 10 years for each count of money laundering, and up to five years for each count of structuring financial transactions to avoid federal bank reporting requirements. His arraignment is scheduled for Jan. 25. For more information, read the government press release.
About our law firm:
The law firm of Meyer Wilson represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

LinkedIn Scam Spurs Warning to Investors About Social Media Investment Fraud

Fri, 13 Jan 2012 08:00:00 EST

Anthony Fields, an investment advisor from Illinois, has been accused by the Securities and Exchange Commission (SEC) of attempting to run an investment scam through the social media site LinkedIn. According to officials, Fields tried to sell fake investments to users of the site, and he has also been accused of giving inaccurate - or outright false - information on his own firm's website, among other issues.
However, although Fields allegedly offered these fake securities to investors through LinkedIn, not a single investor took him up on his offer. Some investors showed interest in the investment opportunity, but did not go as far as handing over their cash, which probably ultimately saved them a lot of money and heartache in the long run.
In the wake of the civil charges against Fields, investors are being urged to review carefully any investment opportunity that comes through social media sites like Facebook or LinkedIn. Fraudsters are increasingly using these types of websites to sell the unsuspecting on stock scams, Ponzi schemes, and other investment scams. As always, beware any unsolicited investment offer, and be wary of any offer that touts very high returns or claims to be a "limited-time offer." Avoiding social media investment scams can be difficult, but with a little extra research and care, you can help ensure your financial safety.
The experienced investment fraud attorneys with the Law Firm of Meyer Wilson represent investors nationwide who have lost money to investment scams, Ponzi schemes, and financial fraud and would be happy to speak with you about your situation in a free consultation.

SEC Charges Life Partners Holdings with Life Settlements Investment Scheme

Tue, 10 Jan 2012 08:00:00 EST

The SEC charged Texas-based financial services firm Life Partners Holdings, Inc., and three of its senior executives with engaging in an alleged accounting fraud and life settlements investment scheme. According to the Complaint, Life Partners, through its officers Brian D. Pardo (CEO), R. Scott Peden (general counsel), and David M. Martin (CFO), misled company shareholders about the company’s profitability and sustainability. They also allegedly misled shareholders about consumer demand for the company’s brokered products: life settlement investments.

The Complaint further alleges that Life Partners "systematically uses life expectancy estimates that the Company knows to be materially short in brokering life settlements" in order to "artificially inflate the Company’s revenues and profit margins." According to the Complaint, Pardo and Preen personally profited from the Company’s fraudulent actions by concealing the information from shareholders, and using that same information to sell shares of the Company "at artificially inflated prices."

"The senior-most executives at Life Partners concealed significant risks to the business, manipulated financial statements with improper accounting, and knowingly profited from their misconduct by executing insider trades based on information that was not available to the public," said David Woodcock, Director of the SEC’s Fort Worth Regional Office.

Life insurance settlement transactions are financial transactions in which a policyholder sells his or her life insurance policy to an "investor" for a lump sum payment, which is heavily influenced by the insured’s estimated life expectancy. The "investor" then takes over the monthly payments and receives the death benefit when the insured dies. The Complaint alleges that, like almost all life insurance settlement brokers, Life Partners makes its profit by finding a number of "investors" to purchase interests in a policy, and then keeping the difference between the amount the "investors" pay and the amount the policyholder receives for the sale.

According to the SEC Complaint, Life Partners began using a new doctor, Dr. Donald Cassidy, to estimate their policyholders’ life expectancies in 1999. The Complaint alleges that Cassidy had no experience estimating life expectancies, no qualifications to do so, and performed no research into the methodology used by most life settlement underwriters. The Complaint further alleges that Dr. Cassidy was paid "$500 for each policy Life Partners successfully brokered using the life estimates that Cassidy provided," plus (starting in 2008) $15,000 per month. According to the Complaint, the manner in which Life Partner’s estimated policyholder life expectancies "constituted a material risk to the company’s revenue."

"Life Partners duped its shareholders by employing an unqualified medical doctor to assign baseless life expectancy estimates to the underlying insurance policies," said Robert Khuzami, Director of the SEC's Division of Enforcement. "This deception misled shareholders into thinking that the company's revenue model was sustainable when in fact it was illusory."

The SEC is seeking disgorgement of all ill-gotten gains plus interest, payment of civil penalties, and Orders banning the officers from serving as an officer or director for any securities industry-related firm in the future. To learn more about the Complaint filed this week in Waco, Texas, click here.

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Mormon Church Leader Allegedly Used Leadership Position to Perpetrate $16M Ponzi Scheme, Says SEC

Tue, 10 Jan 2012 08:00:00 EST

The SEC filed a civil fraud action against Kevin J. Wilcox, Jennifer E. Thoennes, and Eric R. Nelson last week for their alleged roles in a $16 million Ponzi scheme allegedly operated by Joseph Nelson. According to the SEC, the investment scheme involved the sale of at least $16 million worth of promissory notes offered by Joseph Nelson’s companies to more than 100 investors, most of whom were Mormons affiliated with Joseph Nelson’s church.

The SEC charged Joseph Nelson and a variety of co-defendants on June 25, 2010. The June Complaint alleged that Nelson and co-defendant Anthony C. Zufelt solicited investments from mostly Mormon investors by fraudulently claiming that they ran profitable businesses and by promising returns of over 200 percent. The Complaint further alleged that Nelson, Zufelt, and other co-defendants "each encouraged and convinced potential investors to borrow against their homes in order to invest in these schemes."

The Complaint filed last week alleges that Wilcox and Thoennes helped Joseph Nelson lure investors into the alleged scheme by soliciting millions of dollars in investments, issuing promissory notes to investors, and promising exorbitant returns. The Complaint also accuses Eric Nelson of creating fictitious business and bank documents that were used to mislead investors about the nature and profitability of Joseph Nelson and his companies.

"The SEC alleges that Joseph Nelson and his companies never purchased or sold a single merchant portfolio," wrote the Commission in a litigation release. "The money invested with Joseph Nelson and his companies was instead used by Nelson to make incremental payments to investors in a Ponzi-scheme fashion, to pay his associates, including Wilcox and Thoennes, and to pay his own lavish personal expenses, as well as those of other family members."

The SEC’s case against Joseph Nelson, and his co-defendants, is currently pending in the U.S. District Court of Utah. For more information about the cases, read the SEC’s current litigation release and find links to the June 25, 2010 case here.

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Former Utah Scoutmaster Sentenced to 10 Years in Prison for $145M Ponzi Scheme

Tue, 10 Jan 2012 08:00:00 EST

Travis Wright, of Draper, Utah, received a 10-year federal prison sentence last Friday for defrauding more than 175 investors out of approximately $145 million. Wright admitted to the Ponzi scheme in May 2011. As part of Wright’s sentence, U.S. District Judge Clark Waddoups ordered the former Utah scoutmaster to repay $43.2 million in restitution.

According to court documents, Wright acted as the sole manager of Waterford Funding, a real estate loan fund, from September 1999 to March 2009. Wright told investors the fund would render returns of 8 to 44 percent in as little as nine months. Investors, most of whom were elderly, forked over more than $100 million in the nine-and-a-half year period.

In a July 2010 Complaint, the SEC accused Wright of making various misrepresentations to investors in Waterford Funding, including statements that investor funds would be used exclusively to make loans secured by commercial real estate. The SEC also accused Wright of telling investors their promissory notes were secured by a trust. An SEC investigation, however, revealed that the trust never existed, and that Wright was using investors’ funds to make loans and investments that had nothing to do with real estate, as well as for his personal purposes. (For more information about the SEC’s case against Wright, click here.)

U.S. District Court documents showed that Wright stole more than $15 million of investor money for his personal use. Along with lavish vacations, luxury items, and a $5 million home, Wright gave his wife $1.3 million in spending money. The investment scheme unraveled in 2008, when Wright stopped making "interest" payments to investors.

Wright’s Ponzi scheme was one of the largest Ponzi schemes perpetrated in Utah history. Wright officially pled guilty to one count of felony mail fraud. His charges with the SEC were settled in June 2011.

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Utah "Venture Capitalist" Accused of Serial Securities Fraud

Mon, 09 Jan 2012 08:00:00 EST

Utah-based company, Q-6 Associates, recently filed a lawsuit against Dwight Shane Baldwin, of Salt Lake City, in which Q-6 accuses Baldwin of being a serial fraudster. According to Q-6, Baldwin stole more than $1.5 million from the company and used the funds for his personal purposes. (For more about the lawsuit, read the Dec. 29, 2011 CourthouseNews.com post here.) Even worse, said Q-6, this wasn’t Baldwin’s first time to steal from investors.

In Dec. 2008, the Utah Division of Securities filed a Complaint against Baldwin and his company, SilverLeaf Capital Partners 1, LLC, in which the state alleged that Baldwin committed securities fraud through the fraudulent solicitation of hundreds of thousands of dollars from Utah investors. Baldwin allegedly asserted that the investors’ funds would be used to invest in the California-based GarageCo, Inc., and that investors would receive a return of principal plus profit within three to five months.

The Complaint further alleged that Baldwin "personally guaranteed" the investment to at least one investor, and told investors that they would receive an equity ownership in both GarageCo and Silver Leaf Capital for their investments. According to the State, the investors never received any of the allegedly promised profit or equity ownership.

Almost two years later, in June of 2010, the Utah Division of Securities issued a Stipulation and Consent Order against Baldwin and SilverLeaf Capital Partners 1, LLC. According to the Order, a state investigation uncovered misrepresentations and omissions made by Baldwin and his company in connection to a security offering. Though Baldwin and SilverLeaf Capital neither admitted to nor denied the findings, the Order was entered.

Utah prosecutors also charged Baldwin with two counts of theft and two counts of fraud in connection to the GarageCo. Inc investments. In June of 2010, Baldwin pled guilty to two counts of attempted theft, and promised to pay full restitution to the defrauded investors.

On Jan. 6, 2011, the Better Business Bureau officially revoked accreditation for SilverLeaf Companies, LLC, saying that "recent government action involving the business's customer relations … indicates a significant failure of the business to meet standards of conduct expected of a BBB member."

Neither the BBB’s revocation nor the civil and criminal charges of securities fraud stopped Baldwin for long, however. In a June 24, 2011 press release, Baldwin touted his "entrepreneurial accomplishment[s]," "business education," and financial experience. The release went on to applaud the successes of SilverLeaf Financial:

"Under Shane Baldwin's leadership, SilverLeaf Financial acquires both performing and non-performing first position CRE loans and converts them into legal tender. Since its establishment in mid 2008, SilverLeaf Financial has acquired over $500 million in face value notes from banks and other financial institutions across the nation."

In the release, SilverLeaf and Baldwin told investors worried about the current distressed loan market that their worries were unfounded. "Shane Baldwin and his team carefully analyze each loan to determine value prior to potential acquisition. Because of the extensive evaluation process the risk level of these types of investments is considerably lowered."

Shortly after the release was published, in August of 2011, a group of Nevada investors sued Baldwin in Nevada court for alleged misrepresentations about the ownership of a pool of foreclosed residential real estate properties. The lawsuit also alleged that Baldwin failed to disclose his prior securities fraud charges, a common allegation against serial fraudsters.

For information on how to spot a career criminal and serial fraudster, read Six Ways to Avoid an Investment Scam.

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SEC Adopts New Net Worth Standard for Accredited Investors

Mon, 09 Jan 2012 08:00:00 EST

Many complicated and unregistered securities products, such as private-placement real estate investment trusts (also referred to as "private-REITs"), can only be sold to "accredited investors," a term defined by the Securities and Exchange Commission.

This requirement aims to protect unsophisticated and/or lower-net-worth investors from marketing materials and sales pitches designed to promote exceptionally complicated and/or risky products. By limiting the marketing of certain products to only "accredited investors," the rule also permits certain of those products to be sold without registration and without specified disclosures.

Under SEC rules, an individual can qualify as an "accredited investor" if the individual has a net worth of at least $1 million. Until recently, principal places of residence were considered a factor in the net worth calculation. Now, in order to meet the requirements of the Dodd-Frank Act, the SEC has amended the rule to exclude the value of an investor’s home from the calculation.

This change means fewer individuals will qualify as "accredited investors," which will limit the marketing pool for certain investment products. Hopefully, the amended rule also will limit the number of unsuitable pitches made to investors who cannot afford to lose their nest eggs.

This change will take effect 60 days from publication in the Federal Register. For more information about the new rule, read the SEC’s full release here.

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Alleged Belleville Fraudster Sentenced to 20 Years after Ponzi Scheme

Sat, 07 Jan 2012 08:00:00 EST

Edward Moskop, 64, was sentenced on December 13^th for mail fraud and money laundering in relation to an alleged investment scam. During the hearing, many of the affected investors told their stories, including an 85-year-old woman who had survived World War II in a labor camp and intended to use her lost savings to support a relative with Down's Syndrome.
We reported earlier this year on Moskop's alleged Ponzi scheme, in which he is said to have promised his investors - mostly unsophisticated and elderly investors - some nice returns. Unfortunately, Moskop is said to have used the money to fund his own lifestyle while paying out some of the cash to investors to keep up the appearance of legitimacy. Truth be told, Moskop already had a history of investment fraud and had already been barred from selling securities back in 1990.
Many of the investors related stories in which Moskop enticed them with flowers, gifts, and personal phone calls. One investor was comfortable enough with Moskop to invite him to his wedding reception. (Although the investor said that Moskop offered to sell him event insurance for the wedding after accepting the invitation.)
Moskop was reportedly tearful in the courtroom throughout the hearing and said, "I will regret this for the rest of my life."
The respected investment fraud attorneys with the Law Firm of Meyer Wilson represent investors nationwide who have lost money to investment fraud, stock scams, and unscrupulous brokers and financial advisors.

Ponzi Scheme Sentencing Delayed after Accused Asks for Mercy

Thu, 05 Jan 2012 08:00:00 EST

Anthony Cutaia, 65, who pleaded guilty to federal charges of mail fraud earlier this year, will now not be sentenced until January. Sentencing was to have taken place on December 13^th, but apparently the time of the hearing had changed. Because many of the alleged victims had planned to attend and/or speak at the hearing and there would not be time to inform them of the change, the hearing was postponed until January 2012. Additionally, Cutaia had submitted a request to reduce his sentence, which also figured into the postponement.
According to court documents, Cutaia ran a real estate Ponzi scheme that affected anywhere from 10 to 50 people total. He could face up to 20 years in prison, although it was recommended that he serve 41 - 51 months. His attorney claims that Cutaia otherwise led an "exemplary life" and should be allowed to serve only two years for the alleged investment scam. His attorney says that Cutaia suffers from physical and mental health issues and also has issues with gambling addiction. Cutaia's attorney made no mention of the many civil suits against Cutaia or his multiple filings for bankruptcy protection in the years since the alleged scheme.
The investment fraud lawyers with the Law Firm of Meyer Wilson represent victims of Ponzi schemes nationwide in stockbroker mediation, arbitration, and litigation. We've helped more than 800 investors recover their losses, and we look forward to working with you.

AARP Warns Seniors: That "Free Lunch" Could be Costliest Yet

Wed, 04 Jan 2012 08:00:00 EST

"Free lunch" scams are a continuing problem, particularly for seniors. According to FINRA, approximately 80 percent of seniors receive at least one invitation to a "free lunch seminar" each year. Many seniors receive more than one invitation. Though they’re often marketed as "seminars" and "educational workshops," at which "nothing will be sold," these claims are patently false.

"There is no such thing as a free lunch," stated Connecticut Banking Commissioner Howard F. Pitkin.　"Oftentimes at these investment seminars, the presenter is ultimately interested in selling a product or signing up new clients."

Since at least 2007, regulators have warned investors that most "free lunch" presentations are from firms that have been found to neglect their supervisory duties, and a large percentage feature falsified or misleading claims about unsuitable products.

"Seniors attending these seminars are often putting themselves in financial danger," Office of Financial and Insurance Regulation (OFIR) Commissioner Ken Ross told the AARP. "We've found that seniors are often exposed to misrepresentations, high-pressure sales tactics and outright fraud."

To help educate seniors on the dangers of "free lunch" scams, the AARP is offering a variety of seminars across the country that help seniors recognize and avoid investment scams. The organization also recently launched a Free Lunch Seminar Monitor program, which organizes volunteers to attend the "free lunch seminars" and then report back on the seminars’ activities. The program’s volunteers also have generated a checklist, which seniors can use to help them determine whether or not a "seminar" is actually a scam.

The checklist includes questions such as: "Did the speaker use a title that suggested he or she was particularly qualified to advise older investors?" and "Did you feel pressured to make an immediate decision?"

While investors should think twice before attending any workshop or seminar that offers a "free" meal, those who decide to attend should consider using the checklist to catalogue their impressions. (The checklist can be found here.) And, of course, before you part with any of your money or follow any presenter’s advice, verify the presenter’s information with your state securities regulator, FINRA, or the SEC.

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Framingham Man Receives More Than 8 Years in Prison for 20-Year Ponzi Scheme

Tue, 03 Jan 2012 08:00:00 EST

Richard Elkinson, of Framingham, was sentenced to 8.5 years in prison for the operation of a 20-year-long, $29 million Ponzi scheme. He also was ordered to repay $17 million in restitution to the more than 200 victims who suffered losses related to the scheme.

According to authorities, Elkinson lied to investors by falsely representing himself as a broker affiliated with a Japanese clothing manufacturer that sold uniforms to state government entities. Elkinson claimed that funds invested with him would be used to manufacture those uniforms and would render returns between 9 and 15 percent, payable after the uniforms were sold.

The entire story was a lie. Elkinson was never affiliated with a Japanese clothing manufacturer, and none of the investors’ funds were ever used to manufacture uniforms. Instead, Elkinson used the money to make Ponzi payments to earlier investors and for his personal living expenses.

The scheme began to unravel in 2008, when investors began asking for more information about their investments. Elkinson fled the area in December 2009. He was arrested in Mississippi in early 2010, and returned to Boston. This April, he pled guilty in U.S. District Court in Boston to 18 counts of mail fraud in connection to the investment scheme.

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FINRA Orders $19M in Restitution to Defrauded Investors in 2011

Tue, 03 Jan 2012 08:00:00 EST

In 2010, the Financial Industry Regulatory Authority brought 1,310 disciplinary actions against unscrupulous brokers and brokerage firms – a 13 percent increase over 2009, and the largest number of actions filed in recent years. That is, until now.

By Dec. 16 of 2011, FINRA already had brought 1,411 disciplinary actions against registered individual brokers and firms, and ordered more than $19 million in restitution to investors, according to a Dec. 16 FINRA news release. Registered brokers and firms accused of securities violations also were ordered to pay more than $63 million in fines. In addition to monetary penalties, FINRA suspended 432 brokers from association with FINRA-regulated firms, barred 317 individuals, and expelled 17 firms from the securities industry.

Complaints and disciplinary actions filed in 2011 included those against:

David Lerner & Associates for alleged misrepresentations, advertising and suitability violations concerning the sales of Apple REIT Ten;
Wells Fargo for alleged unsuitable reverse convertible sales;
Credit Suisse for alleged misrepresentations of subprime securitizations;
Merrill Lynch for alleged misrepresentations of subprime securitizations;
Citigroup for alleged failure to supervise;
UBS for alleged securities violations involving short sales and for alleged failure to supervise;
UBS Financial Services for alleged misleading communications about Lehman-issued notes; and
Morgan Stanley for alleged excessive markups and markdowns on corporate and municipal bond transactions.

FINRA's investigations also led to more than 600 referrals of potential fraud to federal and state regulators and law enforcement agencies, according to the release.

In addition to the significant increase in disciplinary actions filed this year, FINRA’s 2011 activities included substantial investments in investor education, such as the newly redesigned SaveAndInvest.org website and the newly launched Research Center on the Prevention of Financial Fraud. FINRA also issued a total of ten investor alerts, which warned investors about the potential perils and pitfalls of investing in diverse products, including: non-traded REITs, high-yield products, structured products, and gold.

"Our top priority is to protect investors," said Richard Ketchum, FINRA's Chairman and CEO. "We are continually incorporating measures designed to root out products and practices that harm investors, as well as providing information and tools that help investors save and invest for their future and avoid costly mistakes. We remain committed to ensuring that those who engage in fraudulent or other activities posing a threat to investors are held accountable."

For more information about FINRA’s 2011 activities and actions, read the full release here.

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Co-Founder of Global One Sentenced to 25 Years for Investment Fraud

Mon, 02 Jan 2012 08:00:00 EST

Rick Young, of Lewistown, Montana, was sentenced to 25 years in federal prison for his role in an investment scheme carried out by his Nevada-based company, Global One Group LLC (Global One). U.S. District Judge Larry Hicks in Reno also ordered Young to pay $13.2 million in restitution.

According to prosecutors, Young and his partner, William Willard, defrauded more than 1,700 investors through Global One from 2006 to 2007. Young represented himself as a successful trader in the foreign currency exchange market (FOREX), and marketed Global One as an online training forum where individual investors could learn how to trade profitably in the high-risk market. Young also fraudulently represented Global One as a licensed securities broker, and claimed to possess a software program ("Global Trac") that could automatically execute winning trades over 95 percent of the time.

Investors who paid the $500 annual membership fee gained access to Global One’s website, training "webinars," and conference calls. Members were also offered the chance to participate in a "profit-sharing" plan that would enable them to reap a share of the profits earned by Global One’s FOREX trades. Participation required monetary contributions in thousand-dollar increments. Young instructed investors to place their money in FOREX broker accounts, which were recommended by Global One, and promised trades would be executed automatically with Global Trac.

According to evidence presented at Young’s trial, Global Trac never existed. Young and his cohorts executed the trades themselves, and then misled investors about the staggeringly high losses they suffered. Young paid "profits" to investors with money contributed by other investors. He also took millions of dollars of investor funds for himself.

"Young molded and perfected a sophisticated and wide-ranging fraud perpetrated over a three-year period where he controlled all the money, manipulated information, drained the savings of victims, captivated and brainwashed others through repeated lies and false promises spewed over and over again through the Internet, defamed and denigrated those who dared challenge him and enriched himself in the process without a care for those who suffered enormous loss," Assistant U.S. Attorney Steven Myhre wrote in a sentencing brief (as quoted in a Dec. 13 Associated Press article.)

A federal jury convicted Young of one count of conspiracy to commit mail fraud and wire fraud, two counts of wire fraud, three counts of money laundering, and one count of securities fraud on March 30, 2011. Willard pled guilty to conspiracy to commit wire fraud in Feb. 2011, and was sentenced to 15 months in prison last week.

Young’s 25-year sentence is one of the most significant sentences handed down for white-collar crime in the history of Nevada. Prosecutors claimed they asked for a long sentence in part because Young used investors’ religious beliefs to lure them into the investment scheme. Judge Hicks, astounded by the "aggravated" nature of the crime and the significant losses of the victims, denied the defense’s request to allow Young to serve his sentence in such a way as to reduce his total incarceration time.

To learn more about the case, read the AP’s full story here. Information on the original indictment can be found on the FBI’s website.

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Wells Fargo Fined $2M for Unsuitable Sale of Reverse Convertibles to Elderly

Mon, 02 Jan 2012 08:00:00 EST

The Financial Industry Regulatory Authority (FINRA) levied a $2 million fine against Wells Fargo Investments, LLC for the unsuitable sale of reverse convertible securities to 21 customers by Alfred Chi Chen, a former Wells Fargo registered representative, and for failure to provide sales charge discounts on Unit Investment Trust (UIT) transactions to eligible customers. Restitution was ordered as well.

"Wells Fargo failed to review reverse convertible transactions to ensure they were suitable," said Brad Bennett, FINRA Executive Vice President and Chief of Enforcement. "[Wells Fargo] also did not provide sales charge discounts to eligible customers purchasing unit investment trusts, [these were] both serious failings that harmed investors."

According to a FINRA investigation, Alfred Chi Chen recommended hundreds of unsuitable reverse convertible securities to 21 mostly elderly clients. More than a quarter of the accounts with reverse convertible holdings had 90 percent of their assets in the risky securities. (FINRA also filed a complaint against Chen, which accuses him of making unauthorized trades in customer accounts, including several customers who were deceased.)

"The reverse convertible transactions exposed these customers to risk inconsistent with their investment profiles, and resulted in overly concentrated reverse convertible positions in their accounts," wrote FINRA in a Dec. 15 press release.

FINRA’s investigation also found that Wells Fargo’s systems and procedures were "insufficient" to adequately monitor the sale and recommendation of reverse convertible sales and to ensure proper receipt of UIT discounts for eligible customers. Wells Fargo neither admitted nor denied FINRA’s allegations. The firm did, however, consent to the entry of the findings.

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Massachusetts Secretary Charges Three Investment Advisers with Varying Flavors of Investment Fraud

Mon, 02 Jan 2012 08:00:00 EST

Massachusetts Secretary of the Commonwealth, William Francis Galvin, filed complaints against three investment advisers in three separate investment fraud cases. The cases involved breach of fiduciary duty, the unregistered sale of securities, false statements, and misrepresentations and omissions.

Daniel A. McKenna was charged, along with his investment adviser firm (Principle Profits Asset Management), with selling more than $1 million dollars in "worthless Principle Profits stock" to – and entering into borrowing agreements with – various clients over the course of 17 years. The State claimed McKenna’s actions constituted a gross conflict of interest and violated his fiduciary duty to the clients. The Complaint asks that "fair compensation" be paid to defrauded investors.

John B. Wilson was charged with selling unregistered securities in JBW Capital, LLC to approximately 25 investors. According to the Complaint, Wilson was not a registered investment adviser. The State accused Wilson of misrepresenting and omitting material facts about JBW Capital, LLC (a pooled investment vehicle, which purportedly used automatic trading software to trade on the Chicago Mercantile Exchange) in order to "hide investment losses and to induce further investments." The Complaint asks for disgorgement of profits, restitution, and that Wilson be banned from the industry for life.

Sean Michael O’Brien and his firm, Andover Equity Investment Group LLC, were charged with fraudulently offering, selling, and purchasing securities. In particular, Andover Equity was accused of charging "exorbitant fees" to clients and of using certain client funds to pay O’Brien’s personal expenses. Andover Equity and O’Brien also were accused of interfering with a Securities Division investigation by making false statements and refusing to provide requested information. The Complaint asks for disgorgement of profits, restitution to investors, and the revocation of both Andover Equity’s and O’Brien’s licenses as registered investment advisers.

"These cases are indicative of the swift and decisive action my securities division will take when we uncover investment advisers who have violated the securities laws," Secretary Galvin told InvestmentNews.

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'Tis The Season ... For Scams Against Seniors

Mon, 02 Jan 2012 08:00:00 EST

The holiday season is prey season for scam artists, particularly those scam artists who prey on seniors. Scammers target seniors for a variety of reasons, including the increased likelihood that they live alone, have more time to answer cold calls, and will say "yes" under pressure. Unfortunately, while seniors are prime targets for fraudsters, they’re also the least likely to be able to afford a loss.

Seniors should be aware of the common phrases con artists use to lure in new victims. These include promises of "guaranteed returns" and "zero to no risk," as well as offers that "won’t be here tomorrow" and offers to "get in on the ground floor."

Younger family members who want to help their older loved ones avoid falling prey to an investment scheme should check in over the holidays. Go to their homes and "look around for warning signs," says Bob Denz, a spokesman for　AARP, "[such as] lots of phone call messages, lots of requests to call back, solicitations, many magazines around or magazine subscription come-ons, batches of mail and so forth."

Family members should remind seniors to be wary of fraud and not to give out personal information about themselves or their finances. Placing the senior on the national "Do Not Call List" may help cut down on potentially fraudulent phone calls. Seniors should also be advised that it’s okay to walk away from a deal or hang up on a promoter who won’t back down. Many elderly victims of investment fraud say the fraudster was "just so nice" that "it was hard to say no to him."

To learn more ways to help protect seniors from investment fraud, financial abuse, and stockbroker misconduct, read Common Senior Investment Scams here. The AARP’s website also features online tools and a host of information to help seniors fight fraud.

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President Obama Addresses Securities Fraud and Penalties

Sun, 01 Jan 2012 08:00:00 EST

On Tuesday, December 6^th, President Obama gave a speech in Osawatomie, Kansas that covered several topics, including the topic of instituting stiffer penalties for those who commit securities fraud.

Some references were made to the proposed $285 billion settlement with Citigroup over alleged fraud related to collateralized debt obligations. If the alleged fraud played out as described, investors would have lost over $700 million, and Citigroup would have profited by $160 million. US District Court Judge Jed Rakoff had commented at the time that “If the allegations of the complaint are true, this is a very good deal for Citigroup; and, even if they are untrue, it is a mild and modest cost of doing business.”

In Tuesday's speech, Obama stated it was time for this to change:

"Too often, we’ve seen Wall Street firms violating major anti-fraud laws because the penalties are too weak and there’s no price for being a repeat offender. No more. I’ll be calling for legislation that makes these penalties count – so that firms don’t see punishment for breaking the law as just the price of doing business.”

The investment fraud lawyers with the Law Firm of Meyer Wilson are interested to see how any changes to investment fraud penalties play out, and we hope to see stronger penalties in the future for those who would take advantage of vulnerable investors.

Man Charged in Latest Detroit Ponzi Scheme Case

Fri, 23 Dec 2011 08:00:00 EST

Brian Marsack, of Chesterfield Township, has been charged with stealing the life savings of at least three individuals. The alleged victims include a 91-year-old man, Edward Mancini, and his now-deceased wife, Joan. The Mancinis had known Marsack since he was a child.

"He approached my wife, Joan, a couple of years ago and told her he was doing some day trading," Mancini told The Oakland Press. "He said he could make her some money."

The prosecution alleges that Marsack posed as a stockbroker and solicited more than $1 million from the alleged victims. He allegedly told the investors that their funds would be put into investment accounts with Goldman Sachs. He also allegedly sold investors one-year CDs that promised 7 percent interest.

According to the police, Marsack never invested any of the funds. Instead, investigators allege, he kept the money for himself and provided falsified documents on Goldman Sachs letterhead that showed the funds were doing well. To perpetuate the alleged scheme, police believe Marsack issued "dividend checks" of $1,500 to the investors.

Marsack has been charged with three counts of larceny by false pretenses and one count of racketeering. He remains in custody on a $150,000 bond. If convicted, Marsack faces three potential 10-year sentences and one sentence of between three and four years.

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CEO of Samex Capital Agrees to Plead Guilty in Alleged Ponzi Scheme Case

Fri, 23 Dec 2011 08:00:00 EST

Keenan R. Hauke, CEO of the Indianapolis investment firm Samex Capital Partners LLC, has agreed to plead guilty to one count of securities fraud in connection to an alleged $7 million Ponzi scheme ("Samex Capital’s Hauke Charged in $7 Million Ponzi Scheme," Bloomberg, Dec. 14, 2011).

According to Indianapolis U.S. Attorney Joseph H. Hogsett, Hauke is accused of defrauding 67 investors over the course of approximately seven years. The complaint filed against Hauke alleges that he failed to invest his clients’ funds as promised, and instead used the money to make Ponzi-style payments to other investors. He also is accused of misappropriating some of the funds for his personal use.

According to the complaint, Hauke falsely reported to investors that they were earning high rates of returns through the investment fund. Hauke allegedly lied in order to keep the investors from closing their investment accounts. The alleged scheme unraveled earlier this year, after a former Samex Capital employee resigned from Hauke’s company and informed investors that their funds may not be secure.

The securities fraud charge is punishable by up to 25 years in prison. According to Hauke’s plea agreement, however, he will be sentenced to less than 17 years. Hauke is scheduled to appear in court on Dec. 28.

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Want to Avoid Investment Fraud? Spend Time Choosing Your Adviser

Thu, 22 Dec 2011 08:00:00 EST

We have long advised investors to take steps to minimize the risk of investment fraud by choosing the right financial adviser. Spending the time to conduct a thorough background check and to understand a potential adviser’s financial designations may seem unnecessary, but it’s one of the best ways investors can avoid investment fraud.

Take affinity fraud, for example. Most affinity fraudsters rely on the assumption that investors will take their friend’s, boss’s, or community leader’s word on an investment opportunity, without doing any research on their own.

"People just don't do any research at all," Mike Alfred, CEO of BrightScope, told USA Today. "They rely entirely on their golf buddy or a friend from church who say this is a good guy."

Entrusting someone with your hard-earned money should take more than a friend’s recommendation. Before you write a check, make sure you conduct a thorough background check on the investment and the person pitching it. Tools like FINRA’s BrokerCheck and BrightScope can help.

Proper planning also can help you avoid falling prey to an investment scheme. Take the time to figure out your financial objectives and goals before you meet with a potential adviser. Then, meet with several people to learn how each one would approach your situation. Make sure the adviser or financial professional you choose has experience helping people in your situation achieve similar goals.

USA Today recommends asking the following questions before you make your choice:

What experience do you have?
What are your qualifications?
What licenses do you have?
How are you compensated?
What organizations are you and your firm regulated by?

For additional tips, read the full USA Today article here. And, remember: Never take it for granted that a financial professional is telling you the truth. Verify any information you receive about experience, qualifications, licenses, and background with a regulator.

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Fake Hedge Fund Managers Charged with Fraud in Alleged $3.5M Foreign Currency Ponzi Scheme

Thu, 22 Dec 2011 08:00:00 EST

George Sepero, of Glen Rock, N.J., and Carmelo Provenzano, of Garfield, N.J., were arrested on Wednesday on charges related to an alleged $3.5 million investment fraud. In the Complaint, Sepero and Provenzano are accused of defrauding investors by claiming to run a series of New Jersey hedge funds that could render extraordinary returns of over 150 percent through the use of a proprietary computer algorithm.

"The old adage ‘if it sounds too good to be true, it probably is’ remains constant," said Michael B. Ward, Special Agent In Charge of the Newark Division of the FBI, in a U.S. Attorney press release. "In this case, Sepero and Provenzano claimed to own a secret computer algorithm which would achieve returns of 170 percent or more at a time when financial markets were in flux. Instead, it was another of the many Ponzi schemes that have been uncovered in New Jersey wherein subjects are diverting money to support lavish lifestyles."

The Complaint alleges that Sepero and Provenzano lured investors with the promise of sky-high returns, and then issued fake reports and emailed faked "screen shots" to support their claims that the funds were doing well. According to the Complaint, the men never invested any of the money in the foreign currency market, but rather diverted and misappropriated the majority of the funds for their personal use. They also allegedly used some of the money to make Ponzi-style payments to investors.

"According to the Complaint, Sepero and Provenzano used fake companies and phony reports to steal millions in real money from trusting investors," said U.S. Attorney Paul J. Fishman. "With other people’s cash in their pockets, the defendants allegedly went on a spending spree involving luxury vehicles, international travel and extraordinary bar bills."

Each of the men has been charged with one count of wire fraud conspiracy. If convicted, Sepero and Provenzano could face up to 20 years in prison.

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Investor Alert: Beware of Fake Securities Regulator Scams

Wed, 21 Dec 2011 08:00:00 EST

Late last month, the North American Securities Administrators Association (NASAA) sent a Cease-and-Desist letter to the operator of the "State Securities Commission" website, a website the NASAA alleged misappropriated NASAA content in order to dupe investors.

The website, www.statesec.org, was likely launched in October. Jack Herstein, NASAA President and Assistant Director of the Nebraska Department of Banking & Finance Bureau of Securities, said NASAA had no affiliation with the copycat website, and is "concerned that con artists are attempting to cash in on our reputation for effective investor protection to lure others into an illicit scheme."

While it appears the website is no longer active, whoever ran it isn’t the only con artist using fake regulator websites to scam investors.

"Several fake regulator websites have been brought to the attention of state and federal securities regulators in recent years," Herstein said in a press release. "Many of these sites purport to offer relief to investors. In reality, they are fronts for con artists posing as regulators."

Investors who want to protect themselves from fake securities regulator scams need to be especially vigilant online. "Cons will go to great lengths to make themselves appear legitimate," said Herstein.

The best way for investors to avoid this type of financial fraud is to make sure they know who they’re dealing with. Investors looking for information on a particular broker, adviser, or security can always request information through the SEC and FINRA. Anyone who needs to contact their state securities regulator directly can find a verified list of contact information for all 50 states on the NASAA’s website.

Investors should also be aware that regulators do not ask for personal account information or money. Many of the fake regulator scams claim that investors can access a Securities Investor Protection Act claim form for broker-dealers in liquidation by sending in their financial account documentation and a check. A legitimate regulator would not request this type of information.

"Requests to submit personal account information and money to a ‘regulator’ are red flags of investment fraud," Herstein said.

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Boston-Area Man Indicted In Alleged Hedge Fund Investment Scheme

Tue, 20 Dec 2011 08:00:00 EST

Andrey C. Hicks, owner of Locust Offshore Management LLC. has been indicted on federal fraud charges in connection to an alleged $2.5 million investment scheme involving a purportedly billion-dollar hedge fund, Locust Offshore Fund, Ltd (Locust Fund). Authorities say at least nine individual investors and two companies were defrauded in the scheme.

Hicks is accused of luring investors to invest in his hedge fund scheme by misrepresenting his experience, his background, and the specifics of the hedge fund. In particular, the indictment alleges that Hicks told investors that he held undergraduate and graduate degrees from Harvard University, and that he had experience managing billions of dollars in assets for Barclays Capital. He allegedly also told investors that Locust Fund managed over a billion dollars in customer assets, and earned nearly 80 percent profit in 2011.

According to the indictment, none of Hicks’ statements was true. Hicks is further accused of misappropriating the vast majority of investor funds and using the money for his personal purposes. The SEC filed similar charges against Hicks and his companies in October. A federal judge subsequently ordered a temporary freeze on Hicks’ assets, as well as the assets of his firm and of Locust Fund. If convicted, Hicks could serve up to 20 years in prison.

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Florida Ponzi Schemer Sentenced to Nearly 20 Years in Prison for $21M Fraud

Tue, 20 Dec 2011 08:00:00 EST

James Risher, of Sanibel, Florida, has been sentenced to 19 years and 7 months in federal prison for charges related to his role in a Ponzi scheme that defrauded 106 investors in Florida and North Carolina out of approximately $21 million. Many of the investors were retirees and schoolteachers.

According to court documents, Risher solicited investments in a fraudulent private equity fund called "The Preservation of Principal Fund." He hid his scheme by issuing falsified reports that showed the fund was profitable, and used new investor funds to make Ponzi payments to older investors. In addition to lying about his background, Risher also neglected to tell his clients that he had been previously convicted of securities fraud.

The SEC filed similar charges against Risher and a partner in Aug. 2011.

"Risher boasted to investors that he had substantial experience in trading equities and providing wealth and asset management services," wrote the SEC in a Aug. 29 press release. "In reality, Risher had no such experience but rather a lengthy criminal history, spending 11 of the last 21 years in jail instead of growing a thriving retail brokerage business as he claimed."

Risher plead guilty to mail fraud, money laundering, and engaging in an illegal monetary transaction in September. In addition to his prison sentence, Risher was ordered to forfeit $12.4 million, several luxury vehicles, expensive jewelry, and a painting.

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SEC Gearing up for Investment Fraud "Enforcement Wave"

Mon, 19 Dec 2011 08:00:00 EST

"An enforcement wave is coming," warns a former assistant director at the Securities and Exchange Commission's asset management unit in a Dec. 4 InvestmentNews article, "The world is about to change for investment advisers."

A quick look at the November’s big enforcement actions shows the former assistant director may be correct.

On Nov. 10, the SEC charged San Diego-based Western Pacific Capital Management LLC and its president, Kevin James O’Rourke, with investment fraud in connection to the non-public offering of stock by Ameranth Inc. A day earlier, the SEC charged two Minnesota-based hedge fund managers with facilitating the $3.65 billion Petters Ponzi Scheme. And, on Nov. 17, the Commission brought charges against broker-dealer FTN Financial Securities Corp. (FTN) for allegedly assisting the now bankrupt Sentinel Management Group, Inc. (Sentinel) in covering up Sentinel’s alleged 2006-2007 investment fraud.

Additional examples of the "SEC’s newfound aggressiveness" included in the article were several actions from the last week of November. In just one week, the SEC charged three advisory firms with inadequate or nonexistent compliance programs, and charged three hedge fund advisory funds with fraudulent violations, improper use of fund assets, and lying about returns. Six individuals were also charged.

In the article, Robert Khuzami, director of the SEC's enforcement division, is quoted comparing the SEC’s new enforcement efforts with former New York Mayor Rudy Giuliani’s efforts to clean up NYC in the 1990s:

"For Rudy, it was a focus on subway turnstile jumpers and squee-gee men," Mr. Khuzami said. "For us, it's advisers who lie about graduating Phi Beta Kappa, conceal their association in a past failed business venture or inflate their assets under management, who might well be the same persons who outright steal your money when the markets turn against them."

If November’s actions – and Khuzami’s words – are indeed an indicator of an impending securities fraud enforcement wave, this month will likely be a tough one for advisers and brokers, and a good one for investors. To learn more, read the full article here.

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NY CPA and Business Owner Sentenced to 5 Years for Gas-Pipeline Investment Scheme

Mon, 19 Dec 2011 08:00:00 EST

Laurence M. Brown, of Westchester County, was sentenced to five years in prison recently for his role in a $2 million fraudulent gas-pipeline investment scheme. According to court documents, Brown (along with his partner) used his position as a certified public accountant and principal of Marshall Granger & Company LLP to offer and sell fictitious promissory notes to unsuspecting investors.

Falsely representing himself as the president of a gas pipeline company in Tennessee (Infinity Reserves-Tennessee, Inc.), Brown told potential investors that their funds would go toward upgrading gas meters, compressors, and other equipment. In reality, Brown had no affiliation with the company.

In fact, according to an SEC complaint filed against Brown and his partner in 2010, Infinity Reserves was an inoperative company solely owned by one of Marshall Granger’s client. The company held a single principal asset – a gas pipeline in Tennessee, which hadn’t functioned in over ten years.

Brown’s fraudulent pitch to investors included a false valuation on Infinity Reserves of $5 million and statements that the company was an alternative energy company. Of the $2.1 million raised from Jan. 2008 to June 2010, Brown misappropriated the vast majority for his personal use. Approximately $136,550 was used to make Ponzi-style payments to previous investors.

Criminal charges were filed against Brown on July 22, 2010 in federal court. Over a year later, on Sept. 8, 2011, Brown pled guilty to charges of securities fraud, wire fraud, and money laundering. In addition to his five years in prison, Brown faces two years of supervised release. Restitution has not yet been determined.

"Laurence Brown used his position as an accountant to dupe his clients and other investors into believing they were making sound investments.　 He took advantage of their trust for his own personal enrichment, and now he will pay for his crimes," said U.S. Attorney Preet Bharara.

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Nationwide Surge in Investment Fraud Against Baby Boomers Continues

Mon, 19 Dec 2011 08:00:00 EST

Baby boomers make up 25 percent of the U.S.’s current population. That’s approximately 77 million people, many of who are living on significantly smaller incomes than they had anticipated. The 2007-2009 financial crisis crippled most Americans’ retirement savings accounts. Unfortunately for the baby boomers, retirees and those nearest to retirement age suffered the most devastating losses.

With few years left to rebuild their nest eggs, many baby boomers are turning to high-yield products and investment opportunities out of the hope that they can make up some of what they lost in the late 2000s. Quick gains, however, don’t exist without risk – especially the risk of investment fraud. The boomers’ collective desire for fast returns has quickly turned them into the con artist’s favorite mark.

In 2010, state regulators saw a single year increase of more than 50 percent in investment fraud actions and complaints where the victims were over 50 years of age, according to the NASAA. And, according to a Dec. 14 WSJ article, there’s every reason to believe the trend only worsened this year.

According to the article, "free lunch" scams, self-directed IRA investment schemes, Ponzi schemes, unregistered securities scams, private placements schemes, and promissory note schemes are all on the rise. They’re also all investment schemes that target people over 50 years of age. (To learn more, read the entire article here.)

Investment fraud against baby boomers is "rampant," Matt Kitzi, Missouri's securities commissioner and chairman of the association's enforcement committee, told the WSJ.

To protect themselves, investors over the age of 50 should be particularly vigilant about verifying any and all information a broker, adviser, or other financial professional provides about an investment opportunity. Investors should also conduct a thorough background check on the salesperson, broker, or adviser.

For additional tips on avoiding investment fraud as a baby boomer, click here.

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FINRA Slams Broker-Dealers On Private Placements, Again

Mon, 12 Dec 2011 08:00:00 EST

DBSI, Inc. filed for bankruptcy in 2008. Medical Capital Financial Corp. and Provident Royalties both filed for bankruptcy a year later. Since then, approximately two dozen independent broker-dealers have gone out of business or been sanctioned by regulators for "sloppy" due diligence and the sale of billions of dollars worth of allegedly fraudulent private placements. Based on a recent FINRA statement, the crackdown isn’t over. It looks like the broker-dealers that are left aren’t out of the woods yet.

According to a recently issued FINRA statement, the SRO issued a substantial number of enforcement actions over the past few months, including an Order requiring Next Financial to pay $2 million in restitution to clients who purchased $20 million worth of three different Provident Royalties private placements.

"Despite the fact that Next received a specific fee related to the due diligence that was purportedly performed in connection with each offering, beyond reviewing the private-placement memorandum for the offerings, [Steven Nelson, vice president of investment products and services] did not perform adequate due diligence on the [Provident] offerings," wrote FINRA in a letter of acceptance, waiver, and consent.

FINRA’s statement also detailed a $250,000 fine to Securities America for the sale of two Provident Royalties private placements. (Securities America also sold $700 million worth of Medical Capital private placements, but the fine was not levied based on those notes.)

InvestmentNews reported that several other firms were hit with FINRA enforcement actions recently, including: Investors Capital Corp., Garden State Securities Inc., Capital Financial Services, National Securities Corp., Equity Services Inc., and Newbridge Securities Corp. (To find out more, read the Nov. 29 article here.)

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Previously Convicted Knoxville Fraudster Heads Back to Prison for Second Investment Scheme

Mon, 12 Dec 2011 08:00:00 EST

Jon Edwards Hankins, of Knoxville, Tennessee, was sentenced to three years and four months in prison late last month for perpetrating an investment scheme while still on home confinement for a 2007 securities fraud conviction.

According to officials, from 2009 to 2010, Hankins distributed false marketing materials for two sham companies ("Christian Financial Brotherhood" and "Banker’s Trust Annuity") and solicited investments in "Strategic Arbitrage Fund," a fraudulent hedge fund. Hankins told investors that Banker’s Trust Annuity managed over $100 million in client assets. He also said Strategic Arbitrage Fund maintained over $30 million in client funds. Neither of these statements was true.

In reality, the entire thing was a fraud. The companies didn’t engage in profitable securities trading, the marketing materials were false, and the representations made to lure investors into the scheme were lies. Hankins also never disclosed that he was still serving federal time for a securities fraud conviction.

"Before he was even discharged from an earlier federal sentence for investment fraud, he launched another fraudulent scheme," said United States Attorney Sally Quillian Yates.

The 2007 securities fraud conviction was in connection to a multi-million dollar investment fraud scheme that involved Hankins’ Knoxville-based investment company "Tenet Asset Management." The charges came after the SEC filed a civil injunction against Hankins in 2005, in which the Commission accused Hankins of making gross misrepresentations to and concealing large investment losses from investors. (For more information about the SEC’s 2005 charges, click here.)

The FBI shut down Hankins’ latest investment scheme in April 2010. Of the $600,000 Hankins obtained from his unsuspecting investors, $200,000 was returned. Hankins pled guilty to charges of wire fraud in connection with the investment scheme on June 13, 2011. His prison sentence will be followed by three years of supervised release.

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Multiple Issues for Investors in "Mini-Madoff" Ponzi Scheme

Fri, 09 Dec 2011 08:00:00 EST

A Michigan man has been accused of running a Ponzi scheme, and some people have taken to calling him a "mini-Madoff." The man in question is Martin T. Wegener, and he is now facing federal charges of mail fraud for the alleged investment scam.

The U.S. Securities and Exchange Commission had previously filed a civil injunction in the case, which stated that Wegener and his companies attempted to entice 20 investors to give up their cash - even though he was not registered to do so as a broker or financial advisor. The current mail fraud charges arose from Wegener allegedly sending false account statements to investors, which served to make investors believe their cash was safe and doing well. Instead, it is believed that Wegener was using investors' money to pay off other investors and for his own personal use.

According to court documents, a U.S. Attorney in the case stated that:

“Wegener induced his clients to withdraw money from their retirement accounts, investment accounts, bank accounts and from other sources on the premise that Wegener would invest their money into legitimate investment opportunities. However, Wegener lied about the success of Wealth Resources LLC, and other investment opportunities that he recommended, and diverted some of his clients’ money for his own use."

The experienced investment fraud attorneys with the Law Firm of Meyer Wilson represent victims of investment fraud and Ponzi schemes in mediation, arbitration, and litigation against stockbroker and financial advisors who have done them harm.

Man Found Guilty in High-Profile Investment Fraud

Fri, 02 Dec 2011 08:00:00 EST

Samuel "Mouli" Cohen was recently found guilty in an investment fraud scheme that officials say targeted high-profile investors, such as actor Danny Glover and the Vanguard Public Foundation. Although sentencing has not yet taken place in the case, Cohen could face up to 20 years in federal prison.

According to the allegations, Cohen claimed his company Ecast was going to be acquired by Microsoft in the near future. He allegedly offered investors shares, which he claimed would be exchanged for Microsoft shares after the acquisition. If Cohen's claims were true, investors could have stood to gain shares that were worth up to ten times their initial investment in the deal. Unfortunately, Microsoft actually had no plans to acquire the company.

In order to prolong the investment scam, prosecutors say Cohen instead took in even more cash from investors, claiming that certain fees and bonds were necessary to approve the acquisition. They say he was using investors' money to rent a home in Belvedere, buy expensive cars, go on pricey vacations, and rent jet planes.

Investors put up over $6 million initially and were then taken for an additional $25 million in fees and bonds. His sentencing is scheduled for February, but a defense attorney in the case said Cohen is expected to appeal.

The securities fraud attorneys with the Law Firm of Meyer Wilson represent investors who have lost money to investment and securities fraud. If you have been harmed by financial fraud, speak with one of our qualified FINRA attorneys today.

Former Florida Man Sentenced for $30 Million Ponzi Scheme

Fri, 02 Dec 2011 08:00:00 EST

David Lewalski, formerly of Gainesville, has recently been sentenced in a $30 million Ponzi scheme case. According to officials, the scheme affected over 500 investors and took about $30 million. The sentencing, which took place in Tampa, was for a charge of mail fraud, although wire fraud and conspiracy were also among the original charges in the case.

Allegedly, Lewalski offered investments in foreign currency through his company Botfly, LLC. He is said to have promised investors returns of up to 10% each month. Unfortunately, officials say that Lewalski instead used investor cash to pay off prior investors, rent private jets, lease swanky real estate, and purchase luxury items, such as jewelry and expensive cars.

Lewalski has been sentenced to 20 years in prison, which is the maximum sentence for mail fraud, and he also will have to hand over the cash taken in the scheme and items purchased with investors' money.

The investment fraud lawyers with the Law Firm of Meyer Wilson represent investors who have lost money in Ponzi schemes, investment scams, and securities fraud in stockbroker mediation, arbitration, and litigation nationwide.

Seniors Increasingly Targets of Illinois Investment Fraud

Thu, 01 Dec 2011 08:00:00 EST

A recent report out of Illinois focused not only on the rise of investment fraud that targets the elderly, but also on why seniors are so often taken in by Illinois investment fraud and other scams across the nation. There's no doubt that investment fraud is on the rise, and it's estimated that one in five seniors over the age of 65 has been taken in by financial fraud, according to a 2010 Investor Protection Trust Survey.

Why does financial fraud work on older investors?

Part of the problem is that many of these fraudsters work hard to "befriend" seniors before making a pitch. Many older victims of financial fraud admit that the fraudster gained their trust by buying lunches, attending birthday parties and family weddings, and dropping by investors' homes. One investor said of the fraudster who had lured in her and her husband, "We are so duped by personalities. They were such nice people, easy to talk to, easy to work with and we trusted them."

What can Illinois seniors do to avoid investment fraud and Ponzi schemes?

The best thing you can do is take advantage of educational resources and always do your research before investing. Take a trusted friend or family member to each meeting with your broker or financial advisor, and don't be taken in by gracious offers and friendly banter when it comes to making financial decisions.

The Illinois investment fraud lawyers with the Law Firm of Meyer Wilson represent senior investors who have been the victim of stock scams, investment fraud, and Ponzi schemes. We have recovered millions of dollars in losses for our clients and look forward to speaking with you.

Texas Father and Son Plead Guilty in Investment Fraud Case

Thu, 01 Dec 2011 08:00:00 EST

Michael K. Wallens, Jr., of Plano, Texas, has pleaded guilty to securities fraud. He has been sentenced to five years in prison, and he will also have to pay out $13 million in restitution. His father Michael Wallens, Sr., of Spring, Texas, also pleaded guilty to securities fraud earlier this year in the case, but he has not yet been sentenced.

According to court documents, the Wallens preyed mostly on elderly investors and allegedly enticed them with promises of a safe and conservative investment in secured debt obligations. Unfortunately, the Securities and Exchange Commission (SEC) says that the Wallens used investor cash to make risky energy, real estate, and other unauthorized investments through their W Financial Group. The SEC has accused the Wallens and alleged co-conspirator, Adley H. Abdulwahab, of lying to investors about the safety of their investments. The trio apparently took in a total of $17.9 million in the alleged investment scam.

The experienced and respected investment fraud attorneys with the Law Firm of Meyer Wilson represent investors who have lost money in investment scams, securities fraud, and Ponzi schemes in mediation, arbitration, and litigation against stockbrokers and financial advisors nationwide.

2010 Investment Fraud Enforcement Actions Up 51 Percent, Says NASAA

Mon, 28 Nov 2011 08:00:00 EST

In its 2010-2011 annual enforcement action report (released last month) the North American Securities Administrators Association (NASAA) reported a 51 percent increase in the number of enforcement actions filed by state securities regulators.

According to the report, regulators filed a total of 3,475 criminal, civil, and administrative enforcement actions in 2010, and ordered a combined $14.1 billion in restitution. Approximately 90 percent (more than $12 billion) of the restitution ordered was returned to investors, a 200 percent increase over 2009.

In addition to ordering firms to repay investors for unscrupulous conduct, regulators withdrew, revoked, denied, suspended, or conditioned 3,242 adviser and broker licenses last year. Regulators also ordered more than $171 million in fines and penalties, and conducted investigations that resulted in individual sentences totaling 1,134 years in prison.

The primary cause for action against advisers, brokers, and firms in 2010 was unregistered selling. Almost 900 enforcement actions were brought against individuals and firms selling unregistered securities. Another 800 actions were brought against unregistered individuals and firms. Nearly 1 in 3 actions involved elder abuse or fraud targeted at senior citizens.

In addition to highlighting last year’s actions, the report included a list of new resources available to investors who want to protect themselves from investment fraud. Among those listed were:

An enhanced Investment Adviser Public Disclosure (IAPD) website, which enables individuals to electronically access information about particular financial professionals.
NASAA’s Women in Transition program, designed to "empower women investors to take control of their financial futures." (Women investors interested in the program should contact their state securities regulator for information.)
NASAA’s Live "Stock" Adventure. A new youth investor education program that helps middle school youth learn about the risks and rewards of investing through an interactive game. (Information about the game is available on NASAA’s website.)

To learn more, download the full 2010-2011 annual report here.

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Seniors Targeted in Alleged Arizona Real Estate Investment Fraud

Sun, 27 Nov 2011 08:00:00 EST

Over a period of approximately 20 years, Kenneth Joseph and Mary Kathryn Plein, dba Tri-Star Realty, solicited investments from at least 98, mostly elderly, investors purportedly for the purposes of purchasing, renovating, leasing, and reselling real estate in the Sun City area. When the real estate market crashed, however, the Pleins ran out of money and had to file for bankruptcy.

Now, nearly 100 investors are out nearly $20 million in what the Arizona Corporation Commission has deemed a fraudulent real estate investment scheme.

According to the Commission, Plein (a licensed real estate agent) and his wife – neither of whom was licensed to sell securities in Arizona – fraudulently sold unregistered investment contracts and deed of trust investments to investors. Allegedly, neither Plein nor his wife disclosed to investors that they "frequently filed multiple deeds of trust on a single piece of real estate, which had the effect of either making the investments under-secured or effectively unsecured."

Many of the investors say they lost everything with the Pleins.

Last March, the Commission ordered the Pleins to pay a $250,000 administrative penalty and $19,851,868 in restitution. The couple admitted to the Commission’s findings for the purposes of the administrative proceeding only.

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5 Red Flags of Investment Fraud

Sun, 27 Nov 2011 08:00:00 EST

5 Red Flags of Investment Fraud

Guaranteed riches.

An opportunity that promises "guaranteed" returns should always be taken with a grain of salt. An opportunity that promises "guaranteed" returns that are significantly higher than the market average is a definite marker for investment fraud. Remember: Things that seem too good to be true are, in fact, too good to be true. No one can promise you guaranteed, high yield returns in good faith – they simply don’t exist. If you want a high yield product, you’re going to have to pay for it with added risk. Anyone who says otherwise is out to con you.

"Hurry – this offer won’t last long."

Scam artists are experts at using a sense of urgency to push otherwise wary investors into shady investments and/or downright frauds. Any person who insists you have to act now, regardless of the reason, wants to ensure you don’t have time to think about the investment or investigate it. Insist on taking the time you need to do your research. With the plethora of investment schemes out there, it’s better to be safe than sorry.

Vague answers and/or flimsy (or non-existent) documentation.

Before you part with your hard-earned money, you should understand why you’re parting with it and where it’s going. Ask questions, and make sure you get an offering statement, a prospectus, or some other form of documentation that describes the investment strategy, the risks and benefits, and the details (fees and costs, liquidity restraints, etc.). If you can’t get the answers you need, walk away. Whoever is pitching the "opportunity" to you is being vague on purpose.

Dropping names.

Affinity fraud is popular among con artists, and they’ll often try to build trust with prospective investors by gaining the trust of other prominent figures in the investors’ community. If the main pitch for an investment opportunity is that your pastor, your neighbor, your boss, your mother, or a well-known celebrity is "in" on the investment too, double your research efforts. The name dropping is likely a cover-up for investment fraud.

Glamorous or expert credentials.

Recent con artists have used their purported backgrounds as CEOs, vice presidents, and other big-name positions to drum up business and inspire trust. One alleged fraudster even used his status a

an ex-FBI agent

to attract investors. Don’t take anyone’s word as proof of his or her expertise. Do your own research to make sure you don’t get taken in by a fast-talking con with a glamorous, but bogus, resume.

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SEC Charges Western Pacific Capital Management and Its President with Investment Fraud

Sat, 26 Nov 2011 08:00:00 EST

The SEC charged San-Diego-based Western Pacific Capital Management LLC and its president, Kevin James O’Rourke, with investment fraud in connection to the non-public offering of stock by Ameranth Inc.

According to the SEC, during 2005 and 2006, Western Pacific and O’Rourke advised their clients to purchase Ameranth stock, for which Western Pacific and O’Rourke would be paid a 10 percent "success fee." The SEC alleges that neither Western Pacific nor O’Rourke disclosed the conflict of interest to their clients. (Western Pacific’s commission from Ameranth totaled $482,745.)

"Investment advisers have a fiduciary duty to act in the best interests of their clients and be forthcoming with them," said Marshall S. Sprung, Assistant Director in the SEC Enforcement Division’s Asset Management Unit. "Western Pacific and O’Rourke fraudulently breached that duty by failing to disclose the commissions they would receive for the recommended investments."

The SEC has also charged Western Pacific Capital Management LLC and O’Rourke with failure to provide written disclosures to clients, making material misstatements and omissions to clients about Ameranth’s liquidity, and failure to register as a broker.

For more information, you can find the SEC Order here.

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Former Visions Securities Stock Broker Charged with Fraud

Fri, 25 Nov 2011 08:00:00 EST

Daniel Gallagher, a former stockbroker at Vision Securities Inc., was arrested in Boca Raton last week on charges related to a criminal complaint filed against him in federal court in Brooklyn. The complaint alleged that Gallagher participated in an investment fraud scheme that authorities say defrauded 13 investors out of approximately $485,000.

According to the complaint, Gallagher – as a part owner and registered representative for the New York-based broker-dealer Vision Securities Inc. – solicited investments over a two year period for a product he formed in September 2009: Nano Acquisition Group, LLC (NAG).

Gallagher allegedly told investors and potential investors that NAG was formed to acquire certain assets of Nanodynamics, Inc., a fuel cell technology company that filed for bankruptcy in summer of 2009. Gallagher also allegedly represented to investors that no fees or salaries would be paid to managing members or employees unless and until $1 million had been raised. If $1 million could not be raised, Gallagher allegedly represented, then NAG would return the bulk of the invested funds to the investors.

According to the complaint, however, Gallagher lied. Allegedly, after Gallagher failed to acquire any of Nanodynamics’ assets and failed to raise $1 million for NAG, he decided to take 90 percent of the invested funds for his personal use. None of the money was returned to the investors.

"As alleged, this is a clear case of investment fraud. Gallagher solicited a significant sum for a specified purpose, did not apply it as promised, and failed to return the money. In simple terms, he stole his investors’ money," stated FBI Assistant Director in Charge Janice K. Fedarcyk in an FBI press release.

Authorities have charged Gallagher with wire fraud. If convicted, he faces a potential 20 years in prison. He is scheduled to appear today before United States Magistrate Judge Linnea R. Johnson at the U.S. District Court in West Palm Beach, Florida.

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Popular BDCs Attract Regulator Scrutiny

Fri, 25 Nov 2011 08:00:00 EST

Business development companies (BDCs), such as FS Investment Corp., are coming under regulator scrutiny, according to a recent InvestmentNews article. The products, which allow individual investors to invest in privately owned companies, are part of the $1.6 trillion private-secured-debt market.

Congress created BDCs in the early 1980s, with the hope that growing, struggling, or small companies could use them to gain access to necessary capital. Though there are only about 28 publicly traded BDCs at the moment, the products are popular with investors (primarily because of the potential for high yields), and more issuers are gearing up to launch their own.

The illiquid products are risky, however, and they are meant to be sold only to sophisticated investors with high incomes and/or significant assets. Regulators are concerned that the increase in BDC availability could trigger increases in broker misconduct or investment fraud if regulator oversight of the products isn’t increased as well.

"We're seeing a strong increase in the number of BDC filers and filings, which have necessitated us to look at whether we should draft a specific review program just for BDC issuers," Arkansas securities commissioner A. Heath Abshure told InvestmentNews.

The SEC adopted new rules for BDCs in 2006, but the rules didn’t include additional oversight. For more information on BDCs, read the full InvestmentNews article here.

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Minnesota Hedge Fund Managers Charged with Facilitating $3.65B Petters Ponzi Scheme

Fri, 25 Nov 2011 08:00:00 EST

The SEC charged two Minnesota-based hedge fund managers recently in connection to the $3.65 billion Petters Ponzi Scheme. James N. Fry, of Long Lake, and Michelle W. Palm, of Edina, allegedly facilitated the multi-billion dollar Ponzi scheme by falsely assuring investors and potential investors that their funds would be protected via collateral accounts. They are also accused of helping to cover up the scheme by hiding problems with payments from investors.

In July 2009, the SEC charged Tom Petters with orchestrating a "massive" Ponzi scheme that defrauded investors out of $3.65 billion. The investment scheme ran from as early as 1995 through 2008, when Petters’ co-conspirator Deanna Coleman reported the scheme to the authorities. Petters was sentenced to 50 years in prison - the longest imprisonment term ever ordered for financial fraud in the state of Minnesota - in early 2010.

Fry and Palm are the not the first hedge fund managers to be charged in connection to the Petters Ponzi scheme. Hedge fund managers in Illinois, Florida, and Connecticut have been charged as well. For additional information, read the SEC’s latest litigation release here.

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FINRA Warns B-Ds to Be Careful About Claiming Senior Designations

Thu, 24 Nov 2011 08:00:00 EST

Earlier this month, FINRA released a Regulatory Notice to remind broker-dealer firms of "their supervisory obligations regarding the use of certifications and designations that imply expertise, certification, training or specialty in advising senior investors (senior designations)."

Currently, there are around 44 different senior designations used by registered representatives in the United States. Over the past few years, as an ever-increasing number of confusing and misleading professional credentials have entered the market, regulators increasingly have become concerned over the potential for misuse and deception, particularly when it comes to senior investors.

The Massachusetts Securities Division, for example, filed a regulatory enforcement action against Brokers Choice of American (BCA) and Senior Benefit Centers Network (SBCN) in which the Division alleged that the BCA and the SBCN "fraudulently touted their financial planning skills, investment expertise and knowledge" and "used such specious titles as ‘Certified Elder Planning Specialists’ to mislead the elderly and disguise the fact that the associates were simply insurance salesmen."

To determine whether firms were adequately supervising the use of such "specious titles," FINRA conducted a 2011 senior designation survey. Based on the survey’s results, FINRA determined that approximately two-thirds of broker-dealer firms permitted registered representatives to use some sort of "senior designation." Unfortunately, the survey also revealed that many of those designations lack rigorous qualification standards and/or adequate supervision.

"As a result," wrote FINRA, "a designation did not ensure that those registered persons holding the designation possessed financial services skills that were unique or valuable to senior investors."

This could open the door to elder financial abuse and investment fraud, because most investors cannot tell the difference between a legitimate professional designation and "a designation that is simply a marketing tool."

To help ensure investors are protected from dubious designations, FINRA recommended firms prohibit the use of designations that do not require:

A rigorous curriculum;
An emphasis on ethics;
Continuing education;
Demonstrable experience, and
A public disciplinary process.

Whether or not firms will follow FINRA’s recommendations remains to be seen.

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Broker-Dealer FTN Financial Securities Corp. Charged with Aiding Sentinel in Fraud

Wed, 23 Nov 2011 08:00:00 EST

The SEC brought charges against broker-dealer FTN Financial Securities Corp. (FTN) last week for allegedly assisting the now bankrupt Sentinel Management Group, Inc. (Sentinel) in covering up Sentinel’s alleged 2006-2007 investment fraud.

In August 2007, two days after Sentinel filed for Chapter 11 bankruptcy, the SEC charged the Illinois-based investment adviser with misappropriating, commingling, and leveraging client assets without proper authorization. Though Sentinel told its clients that their investments would be placed primarily in highly liquid cash management products, the SEC claimed the firm used client assets as collateral for a bank loan used to finance trading in numerous illiquid securities.

In the complaint filed last week, the SEC alleged that FTN helped Sentinel carry out the fraud through the approval of a five-day reverse repurchase transaction. In the complaint, the SEC claimed that FTN "should have known that Sentinel would use the Repo Transaction for an improper purpose," because of statements made to several FTN employees in March of 2006.

"Earlier in March 2006, before engaging in the Repo Transaction, FTN had engaged in a transaction with Sentinel to purchase securities from Sentinel at quarter-end, a transaction that Sentinel told FTN employees it needed to ‘make our loan look lower.’ In addition, toward the end of 2006, before engaging in the Repo Transaction, a Sentinel employee made statements to one of those same FTN employees suggesting that Sentinel intended to use the Repo Transaction to circumvent a regulatory requirement," wrote the SEC in the Complaint.

According to the SEC, Sentinel used the Repo Transaction with FTN to temporarily pay down a portion of the client-collateralized bank loan in order to reduce the amount Sentinel had to report on its 2006 year-end financial statements. Sentinel did not include the Repo Transaction on the statements.

FTN neither admitted nor denied the SEC’s charges, but the firm did consent to the entry of the SEC’s Cease-and-Desist Order. The Order requires FTN to pay disgorgement of $1,495,878.00 and prejudgment interest of $377,758.73.

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Investor Alert: Watch Out for Chinese Precious Metal, Gold, Silver Scams

Wed, 23 Nov 2011 08:00:00 EST

The consumer investor protection group Wall Street Watchdog issued an alert on Friday that advised investors to watch out for Chinese counterfeit precious metal scams and Chinese counterfeit gold and silver coin scams. In the alert, the group warned investors to exercise extreme caution when buying gold, silver, or other precious metals, particularly from China.

"We have one Chinese counterfeiter bragging about the fact that his operation manufactures 100,000 fake US Silver Dollars each year. This is just one guy," said the Wall Street Watchdog. And, you can bet that "one guy" isn’t alone.

With the continuing volatility of the global stock markets, it’s really no surprise that precious metals, gold, and silver investments have become a multi-billion dollar industry. Investors want to put their funds in safe products that carry the potential for high returns. Gold and precious metals often seem to fit the bill. But, as regulators and investor protection groups know all too well, increased popularity brings increased opportunity for fraud.

"Do not do business with any precious metal dealer, or gold, or silver coin retailer unless you can establish they are legitimate, and you can confirm they have a written money back guarantee policy, for their customers," advised the group. "Chinese counterfeit precious metal coins, and gold, or silver bars, are going to ruin many investors, and this is going to get ugly. Do not become a victim."

The Wall Street Watchdog isn’t alone in its warning. In August, the Financial Industry Regulatory Authority (FINRA) issued a news release warning investors against gold-related investment scams:

"Con artists are using the run-up in the price of gold as a hook to part investors from their money," said Gerri Walsh, FINRA's Vice President for Investor Education. "Investors should think twice before investing in any gold investment promising exponential returns."

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Morgan Stanley to Pay $1,371,000 in Fines and Restitution for Excessive Markups and Markdowns

Fri, 18 Nov 2011 08:00:00 EST

FINRA ordered Morgan Stanley to pay $1 million in fines and $371,000 in restitution last week for activities and violations related to certain bond transactions, according to a Nov. 10 FINRA news release.

A FINRA investigation found that Morgan Stanley charged higher-than-warranted markups and markdowns (from 5 to 13.8 percent) to customers on corporate and municipal bond transactions. The markups and markdowns were deemed "excessive" in light of the current market conditions, the cost to execute the transactions, and the value of the service the firm provided to its customers.

When a customer purchases a bond from a broker, that customer pays slightly more for the bond than the broker's original purchase price. This is called a "markup." Typical markups range from 1 to 5 percent. When a customer decides to sell a bond before it matures, the broker will pay the customer a slightly below-market rate for the bond. This is considered a "markdown."

"Firms must ensure that customers who buy and sell securities, including corporate and municipal bonds, receive fair and reasonable prices regardless of whether a markup or markdown is above or below 5 percent. Morgan Stanley clearly violated fair pricing standards and FINRA will continue to require firms that violate such standards to make their customers whole," said Thomas Gira, Executive Vice President of FINRA Market Regulation.

The FINRA investigation also revealed an "inadequate" supervisory system for the bond transactions, which Morgan Stanley must now revise under the FINRA order. Though Morgan Stanley neither admitted to nor denied FINRA's allegations, the firm did consent to the entry of the findings.

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New Defendant Added in Indictment Alleging $105 Million Ponzi Scheme

Fri, 18 Nov 2011 08:00:00 EST

Alfred Gerebizza, formerly of the Chicago area, was recently added as a defendant in an indictment involving an alleged $105 million Ponzi scheme that authorities say defrauded 400 victims over a period of six years.

According to the latest indictment, Gerebizza and co-defendant, Daniel Spitzer, offered and sold $105 million worth of membership and limited partnership interests in "Kenzie Funds," which were purportedly operated by Kenzie Financial Management, located in the U.S. Virgin Islands.

Investors were allegedly told that their investments in the Funds would be used primarily to invest in foreign currency markets. Gerebizza and Spitzer are accused of falsely stating that the Funds had historic annual returns of 4.52 to 13.54 percent. (Actual bank records reflected less than 1 percent total net returns over five years.) The defendants allegedly also misrepresented the total value of the Funds.

Gerebizza and Spitzer are both accused of misappropriating investor money for their personal purposes, and misusing $71 million of investor funds to make Ponzi payments to other investors. Investor losses allegedly total approximately $34 million.

Gerebizza pled not guilty on Oct. 26 to 10 counts of mail fraud and six counts of filing falsified tax returns. He remains in custody at this time. Spitzer, who has been released on bond, also pled not guilty to 10 counts of mail fraud. Both men are scheduled to appear in court before U.S. District Judge James Zagel on Dec. 6.

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Chase Ordered to Reimburse Customers $1.9M for Unsuitable Recommendations

Thu, 17 Nov 2011 08:00:00 EST

FINRA has ordered Chase Investment Services Corporation to reimburse customers almost $2 million for losses related to the company's recommendation of certain unit investment trusts (UITs) and floating rate funds, according to a Nov. 15 news release.

UITs are highly speculative products that can contain a significant percentage of high-yield or junk bonds. Floating rate funds are often illiquid products that invest in loans made to below-investment-grade entities. These characteristics make both UITs and floating rate funds risky, complicated products suitable only for experienced, knowledgeable investors who can afford to take the risk.

Despite this, a FINRA investigation found that Chase brokers made almost 260 recommendations of the products to some of their unsophisticated and inexperienced customers whose "conservative" risk tolerance, liquidity needs, and/or desire for principal protection made the products unsuitable for them. Customer losses stemming from the recommendations totaled approximately $1.4 million for the unsuitable UITs and nearly $500,000 for the unsuitable floating rate funds.

FINRA also charged Chase with failing to properly supervise the sale of the products. Chase neither admitted nor denied FINRA's charges, but did consent to entry of the findings. For more information, read the full FINRA news release here.

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Investor Alert: That ETF May Not Be What It Seems

Thu, 17 Nov 2011 08:00:00 EST

As we've discussed before, while exchange-traded funds are increasingly popular with investors, they pose a serious risk to individuals. Now, with the addition of several similarly named but structurally different products, the $1 trillion exchange-traded market has become even more complicated and confusing.

On Saturday, Barron's published an ETF Special Report titled "Everything Wants to Be Called an ETF These Days." In the article, author Michael Shari highlights the differences between a traditional exchange-traded fund and its similarly named spin-offs.

Leveraged exchange-traded funds, for example, invest in derivatives (securities priced and valued based on the fluctuating values of one or more underlying assets), as do commodity ETFs. These exchange-traded products are therefore particularly risky, because derivatives are often used for speculative purposes.

Exchange-traded notes (ETNs), another type of exchange-traded product often lumped in with traditional ETFs, are primarily unsecured debt securities. ETNs, by definition, offer zero principal protection - a reality that some investors may not understand.

"If you're not careful, the exchange-traded fund you thought you'd ordered could turn out to be something very different," warns Michael Shari in Saturday's ETF Special Report.

Individuals who are interested in the exchange-traded market need to make sure they fully understand the structure of the products they're buying and the underlying risks and costs associated with them. (For help identifying the risks of certain specialized ETFs, read this SEC alert.)

For more information about the different exchange-traded products, read the full Barron's article here.

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Hedge Fund Fraud Was "Brazen Web of Lies"

Tue, 08 Nov 2011 08:00:00 EST

Andrey Hicks, along with his Locust Offshore Management, LLC, has been accused by the US Securities and Exchange Commission (SEC) of running a hedge fund fraud and taking over a million dollars from investors. The SEC claims that Hicks lied about his education, previous employment, and the hedge fund's assets.

The director of the SEC's Boston office stated that "Hicks lied to investors about virtually every aspect of his fictitious hedge fund. This brazen web of lies to investors constituted an outright fraud."

According to the complaint, Hicks claimed that his Locust Offshore Fund worked on a specific mathematical model that he personally developed while in school. Hicks is also said to have claimed that he received both graduate and undergraduate degrees from Harvard, although, in reality, he only spent three semesters at the university and had to withdraw due to poor academic performance. Regarding the special mathematical model that the hedge fund was supposedly based on, reports say that Hicks only took a single math course at Harvard and received a D- grade. Additionally, Hicks is said to have claimed a successful stint with Barclays Capital, but that firm says it has no record of Hicks ever being employed with them.

The complaint also alleged further lies, including lies about the fund's auditor, incorporation, and custodian.

The investment fraud lawyers with the Law Firm of Meyer Wilson represent investors who have lost money due to investment fraud, stockbroker misconduct, and breach of fiduciary duty. We have recovered millions of dollars in losses for our clients, and look forward to working with you.

Seminars and Sermons Held at Atlanta Church Allegedly Investment Fraud

Mon, 07 Nov 2011 08:00:00 EST

Bishop Eddie Long, a pastor with New Birth Missionary Baptist Church in Atlanta, was allegedly involved in an investment fraud scheme that targeted members of his church congregation. Long allegedly ran the scheme along with Ephren Taylor, Jr., of North Carolina.

According to the allegations, Long and Taylor enticed investors through seminars on building wealth, and also through some related sermons. The seminars were held at the church. Many members of the congregation say Taylor urged them to put money from their retirement accounts into the investments, and many members report losing a portion of their life savings.

Although both men in the case are under investigation, the church itself is not under investigation at this time.

Taylor is also a defendant in a North Carolina lawsuit, which alleges that he also made potentially fraudulent investment presentations at several other churches across the nation.

The FINRA lawyers with the Law Firm of Meyer Wilson represent victims of investment fraud, stock scams, and Ponzi schemes in stockbroker mediation, arbitration, and litigation. We have recovered millions of dollars in investment losses for our clients, and look forward to speaking with you about your circumstances.

Warning to Senior Investors: Be Aware of Utah Ponzi Schemes

Sun, 06 Nov 2011 08:00:00 EST

As another alleged Utah Ponzi scheme hits the news, the Utah Division of Securities warns seniors to beware potential investment fraud. There seems to have been a significant number of Utah investment scams and Ponzi schemes recently that have specifically targeted older investors and preyed upon their retirement funds.

Regulators warn that seniors should do their research and question any investment opportunity that offers high returns in a down economy, but they specifically warned against:

Promissory notes
Investments in gold or other precious metals
Oil and gas investments
Energy investments
Securitized life settlement contracts

Sound familiar? It seems that these types of scams are currently popular nationwide, so investors should be prepared to ask questions, meet in person, and do their research before putting their money into any new investment.

If you have already lost money to a Utah Ponzi scheme or other type of investment fraud, speak with an experienced Utah investment fraud lawyer with Meyer Wilson today. We take pride in helping our clients recover their cash through stockbroker mediation, arbitration, and litigation.

Alleged Securities Fraud May Have Led to Bankruptcy and Investor Loss

Thu, 03 Nov 2011 08:00:00 EST

Stephen Durland, of Greensboro, North Carolina, has received a sentence of two years and nine months after his alleged involvement in a securities fraud scheme. Durland pleaded guilty earlier this year to counts of securities fraud, conspiracy to commit securities fraud, and falsifying records.

Durland had been CFO of Fremont-based Pegasus Wireless Corp., which later moved to West Palm Beach, Florida. According to officials, Durland allegedly created fake promissory notes to represent fake debt, and then issued shares. Durland, working with former Pegasus CEO Jason Knabb, allegedly sold the shares to friends, family, and other investors. Durland and Knabb are said to have brought in millions in this fashion, and they have been accused of using most of the cash for their own purposes. Knabb is expected to be sentenced in November after also pleading guilty to similar securities fraud charges.

Prosecutors have also alleged that the securities fraud ended up diluting Pegasus Wireless' stock, led to the company's later bankruptcy, and caused millions of dollars in losses for their clients.

At the Law Firm of Meyer Wilson, we are experienced FINRA lawyers who can represent victims of investment fraud, stock scams, and Ponzi schemes in stockbroker mediation, arbitration, and litigation anywhere in the nation. We are proud to have recovered millions of dollars in losses for our own clients, and look forward to helping you.

Alleged New York Securities Fraud Takes $4.8 Million

Wed, 02 Nov 2011 08:00:00 EST

Matthew John Ryan, of Troy, New York, has been sentenced to ten years in prison for his part in an alleged securities fraud case. Ryan was the owner and founder of Prime Rate and Return, LLC, and American Integrity Financial Co.

Federal prosecutors alleged that Ryan sold investor contracts, but neither of his financial companies were licensed with the Securities & Exchange Commission to do so. According to officials, Ryan offered returns of 3.85 % to 9.35 % on fixed-term contracts through his companies during the period of 2002 to 2010 when Ryan was active with the companies. Unfortunately, it is alleged that Ryan instead used at least $4.8 million of investors' cash to fund his own lifestyle, dabble in real estate, and pay off prior investors to keep up the appearance of legitimacy.

The New York securities fraud lawyers with the Law Firm of Meyer Wilson represent investors nationwide in stockbroker mediation, arbitration, and litigation. We are skilled FINRA lawyers and have recovered million of dollars in losses for our clients.

If you want to learn more about protecting yourself from investment fraud, request your free copy of our book Five Signs of Investment Fraud ...And What to Do it it's Happened to You.

Citigroup Agrees to Pay $285M to Settle SEC Charges

Wed, 02 Nov 2011 08:00:00 EST

Citigroup Global Markets Inc. has agreed to pay $285 million to settle an SEC securities fraud action related to a collateralized debt obligation (CDO) called Class V Funding III.

In the action brought on Wednesday, the SEC alleged that Citigroup structured and marketed the $1 billion "CDO-squared" Class V Funding III, the value of which was heavily tied to subprime residential mortgage-backed securities, after the U.S. housing market was already showing signs of distress.

The Commission further alleged that Citigroup released marketing materials for the Class V Funding III that "failed to disclose to investors that Citigroup had exercised significant influence over the selection of $500 million of the assets in the Class V III investment portfolio, and that Citigroup had retained a short position in those assets."

"By taking a short position with respect to the assets that it had helped select, Citigroup profited from the poor performance of those assets, while investors in Class V III suffered losses," wrote the Commission in the action.

Robert Khuzami, Director of the SEC's Division of Enforcement expressed outrage at Citigroup's actions in Wednesday's press release.

"The securities laws demand that investors receive more care and candor than Citigroup provided to these CDO investors," Khuzami said. "Investors were not informed that Citgroup had decided to bet against them and had helped choose the assets that would determine who won or lost."

The $285 million will be returned to the Class V III investors, according to the SEC. (For more information, read the full release here.)

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Farmington Hills Investment Adviser Gets 8 Years in Prison for Defrauding Elderly Investors

Wed, 02 Nov 2011 08:00:00 EST

Keith Epstein, a former Farmington Hills investment adviser, was sentenced to eight years and one month in prison in connection with a multi-million dollar Ponzi scheme that ran from late 2006 through 2009.

According to court records, Epstein instructed at least 15 (primarily elderly) clients to liquidate their legitimate investments so that he could invest their funds in newer, lower-risk funds. He also instructed them to make their checks payable directly to him or his company (E&R). He then diverted the funds, and used investor money to make interest payments to other investors and for his personal use.

According to an FBI press release, Epstein gained his clients' trust by regularly visiting them in their homes, revealing personal details about himself, and attending their important family functions. He also provided them with gifts and advised them on important life decisions. Many of his investors lost their entire retirement funds.

Epstein pled guilty to the investment scheme in April of 2011.

In addition to his prison term, Epstein was ordered to pay $4.1 million in restitution to his victims. His sentence was handed down in the U.S. District Court in Detroit.

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How to Choose a New Wealth Manager

Thu, 20 Oct 2011 08:00:00 EST

Big investment firms continue to be affected by a slew of trading scandals, financial crises, and regulator crackdowns. Top managers at UBS, for example, (previously one of the world's most renowned wealth management firms) recently resigned after it came to light that the company suffered $2.3 billion in losses from unauthorized trading. As an increasing number of firms find themselves in financial and regulatory trouble, more and more investors are finding themselves in need of new wealth managers.

Before you make the leap into a new financial relationship, however, you should conduct a thorough investigation. Information on investment advisers, including registration status and certain disciplinary actions, can be found through the SEC's Investment Adviser Public Disclosure website. Brokerage firms and individual brokers can be researched through FINRA's BrokerCheck system. For comparisons between financial advisers or for information on an adviser's compensation arrangements, average account balance, and typical client, check out BrightScope. (For more information on how you can use BrightScope to check up on advisers, read our May blog post here.)

In addition to conducting a thorough background check, you should ask a potential wealth manager the following questions:

• How are you compensated? (You want someone who will work on your behalf, not someone who gets paid more to recommend particular products to clients, regardless of whether those products meet the clients' needs.)

• What are your credentials? (Some credentials, such as "C.P.A." or "C.F.A.," often mean the person is bound by a higher standard of care because the person acts as a fiduciary. Others are bogus. For help understanding what a given credential means, use FINRA's professional designation database.)

• What's the consultation process like? (A wealth manager should spend more time listening to you and asking questions about your current situation and your goals for the future than talking or recommending products.)

• Where will your assets be held? (Investment fraud is more likely if the adviser holds your money him-or-herself. To protect yourself from fraud, you should only work with an adviser if a third-party custodian will hold your assets.)

For tips on how to spot a dishonest investment adviser, click here.

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Former Owners of Bowman Investment Group Indicted on 28 Counts

Wed, 19 Oct 2011 08:00:00 EST

A 28-count indictment against the former owners of Lafayette-based Bowman Investment Group was unsealed on Friday by the U.S. Attorneys Office. The indictment, which was sealed in August, accuses Richard J. Buswell and Herbert S. Fouke (a/k/a Steve Fouke) of cheating over 100 investors out of more than $8 million in an alleged investment scheme that ran from the beginning of 2007 through 2009.

According to prosecutors, Buswell and Fouke, both licensed stockbrokers in Lafayette, Louisiana, solicited investments in Bowman Investment Group in order to generate commissions and wages for themselves. They allegedly defrauded investors through misrepresentations, false pretenses, and false promises, including lying about when and how commissions would be charged.

The indictment alleges that Fouke, a former general contractor, recruited investors from his circle of acquaintances. Then, once investors had handed over their funds, Buswell allegedly engaged in "churning" and unauthorized trading to generate large commissions for the two defendants "without regard for the needs and objectives of his clients."

Both men were charged with one count of securities fraud, one count of investment adviser fraud, and one count of conspiracy. Buswell was also charged with eight counts of wire fraud and 15 counts of mail fraud. Both men were released on bonds.

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Texas A&M Faces $4.4M Lawsuit Stemming from Alleged $8B Investment Fraud

Wed, 19 Oct 2011 08:00:00 EST

Texas A&M is currently facing a multi-million dollar lawsuit related to the $8 billion investment fraud scheme allegedly orchestrated by Robert Allen Stanford, sole proprietor of Stanford Financial.

As reported in a NY Times article two years ago, the SEC charged Robert Allen Stanford and his chief lieutenant, James M. Davis, in Feb. of 2009 with orchestrating and executing a "massive Ponzi scheme" that involved $8 billion in CDs. (For more information, read the full article here.)

Regulators subsequently froze Stanford's assets, but the case didn't progress because Stanford was deemed incompetent to stand trial. Investors - many of who lost their entire savings - then turned to the Securities Investor Protection Corporation (SIPC), which has been integral in helping Madoff victims receive restitution, for help.

When the SIPC said it didn't think Stanford's investors would be eligible for SIPC protection, a flurry of lawsuits were filed against secondary institutions that may have received tainted funds from Stanford. The lawsuit against Texas A&M is one such lawsuit.

"The Stanford parties were running a Ponzi scheme and paid Texas A&M with funds taken from unwitting... investors," the complaint alleges. "The plaintiffs are, therefore, entitled to disgorgement of the CD proceeds the Stanford parties fraudulently transferred to Texas A&M."

The complaint alleges that A&M received 11 payments from Stanford Financial from 2004 to 2008. A spokesman for the university said the payments were part of a sponsored research agreement. No further statements were made.

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Ex-FBI-Agent-Turned-Financial-Advisor and Wife Charged with $1.3M Investment Fraud

Tue, 18 Oct 2011 08:00:00 EST

John Robert Graves and Sara Turberville Graves, both of Fredericksburg, Va., were indicted last week on multiple fraud charges in connection to an alleged $1.3 million investment fraud scheme that authorities say ran from mid-2008 through mid-2011.

According to the indictment, John Graves, founder and president of Brook Point Management (BPM), and his wife, Sara, raised over a million dollars in investor funds through the misrepresentation and omission of material facts, including facts about the nature of the investments.

Authorities further accuse the couple of lying to investors by telling them the funds would be used to invest in a "startup company" and to buy shares of BPM, among other things. Instead, the Graves allegedly used the money for personal purposes, including: to pay credit card bills, to purchase real estate, and to make payments to some investors.

Graves, a certified financial planner, a holder of numerous industry registrations, and an ex-FBI agent, allegedly used his credentials and former FBI experience to gain his clients' trust and convince them to invest with him. Authorities claim he continued to make false and/or misleading statements about the fraud scheme even after it was uncovered.

John and Sara Graves have each been charged with one count of conspiracy to commit mail and wire fraud, one count of mail fraud, and four counts of wire fraud, according to the DOJ press release. John Graves was also charged with three counts of Investment Adviser Act fraud, and one count of making false statements.

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5 Tips to Fight Investment Fraud During the Economic Downturn

Tue, 18 Oct 2011 08:00:00 EST

Tip #1: Watch out if someone promises a lot for a little. One thing most investment schemes have in common is the promise of high returns for little to no risk. In the world of investing, higher yields don't exist without added risk. Remember: If it sounds too good to be true, that's because it is.

Tip #2: Be wary of investments that seem to show overly consistent, positive returns. It is possible to make money in today's markets, but any investment that seems unaffected by the shifting economy is likely a fraud.

Tip #3: Only invest in what you thoroughly understand. Con artists and fraudsters love to use complicated, intricate products to hide their schemes. If you can't explain what you're investing in, how the investment plans to make money, and what the risks are, you probably don't understand the opportunity well enough to recognize whether or not it's suitable for you.

Tip #4: If you have questions and can't get answers, walk away. Difficulty obtaining answers or information (such as an offering statement or prospectus) is a red flag. If someone won't answer your questions or provides you with vague answers, walk away. Better to miss an opportunity than to be defrauded out of your hard-earned money.

Tip #5: Review your account statements on a regular basis. The majority of con artists use fraudulent or falsified account statements to cover up their investment schemes. Review your statements each month for inaccurate, unusual, or unauthorized trades and activity. If possible, you should also check your paper statement against the online statement issued by your custodian/bank to ensure the balances and trades match.

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ETF Investors Face Serious Risk

Mon, 17 Oct 2011 08:00:00 EST

Exchange traded funds (ETFs), which were originally designed for and are exceptionally popular with institutional investors, are increasingly being marketed to and purchased by individual investors - a fact the SEC and FINRA find disturbing.

Recently, the two organizations issued a joint investor alert that warned individual investors of the potential risks associated with ETFs, particularly leveraged or inverse ETFs. (For more information, read the full alert here.)

Exchange traded funds are complicated and risky products, and the differences between them are so intricate that it can be almost impossible for individual investors to understand the specifics of any one ETF well enough to compare it to another. In the alert, the SEC and FINRA warned individual investors about the products' inherent complexities and advised investors to "evaluate each investment closely and not assume all ETFs are alike."

While most ETFs are registered investment companies whose shares represent an interest in a portfolio of securities that track an underlying benchmark or index, not all are. Some ETFs, particularly those that invest in commodities or currencies, are unregistered - a fact investors should be aware of if they want to protect themselves from fraud.

Investors who choose to invest in an ETF should be aware that they are investing in a high-risk product. Common ETF investment strategies involve short sales, swaps, futures contracts, and other derivatives, all of which can expose the ETF and its investors to significant risk.

Long-term and intermediate investors should be particularly wary of non-traditional ETFs, said the SEC and FINRA. "Because leveraged and inverse ETFs reset each day, their performance can quickly diverge from the performance of the underlying index or benchmark. In other words, it is possible that you could suffer significant losses even if the long-term performance of the index showed a gain," warned the regulators in the alert.

Additional risks ETF investors should be aware of include: potentially costly fees and expenses, potential tax consequences, and the possibility that the ETF will not meet its stated objective for the trading day.

For additional information on investing in ETFs, click here.

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Montana Commissioner Releases New Documentary on Investment Fraud

Fri, 14 Oct 2011 08:00:00 EST

As part of the state's efforts to help Montanans avoid investment fraud, the Montana Commissioner of Securities and Insurance has teamed up with AARP Montana to produce a new documentary: "Gold Diggers, Investment Fraud in the Treasure State."

The film, which is scheduled to air on TVMT in November, "tells the shocking stories of two of Montana's most infamous investment schemes" - the Arthur Heffelfinger case in Helena and the Anne Marie Schlenker case in Bozeman.　Together the two schemes defrauded Montana investors out of more than $3 million.

The Commissioner's office hopes the film will help investors recognize the warning signs of investment fraud and thereby avoid becoming victims themselves.

"Education is the silver bullet when it comes to fighting fraud," said Commissioner Monica J. Lindeen.　 "The more Montanans know about their rights and where they can turn for help, the better they can protect themselves from modern day gold diggers."

Actor Bill Pullman narrates the film, which includes interviews with victims of investment fraud, industry experts, investor advocates, securities arbitration attorneys, prosecutors, and regulators. Special screenings will take place from Oct. 10 through Oct. 13. For more information, click here.

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Increased Flexibility Means Added Risk for IRAs

Fri, 14 Oct 2011 08:00:00 EST

Self-directed Individual Retirement Accounts (IRAs) have become a favorite among investors looking to gain flexibility and increased control over their retirement portfolios. In fact, investments in the products have gone up by 25 to 50 percent over the past few years, according to some estimates. Unfortunately, investors interested in adding flexibility for the sake of higher yields are also taking on more risk, including the risk of investment fraud - a fact some investors may not know.

While, the market for the flexible IRAs is small (a mere 2 percent of the general IRA market), the products are quickly becoming a favorite among Ponzi schemers and con artists. To help alert investors to the possibility of fraud, the NASAA recently announced that complaints against the products are on the rise. And, last month, the SEC issued an investor alert that warned investors interested in the products about the increased possibility of fraud, such as the alleged fraud that occurred in the United American Ventures case.

In SEC v. United American Ventures, the SEC alleged that the defendants "promised guaranteed returns in purported investments in medical technologies and raised money by convincing investors to invest through self-directed IRAs and steering them to custodians who offered the self-directed IRAs." A little over one-third of the $10 million in bonds sold through the alleged scheme came from funds in self-directed IRAs.

According to the SEC, fraud promoters are particularly drawn to self-directed IRAs because "they permit investors to hold unregistered securities and the custodians or trustees of these accounts likely have not investigated the securities or the background of the promoter."

To protect themselves, the SEC recommends investors watch out for the following marketing tactics:

Misrepresentations regarding custodial responsibilities. "Self- directed IRA custodians are responsible only for holding and administering the assets in a self-directed IRA," warned the SEC. "Self-directed IRA custodians generally do not evaluate the quality or legitimacy of any investment in the self-directed IRA or its promoters."

Exploitation of tax-deferred account characteristics, which can cause self-directed IRA investors to stay in a fraudulent scheme longer than other investors because they do not want to pay the financial penalties for early withdrawal.

Lack of information for alternative investments. "Self-directed IRAs usually allow investors to hold alternative investments such as real estate, mortgages, tax liens, precious metals, and private placement securities. Unlike publicly traded securities, financial and other information necessary to make a prudent investment decision may not be as readily available for these alternative investments. Even when financial information for these alternative investments is available, it may not be audited. Furthermore, self-directed IRA custodians usually do not investigate the accuracy of this financial information. This lack of available information for alternative investments makes them a popular tool for fraud promoters' schemes," warned the SEC in the alert.

For additional tips on how to avoid investment schemes, read our article on scam-proofing your portfolio here.

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Be on the Lookout for Los Angeles Investment Scams

Fri, 14 Oct 2011 08:00:00 EST

The Los Angeles Times recently ran an article warning California investors to continue to be on the alert for investment fraud, stock scams, and misleading information. Senior investors and small businesses were particularly cautioned, and the article pointed to several recent financial fraud cases as examples of what could go wrong.

For individual investors, many of these problems arise from California Ponzi schemes and unlicensed financial advisors and stockbrokers. Although you can check your broker's history and documentation, these types of scams are often difficult for an average investor to detect and often take in millions before they are discovered.

Senior investors and small businesses need to be careful of investment offers and other scams that hide additional fees and commissions in many pages of "fine print." Additionally, seniors should be suspicious of investment offers that come through the mail or over the phone. Always be sure to meet in person and review all of the documentation regarding the investment.

The investment fraud attorneys with The Law Firm of Meyer Wilson remind all investors that education is power. We represent victims of California Ponzi schemes and other investment fraud in stockbroker mediation, arbitration, and litigation.

Non-Traded REITs Too Risky for Most Investors, Says FINRA

Thu, 13 Oct 2011 08:00:00 EST

According to an investor alert released last week by FINRA, most investors should steer clear of non-traded real estate investment trusts (REITs) if they want to build their nest eggs.

"Non-traded REITs are rarely, if ever, suitable for short-term investors and even long-term investors must be willing to bear the risks of illiquidity," warned FINRA in "Public Non-Traded REITs-Perform a Careful Review Before Investing."

The products, which are increasing in popularity, appeal to investors who are seeking strong yields in the face of a volatile stock market and low interest rates. Unfortunately, they carry a great deal of risk, more so even than exchange-traded REITs - a fact not all investors seem to understand.

"While non-traded REITs and exchange-traded REITs share many features in common, they differ in several key respects," warned FINRA. "Most significantly... shares of non-traded REITs do not trade on a national securities exchange. For this reason, non-traded REITs are generally illiquid, often for periods of eight years or more. Early redemption of shares is often very limited, and fees associated with the sale of these products can be high and erode total return. Furthermore, the periodic distributions that help make these products so appealing can, in some cases, be heavily subsidized by borrowed funds and include a return of investor principal. This is in contrast to the dividends investors receive from large corporations that trade on national exchanges, which are typically derived solely from earnings."

FINRA recommends that investors who are considering investing in public non-traded real estate investment trusts thoroughly understand that they will be "locking up" their investments "with only limited avenues for redemption." Additional risks and complexities include:

Lack of simple valuation processes.
Lack of guaranteed distributions.
Potentially significant tax consequences.
High fees.
Limited diversification.

"Only invest if you are confident the product can help you meet your investment objectives and you are comfortable with the associated risks," warned FINRA.

For additional tips and warnings, read the full investor alert here.

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Man Receives 16 Years for Orchestrating Largest Ponzi Scheme in Michigan History

Mon, 10 Oct 2011 08:00:00 EST

Edward May was sentenced to 16 years in prison last week in federal court in Detroit for orchestrating the largest Ponzi scheme in Michigan history, according to an FBI press release.

May pled guilty in April to 59 counts of mail fraud in connection with a decade-long investment fraud scheme that cheated investors out of $350 million. According to court documents, May solicited more than 1,200 investors to invest at least $350 million in more than 250 limited liability corporations that purportedly provided telecommunications services to major hotels across the United States. The investments were fictitious and resulted in investor losses of more than $49 million.

Investors were told their funds would be "used solely for the purpose of purchasing telephone, high-speed Internet, low-speed Internet, [and] DVD equipment" under "contacts" and "agreements" that didn't actually exist. Instead of investing the funds as represented, May diverted and misappropriated the funds for his personal purposes and to make Ponzi payments to other investors.

For more information, read the full release here.

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Father and Son Sentenced in $930M Ponzi Scheme

Mon, 10 Oct 2011 08:00:00 EST

Roberto Torres and Alejandro Torres were sentenced to 48 months and 46 months in prison on Wednesday for their roles in a $930 million Ponzi scheme orchestrated by Miami businessman Nevin Shapiro.

Shapiro, founder and president of Capitol Investments USA, pled guilty last year to securities fraud and money laundering in connection to the scheme, which involved the fraudulent sale of supposedly "risk-free" securities in a fictitious wholesale grocery-distribution business.

Roberto Torres, CFO of Capital Investments, and Alejandro Torres, an accountant at the company, are father and son. Both men pled guilty in April to helping Shapiro run the investment scheme.

In their plea agreements, the Torres men admitted to creating or ordering the creation of falsified documents that showed the grocery-distribution business was making money. In reality, Capitol had little to no income-generating business, and was using investor funds to make principal and interest payments to other investors. Shapiro also diverted millions of dollars for his personal use.

Roberto and Alejandro Torres were both ordered to pay $82 million in restitution with Shapiro in addition to their prison sentences.

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Fort Collins Real Estate Investment Scam Targets Church and AA Members

Wed, 05 Oct 2011 08:00:00 EST

Niles Stansfield, a Fort Collins real estate agent, has been accused of running a Texas real estate investment scam that allegedly promised high returns to investors.

Through his Fort Lyon Farms, Inc., Stansfield is said to have taken in money from 16 victims, which totaled $865,000. According to the allegation, Stansfield told investors that he would purchase water rights along a ditch near the Arkansas River to be sold to municipalities in Southern Colorado.
Unfortunately, not much of that money was thought to have gone into the actual purchase of water rights.
Members of Stansfield church and members of Alcoholics Anonymous are both said to have been targeted in this scam.

Stansfield faces 15 counts of securities fraud along with several additional counts of theft. His trial had been delayed until this week due to a change in lawyers, as his new representation had to review the evidence in this complicated case.

The Law Firm of Meyer Wilson represents victims of Texas securities fraud in FINRA arbitration, mediation, and litigation.

Who's Most At Risk For Investment Fraud? The Answer May Surprise You.

Wed, 05 Oct 2011 08:00:00 EST

A recent study commissioned by the AARP has revealed that the most common victims of investment fraud may not be the people we first imagine. When we think of investment fraud, we often picture a slick con man sweet-talking our grandmothers out of their dwindling financial resources. But, while senior citizens are the prime targets of scam artists, they aren't the most common victims.

According to recently released AARP Foundation National Fraud Victim Survey, the most common victim of investment fraud is a middle-aged, college-educated man making an annual income of at least $50,000.

Victims of investment fraud share a few other interesting characteristics, as well, including a higher-than-average exposure to sales situations and a higher-than-average interest in pitches promising large returns fast. They're also twice as likely as the general population to attend an investment sales presentation in exchange for a free meal or a free night's stay. (To learn why there's no such thing as a "free lunch," click here.)

Eagerness to increase their nest eggs in the decade before retirement may be one major reason middle-aged men fall for investment schemes that promise high-yield, low-risk products. Unfortunately, such investment opportunities simply don't exist.

To protect themselves from investment fraud, investors should be familiar with and watch out for the persuasive tactics most con artists use to lure in unsuspecting victims. These include the promise of guaranteed returns, "international connections," and high-yield, low risk products. Additional methods of protection include:

Sleeping on it. If someone pressures you with a "must act now," high-pressure tactic, walk away.

Asking questions. An evasive or vague answer should be a warning sign that something isn't right.

Investigating. Don't take someone's word that they have a good reputation, are registered with your state securities regulator, or are pitching a registered product. Contact your states securities regulator yourself to verify registration status and background.

Knowing the truth about "credentials." Some professional designations, such as the CRFA (the certified retirement financial adviser), may not be what they seem. For help figuring out which credentials are worth something and which are dubious at best, read this.

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Alleged Hurricane Katrina Investment Fraud Scam Dupes Montana Investors

Tue, 04 Oct 2011 08:00:00 EST

Terry Parks, formerly of Missoula, Montana, has been found guilty of investment fraud in relation to a Hurricane Katrina scam that took investors for thousands of dollars.

According to officials, Parks offered promissory notes that he claimed would offer a 24% return annually. Parks allegedly claimed these investments were well-secured and the money would go toward rebuilding areas hit by Hurricane Katrina. Unfortunately, neither Parks nor the investments were registered in Montana, and it is alleged that Parks failed to disclose information about risks to the investors involved.

Commissioner of Securities Insurance Monica Lindeen remarked, "This case shows the great lengths con-artists will go to sell hard-working, honest Montanans on a raw deal. To predators like Terry Parks, even a heart-wrenching natural disaster like Hurricane Katrina is just another tool to swindle investors out of their life savings. The jury's verdict in this case should send a clear message that my office won't let con-artists like Parks rip off Montanans and run away scot-free."

If you have been the victim of Montana investment fraud, contact an experienced and professional FINRA lawyer with the Law Firm of Meyer Wilson today.

Massive Investment Fraud Targets Amish Community

Mon, 03 Oct 2011 08:00:00 EST

An Amish man from Sugarcreek, Ohio has been accused of a massive investment scam that targeted his fellow investors in the Amish community. It's alleged that Monroe Beachy, 77, ran the investment scam for 20 years, from 1990 to 2010. He allegedly took in about 2,700 investors in this time period for $17 million overall. The Amish Helping Fund, which helps people in the Amish community with funds for land and buildings, was among the victims.

According to officials, Beachy claimed investors could secure high returns through his A&M Investments, which would put their money into "safe" Ginnie Mae Bond Funds. Unfortunately for the victims, these funds were allegedly never invested in these securities.

The United States Attorney for the Northern District of Ohio said, "This is fraud on a massive scale. This defendant took advantage of people's trust in him and squandered the life savings of hundreds upon hundreds of families."

The Ohio investment fraud lawyers with the Law Firm of Meyer Wilson represent victims of Ohio securities fraud in stockbroker mediation, arbitration, and litigation. If you have been the victim of an investment scam or Ponzi scheme, contact us at 1-866-8-BROKER (1-866-827-6537) today.

Delaware AG Warns of Investment Scams through Social Media

Sat, 01 Oct 2011 08:00:00 EST

In a recent statement from his office, Delaware Attorney General Beau Biden warned investors to be on the lookout for social media scams. His concern comes because more and more people are using social media sites like Facebook to connect with friends and family. In the statement, Biden said that scam artists are also using these sites to lure in their victims.

Fraudsters are taking advantage of social media sites to create a sense of affinity with potential victims before selling them on stock scams and investment fraud. In other words, the fraudster will use the cozy, friendly environment of a social media site to manipulate your trust. The statement from Biden specifically named Facebook, Twitter, LinkedIn, and eHarmony as popular places for scammers to operate these social media investment scams.

Biden advised investors to be careful of offers that come through these avenues. He reminded investors to always ask for a prospectus, do some background research, look out for promises of high returns, and limit the access others have to your personal information on these sites.

The Delaware investment fraud attorneys with the Law Firm of Meyer Wilson concur, and hope all investors will heed this word to the wise.

SEC Charges Solicitor in Investment Scheme Targeting Deaf Community

Fri, 30 Sep 2011 08:00:00 EST

Earlier this month, the SEC filed a civil injunction action against Jody Dunn, a 43-year-old deaf man from Texas, for misrepresentation, misappropriation, and the fraudulent, unregistered offer and sale of investments in Imperia Invest IBC, a company the SEC has already charged with securities fraud.

According to the SEC's complaint, Dunn defrauded approximately 7,133 deaf investors out of $3.45 million through the solicitation of life-insurance investments for Imperia. The complaint further accuses him of siphoning off $353,068 of investor funds for his personal use. He deposited the remainder of the investor funds into Imperia's offshore bank accounts.

According to the SEC's complaint, Dunn failed to verify Imperia's credentials or whether the company was actually investing money as promised. Additionally, the SEC accuses Dunn of continuing to reassure investors of Imperia's legitimacy even after the SEC issued an investor alert warning the deaf community that the Internet-based company was defrauding investors. The alert warned investors that Imperia was fraudulently guaranteeing "annual returns in excess of 1.2% per day" while actually "siphoning the [investors'] funds into foreign bank accounts and not paying any money back to investors."

"No money has been invested, no TEP's were purchased and no investor received any return," wrote the SEC.

Dunn is currently unemployed and receiving social security disability payments, according to the SEC. From August 2007 through July 2010, his primary source of income came from Imperia.

The SEC is seeking civil penalties and disgorgement.

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Two Men Admit to Two Separate Ponzi Schemes on Same Day in Charlotte Court

Fri, 30 Sep 2011 08:00:00 EST

Last Friday, two Charlotte men, Mitchell Brian Huffman and Robert S. Moss, pled guilty to commodities fraud in connection with two separate Ponzi schemes that promised investors huge profits through trading in the commodities future market. Both men were charged with engaging in their respective investment schemes on Aug. 11.

According to the U.S. Attorney's office, Mitchell Brian Huffman fraudulently raised $3.2 million from approximately 30 investors in a five-year-long Ponzi scheme purported to use a proprietary commodities futures trading program that would yield annual returns of 100 to 150 percent.

Court documents show that Huffman directed investors to deposit their funds into his personal bank account. He then used $1.7 million to engage in trading activities, which resulted in massive losses. The remainder of the funds was used to make Ponzi payments to other investors and to pay for Huffman's personal expenses. Like many Ponzi schemers, he used falsified monthly statements to cover up his scheme.

Moss's scheme was longer, according to the U.S. Attorney's office, but involved fewer victims. Approximately 22 people invested $3.1 million with Moss from 2001 through Feb. of 2009. Moss falsely claimed that he was generating substantial profits (from 22 to 41 percent annually) from options trading in the commodities futures market, and that none of his investors had ever lost any capital. In fact, Moss lost $342,264 in the commodities futures market between 2003 and 2009, and made Ponzi-style payments to investors to cover up his scheme. He also misappropriated a portion of investor funds for his personal use.

Sentencing dates for the two men have not yet been set. Both men face a potential 25 years in prison and/or a $250,000 fine. Moss has already agreed to pay $2 million in restitution to victims of his scheme. The agreement was part of a July case brought by the U.S. Commodity Futures Trading Commission (the CFTC).

For additional information about the two investment schemes, read the full Department of Justice press release here.

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4 Smart Tips for Spotting Retirement Scams

Wed, 28 Sep 2011 08:00:00 EST

FINRA and the SEC recently released a joint fact sheet to help Americans spot retirement scams, including early retirement schemes, which typically lure investors with promises of early retirement without significant lifestyle changes.

A real-life example included in the fact sheet was a scheme pitched by a broker at a "free seminar" that promised attendees an early retirement if they cashed out their 401(K)s and pensions and opened a traditional IRA at his firm. He said they could earn returns of up to 18 percent, but failed to mention the risks associated with the high-risk investments he was pitching. The plan outlined by the broker proved unrealistic and unachievable for the majority of the investors who followed it, and many lost a significant portion of their retirement nest eggs before realizing they'd been mislead.

"Signing on to an early retirement investment strategy presents risks. It only makes sense if you have saved enough to begin with, make smart investment choices during your retirement years and withdraw money at a rate that does not deplete your savings too early," warned FINRA and the SEC in the fact sheet.

To help root out early retirement scams, the organizations recommend investors watch out for the following claims:

• Everyone can retire early! Not true, say FINRA and the SEC. "The reality is that many employees simply do not have the resources to do so."

• You can make as much in retirement as you can by continuing to work! "Promises like this usually hinge on unrealistically high returns on investments and unsustainably large yearly withdrawals," they warned.

• You can expect high returns of 12 percent or more! "The stock market is inherently volatile-it goes up, and it goes down," warned the organizations. "Over the past 80 years, there have been many short term periods that produced returns well below the historical average of 9.6 percent."

• You can withdraw 7 percent or more and never run out of money! "While there is no perfect consensus on what this withdrawal rate should be, the uncertainty of return, market fluctuations and increased life expectancies among other factors argue for being conservative with your withdrawals, especially during the first years of retirement. Many experts recommend withdrawal rates between 3-5 percent per year, especially in the first years of retirement."

For more tips on how to spot and avoid retirement scams, read the full fact sheet here.

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Man in Alleged NC Securities Fraud Caught Holding Estate Sales after Asset Freeze

Tue, 27 Sep 2011 08:00:00 EST

According to an emergency court order sought by an attorney for the US Securities & Exchange Commission (SEC), Stanley Kowalewski was found to have been holding estate sales to sell off interior home items from his $1.7 million home in Summerfield, North Carolina. This is despite an ongoing securities fraud investigation and a freeze on his assets. Kowalewski was accused earlier this year of bilking investors out of $8.6 million.

Kowalewski apparently held these estate sales and, according to the SEC attorney, this resulted in "looting of the house of fixtures, light fixtures, doors, kitchen cabinets and other items." The total cost of the items is estimated to be $175,000 at the least, and does not include replacement costs. Many of these items will need to be replaced before the home can be sold. Neighbors also report that during these sales, there were garages full of furniture and other items for sale. Kowalewski has also apparently failed to continue homeowner's insurance coverage on the property.

Kowalewski allegedly took $16 million from investors through his SJK Investment Management and used some of the investors' cash for his own purposes, including a $3.9 million house in Pawley's Island, South Carolina, where he has recently moved with his family.

The securities fraud lawyers with the Law Firm of Meyer Wilson represent investors nationwide in stockbroker mediation, arbitration, and litigation.

Massive Investment Fraud Targets African-American Investors

Tue, 27 Sep 2011 08:00:00 EST

Roy Fluker, of Highland Park, has been sentenced in an alleged far-reaching investment fraud scheme that took $10.7 million from investors. Fluker's son and daughter were also allegedly involved and were convicted late last year.

Roy Fluker, along with his previously convicted family members, are said to have done business through their company All Things in Common, which did business as More Than Enough and Locust International.
They allegedly claimed returns of 25% each month over a one-year period in their "Spend and Redeem Program." They were also involved in their "Housing Program," which was supposed to reduce mortgage payments on a track to home ownership within five years.

Allegedly, the scam targeted African-Americans, who were found through local churches and hotels in Chicago. Some investors received Ponzi scheme-style payments, and about $3.4 million has been obtained since Fluker's accounts have been frozen. He has been sentenced, and it is expected that he will be ordered to pay restitution to the investment fraud victims.

If you have been the victim of a Chicago Ponzi scheme, contact an experienced and successful investment fraud attorney with The Law Firm of Meyer Wilson today.

Clinton Township Man Pleads Guilty to $40M Investment Scam

Mon, 26 Sep 2011 08:00:00 EST

Alan James Watson, of Clinton Township, Michigan, pled guilty on Thursday to one count of mail fraud in connection to an investment scam that defrauded 750 investors out of $40 million. The victims were located across the country, including in Michigan and in Virginia, where Watson entered his plea.

According to the plea agreement, Watson, acting as CEO of an "investment club" that he started in 2004, obtained $40 million in investor funds over the course of a three-year period (from 2006 to 2009) by promising investors they would earn returns of at least 10 percent per month through an equities-trading system. He then secretly invested the vast majority of the funds ($34 million) in high-risk ventures and lost nearly all of it.

"Without the consent of his clients, Mr. Watson gambled away investors' funds on risky ventures that led to millions of dollars in losses," said Assistant Attorney General Lanny Breuer in a Detroit Free Press article. "He used his investment club to cheat people who trusted him out of their savings."

Like many recent con artists, Watson attempted to cover up his scam by issuing false account statements and paying returns to older investors with new investor money. Investors only learned of the scam in 2010, after Watson had lost almost all of their money.

He faces up to 20 years in prison. His sentencing date is scheduled for Dec. 9 in Virginia.

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FINRA Considering Rule Proposal to Shorten Valuation Time Frame for Nontraded REITs

Mon, 26 Sep 2011 08:00:00 EST

FINRA may soon release a rule proposal that would potentially shorten the grace period for untraded REIT valuations.

As reported in a Sept. 20 InvestmentNews article, REITs currently have an 18-month grace period in which to value an REIT at par before an estimated market value is established. The grace period begins once the initial offering is closed to new investors, which typically occurs after about two years.

That means that an untraded REIT could show a $10 per share value (the typical par value for an untraded REIT) on client account statements for a period of three and a half years, regardless of the actual market value. Sponsors also typically find ways to extend the initial offering period in order to increase the amount of time before they have to establish a market value.

FINRA officials are concerned that such a long time frame for market valuation misleads investors, which is what the SRO alleged in a complaint filed against David Lerner Associates Inc. in May for activities related to the company's closed Apple REITs. In the complaint, FINRA said the REITs were "unreasonably valued...at a constant price of $11, notwithstanding market fluctuations, performance declines and increased leverage."

At least 122,000 people - the estimated number of investors in the Apple REITs since 1992 - were affected by the alleged unreasonable valuations. (If you were one of them, click here for tips on what to do next.) FINRA hopes that the potential rule change could protect investors by shortening and defining the length of time non-traded REITs like the Apple REIT Ten would have to record an estimated valuation.

Brokers and the public will be able to comment on the proposed rule before implementation. A publication date has not yet been set.

For more information about the potential proposal, read the full article here.

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Five Tips to Help Scam-Proof Your Portfolio

Wed, 21 Sep 2011 08:00:00 EST

The country's current economic climate continues to breed investment frauds and scams at astounding rates. But, not every investment adviser or broker is a crook, and not every opportunity is a scam. The trick to uncovering an investment scheme lies in these five steps.

1. Do your research. Before you invest, you should always check the registration status of any adviser, broker, brokerage firm, or security that you're considering. Call your states securities regulator to check the registration status and background of an adviser, or use FINRA's BrokerCheck to research a broker. You should also verify that any brokerage firm you're considering doing business with is a member of the Securities Investor Protection Corp. (SIPC), and that all the stocks and securities you purchase are registered with the SEC or your states securities regulator. For added peace of mind, consider checking up on a financial adviser through BrightScope's new financial adviser tool. (For more information on BrightScope, read our May 2, 2011 post here.)

2. Understand the investment. You should never invest in a stock, bond, fund, or other security or investment opportunity without knowing how it works. You should be able to explain (at a minimum) how the investment will make money, what fees/costs are associated with it, and the risks involved.

3. Verify your account's existence independently of your broker/adviser. Recent fraudsters have tried to cover up their investment schemes by issuing false account statements. If you can log on to your account online, check your paper statements against your online statements. Look for any inconsistencies, such as trades reported online that aren't shown on your paper statements or a balance difference. If you can't access your custodian or brokerage firm account online, call the company directly to check your account balance once a month, or once per quarter.

4. Only deposit money into your accounts through your custodian, brokerage firm, bank, or insurance company. Never give your financial adviser or individual broker cash or checks made payable to him/her unless it is for services payable directly to them.

5. Be wary of exaggerated claims or promises. Remember: In the world of investing, if it sounds too good to be true, it almost always is.

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Former UBS Adviser Sentenced to More Than 5 Years in Prison for $5.4M Fraud

Tue, 20 Sep 2011 08:00:00 EST

A former Walnut Creek, California financial adviser for the United Bank of Switzerland Financial Services, Inc. received a 65-month prison sentence last Thursday for stealing $5.4 million from his clients, according to a Sept. 15 FBI press release.

On June 9, Steven Kobayashi, of Livermore, California, pled guilty to one count of wire fraud and one count of money laundering in connection to the fraud. In his plea agreement, Kobayashi admitted to fraudulently transferring approximately $5.4 million in funds from his client's UBS accounts to his personal bank accounts over a period of approximately three years. Some of the transfers were made through forged authorization documents.

Last March, the SEC also filed charges against Kobayashi alleging that the former adviser misappropriated millions in investor funds through a pooled investment fund that he created. According to the SEC, the fund was supposed to be used to invest in life insurance polices, but Kobayashi allegedly stole much of the money and used it to "fund his extravagant lifestyle." Kobayashi agreed to settle the SEC's charges without admitting or denying the allegations.

Restitution will be ordered in a court hearing on Oct. 19. For more information, read the FBI's full release here.

About Our Firm:

The Law Firm of Meyer Wilson represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

NASAA Warns Investors to Watch Out for Online Investment Scams on Social Network Sites

Tue, 20 Sep 2011 08:00:00 EST

"Social networking in the Internet age allows people to connect to one another more quickly and easily than ever before. Investment promoters increasingly are logging on to find investors ... and their money." - NASAA

These days, it's hard to find anyone who isn't on at least one social networking website - and that includes con artists, says the North American Securities Administrators Association in a recently released investor advisory.

"While social networking helps connect people with others who share similar interests or views, con artists infiltrate these social networks looking for victims," warned the association. "By joining and actively participating in a social network or community, the con artist builds credibility and gains the trust of other members of the group."

To protect themselves, investors should watch out for the red flags of online investment fraud: promises of overly high returns, particularly without risk; prods to "recruit your friends;" lack of information or verifiability; offshore operations; and requests to transfer money through an e-currency account.

"If you have to open an e-currency account to transfer money, use caution," warned the NASAA. "These sites may not be regulated, and the con artists use them to cover up the money trail."

Additionally, the NASAA recommends investors always check with their state securities regulator before making an investment. Investors should also ask themselves these two questions before trusting anyone online with their hard-earning funds:

Have I verified that the promoter is legitimate?
Do I understand the risks of the investments?

For more tips on avoiding investment fraud on FaceBook, LinkedIn, Twitter, and other social networking websites, read the full NASAA investor advisory here.

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Portland Gold and Silver Investment Scheme Results in Fraud Charges

Sun, 11 Sep 2011 08:00:00 EST

Lawrence Heim, of Tigard, has been indicted on 13 counts of mail fraud and wire fraud after accusations that he took 1.7 million from defrauded investors.

According to the indictment, Heim was the owner of the Portland-based US Gold & Silver Investments, Inc. and offered investments in silver coins. Investors would pay Heim through the mail, and he would then transfer that cash to his Portland bank account. Unfortunately, Heim is accused of not delivering the promised coins. Investors did not receive refunds on the cash, either.

Some of the affected investors report they trusted Heim and have been doing business with him for a long time. Robert McCurtain was among those investors, and he had also recommended his brother and mother invest their cash with Heim. "It's hard to admit that somebody you thought was a friend could have done something like this," said Robert McCurtain. "Did I screw up? I don't know." He estimates that his family lost a collective $350,000 to the scheme, not taking the coins' appreciation into account.

Heim is due in federal court next month for the charges.

If you have lost money on a fraudulent gold investment or other Portland investment fraud, contact a qualified investment fraud attorney today at 1-866-8-BROKER.

Folsom Man Sentenced for Alleged Ponzi Scheme

Sat, 10 Sep 2011 08:00:00 EST

Luis Fernandez, of Folsom, has been sentenced to almost five years in prison in connection with an alleged affinity fraud and investment fraud scheme that targeted investors native to the Dominican Republic. Fernandez owned Fernandez Financial, Inc. and is accused of luring in 50 investors with the Ponzi scheme-style scam.

According to court documents, Fernandez offered monthly returns of 3% to investors. He brought in $7.4 million in this fashion, but he is accused of using the money to pay off earlier investors and himself.
Although some of the money was actually invested, Fernandez sustained losses for five out of the six years he ran the alleged scam. It is alleged that Fernandez misrepresented the investments, and reported that his company was doing well regardless of the performance of the market. Authorities say he concealed his losses and provided investors with false documentation.

Despite these losses, officials say Fernandez was able to pocket close to $1 million and purchase an expensive home and car.

Fernandez has been sentenced to four years and nine months in prison. He will be required to pay restitution to investors and has also been ordered to serve three years of supervised release after the prison sentence.

We represent investors nationwide in stockbroker mediation, arbitration, and litigation. If you have questions about your options after losing money in a Ponzi scheme, speak with one of our experienced and respected securities fraud attorneys today.

Desperate Floridians Easy Prey for Scammers and Con Artists

Sat, 10 Sep 2011 08:00:00 EST

Seniors are a prime target of con artists, which makes Florida - home to a large percentage of older Americans - a gold mine for fraudsters. Economic woes, including the foreclosure crisis, stock market volatility, and job losses, have also contributed to an ever-increasing number of Florida victims, according to a Sept. 5 article published on SunSentinel.com.

One such fraud, according to federal prosecutors, is a recent alleged investment scheme perpetrated by James Davis Risher of Sanibel and Daniel Joseph Sebastian of Lakeland. Prosecutors alleged that Risher and Sebastian swindled at least 106 investors, including many retired teachers, out of more than $21 million in a Florida Ponzi scheme that promised returns of up to 51 percent. (Risher has agreed to plead guilty to the fraud.)

To help protect investors, President Obama created the Financial Fraud Enforcement Task Force, which brought state and federal agencies together to fight fraud. The government also launched a new website for reporting suspicious investments: Stopfraud.gov.

The Florida state legislature has decided to expand the Florida Office of Financial Regulation, which will (in addition to other duties) help fight investment fraud on a state level.

Scammers and con artists target victims in person, online, through the mail, and over the telephone. For tips on avoiding Florida investment fraud, click here.

For more information, read the full article here.

About our law firm:

The securities arbitration attorneys with Meyer Wilson represent individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

Laguna Niguel Man Sentenced after Affinity Fraud and Ponzi Scheme

Fri, 09 Sep 2011 08:00:00 EST

William Warren Baker has been sentenced after accusations that he ran a $600,000 Ponzi scheme. The alleged scam was discovered when Baker's mother disappeared; as the search was underway for her, inconsistencies were found in her accounts that led to Baker. As of this time, Baker's mother remains missing.

Authorities say that Baker brought in investors by offering investments in property that would be refurbished and resold. Unfortunately, only one piece of property was purchased with the cash, and that property was transferred to Baker's son and then into a trust for Baker's wife.

Baker has been accused of choosing his Ponzi scheme victims from his close, personal contacts, such as friends and members of his church. Additionally, he has been accused of pocketing over $6000 from his mother's Social Security payments after she disappeared.

Baker pleaded guilty earlier this year to 13 counts of making false statement in the sale or purchase of securities. He also pleaded guilty to the aforementioned felony theft from the Social Security Administration. Baker was sentenced to ten years in prison and will pay fines and restitution to affected investors.

If you have been the victim of a California Ponzi scheme, our experienced securities fraud lawyers would like to speak with you. We have over 50 years of collective experience helping investment fraud victims recover their losses through stockbroker mediation, arbitration, and litigation.

Investors Beware: High Yield Equals High Risk

Fri, 09 Sep 2011 08:00:00 EST

Complicated, high-risk products have seen a surge in popularity over the last few years. Investors - wary of the stock market and anxious for returns - have been funneling more and more money into products they don't really understand, often at the advice of brokers or unscrupulous advisers who stand to make a profit on such transactions.

Unfortunately for investors, high yield always means higher risk. A fact many seem reluctant to admit, and one FINRA recently attempted to remind investors of in an August investor alert, titled "The Grass Isn't Always Greener-Chasing Return in a Challenging Investment Environment."

In the alert, FINRA advised investors to ask five key questions before investing in a high-yield product:

Do you understand how the investment operates?

What are the costs and fees associated with the new investment?

Is the product callable?

Does the higher return from the investment come with increased risk?

Could the new investment be fraudulent?

"Legitimate investments that promise returns of 30, 50 or even 100 percent per year without any risk to your principal simply do not exist," warned FINRA. Remember: Always conduct your own background checks to verify any information you're being given through FINRA's BrokerCheck and/or your state securities regulator. (FINRA says the answer to this will "invariably" be "yes.") "Callable" means the issuer has the option to redeem the investment prior to the investment's maturity. If the issuer decides to call the investment, "and you want to reinvest, you may find it difficult or impossible to find an equivalent investment paying rates as high as the original rate, a phenomenon known as reinvestment risk," wrote FINRA. Some products that promise higher yields, such as hedge funds and structured products, include hefty fees and hidden costs that can make it difficult to know how much you're paying.

For more information about risks and problems associated with specific high-yield products, read FINRA's alert here.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

Gregory Loles Barred From Securities Industry for Swindling Investors Out of $8.7M

Fri, 09 Sep 2011 08:00:00 EST

The SEC barred Gregory P. Loles, of Easton, Connecticut, from the securities industry on Tuesday for acting as an unregistered investment adviser and defrauding numerous investors (including officials and parishioners at St. Barbara Greek Orthodox Church in Orange) out of $8.7 million. Loles was the owner and operator of Apeiron Capital Management, Inc., located in Westport.

Aperion was a registered investment adviser and broker dealer from 1995 through 1998, after which the firm lost its registration status. Loles, nevertheless, continued to falsely represent Aperion as a registered investment management firm and to solicit investors on the firm's behalf.

Shortly after Thanksgiving 2010, he was indicted on 32 counts of securities fraud, mail fraud, wire fraud, and money laundering in connection to a $10 million investment scheme. He pled guilty in July. (For more information about the criminal case and Loles' plea, click here.)

Tuesday's Order permanently barred Loles "from association with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization."

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SEC Obtains Emergency Order Against Purported Life Settlement Co.

Thu, 08 Sep 2011 08:00:00 EST

Just before the holiday weekend, the SEC obtained an emergency court order against Daniel C.S. Powell and his L.A.-based company Christian Stanley Inc. to halt an alleged $4.5 million investment scheme.

The SEC believes that the company, a purported life settlements broker, and Powell "have spent the past seven years creating the illusion that it [Christian Stanley] was a legitimate company involved in the life settlement industry." According to the SEC, however, Christian Stanley's purported business ventures never existed and the company was never involved in the brokering of life settlements. Instead, the SEC alleges that Powell and the company simply used Christian Stanley's name to fraudulently raise millions of dollars from at least 50 investors nationwide.

The SEC's complaint accuses Powell of promising investors a fixed 5 to 15.5 percent annual rate of return in a fraudulent debenture offering. The complaint further alleges that Powell told investors that the notes were backed by assets worth billions, including a coal mine in Kentucky that supposedly held deposits valued at $11.8 billion.

Instead of using the money to purchase life settlement contracts or to develop gold and coal mines as promised, Powell and his company allegedly used investor funds for personal purposes and to make Ponzi-style payments to other investors. Among other expenditures (including the purchase of luxury cowboy boots and high-end vehicles), Powell is accused of spending nearly $5,000 of investor funds to register for a dating service.

"Powell and Christian Stanley created the façade of an actual business when in reality they have virtually no revenue," said Rosalind Tyson, Director of the SEC's Los Angeles Office, in the SEC's Sept. 2 news release. "Most of the money raised from investors has been used to finance Powell's extravagant lifestyle and for other purposes that have not been disclosed to investors."

The Honorable George H. King for the U.S. District Court for the Central District of California granted the SEC's request for a temporary restraining order and asset freeze against Powell and his companies last week. A preliminary injunction hearing is scheduled for Sept. 15.

For more information, read the SEC's litigation release here.

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"New Breed" of REITs Remains Flawed Despite Changes in Liquidity and Valuation

Thu, 08 Sep 2011 08:00:00 EST

Clarion Partners Americas LLC and American Realty Capital have recently begun pitching a "new breed" of non-traded real estate investment trusts (REITs), which supposedly addresses the "old breed's" problems of illiquidity and untimely valuation of units. According to an Aug. 28 InvestmentNews article, the new non-traded REITs will be valued daily and will place a larger percentage of assets in liquid products like cash and bonds.

Despite these changes, however, a lot of the old problems still exist.

"New" non-traded REITs, like old REITs, aren't listed on exchange. The amount of units available for repurchase is still capped around 5 percent. And, the number of units available for redemption is still up to the trust's management. Additionally, the initial valuation of the product may be below what investors pay for it, depending on how much is taken out initially for fees.

"For example, if investors pay $10 per unit for a non-traded REIT and then, after commissions and various fees, see it listed immediately at $8.70, that would ‘leave a bad taste in investors' mouths,'" said Stacey Chitty, a partner with Blue Vault Partners LLC, according to the InvestmentNews article. (Blue Vault Partners LLC analyzes the non-traded-REIT market.)

For more information about the risks of non-traded REITS, read our posts on mortgage REITs, unlisted REITs, and Apple REIT 10.

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Former CEO of Frontier Holdings Inc Found Guilty in $7.4M Investment Fraud Case

Thu, 08 Sep 2011 08:00:00 EST

Last week in U.S. District Court, a federal jury found Jeffrey Wallace "J.W." Edwards, of Bremen, Georgia, guilty of fraud. Over two years ago, Wallace, former CEO of Frontier Holdings Inc., was indicted and arrested on charges related to an alleged multi-million investment scheme.

Prosecutors accused Wallace of stealing $7.4 million from at least 31 investors from early 2006 to early 2007. Wallace was also accused of making fraudulent promises to investors, including that they would receive rates of return between 40 and 150 percent by investing in his "high yield" investment programs. According to court documents, Wallace also told investors that he owned a bank, that he had access to confidential investment opportunities, and that he was "a special agent" with the U.S. Federal Reserve.

"A man who lives in a small town in west Georgia allegedly persuaded investors from around the country that with his secret government contacts and other plans, he could make their money multiply into millions," said United States Attorney David E. Nahmias shortly after Wallace's arrest.

Prosecutors further alleged that Wallace never invested any of the investor funds, but instead used the money to pay for family vacations and to buy real estate, vehicles, jewelry, fur coats, and art.

Wallace was convicted of two counts of mail fraud, 17 counts of wire fraud, and 11 counts of money laundering. His sentencing date is set for Dec. 1. He faces up to 20 years in prison for each count of fraud, and up to 10 years in prison for each count of money laundering.

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California Investment Fraud Involved Elder Abuse Charges

Fri, 02 Sep 2011 08:00:00 EST

Back in October of 2009, Kenneth Doolittle was convicted on 20 counts related to theft and fraud for an investment scam involving his Monterey Bay Securities company in Aptos. Doolittle's sentencing hearing has just now been scheduled for September. The hearing had been delayed for nearly two years after Doolittle's attorney experienced health issues.

According to court documents, the charges included both fraud and financial elder abuse. The alleged
investment fraud promised returns of 13% for investors who put money into a company that remodeled and "flipped" mobile homes and reportedly targeted the elderly. Doolittle is said to have brought in about ten investors with the scheme.

Doolittle's sentencing will take place in Santa Cruz on September 7th and is expected to also address restitution for the affected investors.

If you have been the victim of a Santa Cruz investment scheme, you may be able to recover your losses. The experienced securities fraud lawyers with David P. Meyer & Associates have over 50 years of collective experience helping victims of investment fraud recover losses through FINRA arbitration, mediation, and litigation.

Georgia Investment Fraud Traps Investors, Warns Secretary of State

Thu, 01 Sep 2011 08:00:00 EST

Brian Kemp, Georgia Secretary of State, warned investors to be on the lookout for investment fraud in Georgia after the North American Securities Administrators Association (NASAA) issued its 2011 list of troubling financial products. Affinity fraud, distressed real estate schemes, promissory notes, and gold investment scams were among the most common tricky or fraudulent Georgia investments.

Secretary Kemp urged Georgians and their families to "carefully research all offers and those who make the offer before investing their money and resources. Georgia consumers should do business only with licensed brokers and investment advisers and should report any suspicion of investment fraud to us."

If you have been the victim of a Georgia Ponzi scheme or Atlanta real estate investment fraud, contact an experienced FINRA lawyer today at 1-866-8-BROKER for a free and confidential consultation. We are respected securities fraud lawyers who represent victims of investment fraud nationwide in stockbroker mediation, arbitration, and litigation. Let us help you recover your losses.

If you're concerned about your risk for investment fraud or stockbroker misconduct, read our free book: Five Signs of Investment Fraud ...And What to Do if it's Happened to You.

New Advocate Posed to Heat Up Universal Fiduciary Standard Debate

Thu, 01 Sep 2011 08:00:00 EST

Industry professionals and scholars have teamed up to launch the Institute for the Fiduciary Standard, a new nonprofit organization dedicated to advocating for the uniform adoption of the fiduciary standard. ("Fiduciary Standard Gets Powerful Advocate," InvestmentNews, Aug. 28, 2011).

"Misunderstandings abound about what "fiduciary' means," Knut Rostad, president and a founding member of the Institute for the Fiduciary Standard, said in a statement. "The institute provides a permanent platform to build a full program of advocacy and education on this important public issue."

The Institute's launch is yet another development in the heated debate over whether broker-dealers should be held to the same standard of care as investment advisers - a standard of care that includes providing guidance based on the clients' best interests, and disclosing all material conflicts of interest.

Generally, unlike investment advisers, broker-dealers are held only to a standard of suitability, which translates into a significantly lower standard of care - one that investors don't always understand.

"The suitability standard allows brokers to conceal most conflicts of interest from their clients and to escape any obligation to control investment expenses," Mr. Rostad wrote in a letter to the Editor of the NY Times. "For example, brokers do not have to tell a client when they are compensated more for selling certain products than others. Worse still, they aren't obligated by law to recommend the lower cost of two products with equivalent investment characteristics and comparable performance records."

The SEC recommended the adoption of a universal fiduciary standard in January. Less than two months later, the U.S. Department of Labor proposed applying the fiduciary standard to IRAs, a change that would greatly expand the number of financial professionals who would be considered "fiduciaries." (For more, read our March 9 blog post.)

Unfortunately for investors - who would greatly benefit from the expanded application of the standard - those opposed to the universal fiduciary standard have been as vocal and adamant in their opposition as the SEC and investor advocates have been in their support. A fact that only points to the need for a newer and more powerful advocate.

The Institute plans to meet with varying governmental authorities, including: members of Congress, the SEC, and the Labor Department, throughout the next few "critical" months and beyond. A Sept. 9 panel discussion on disclosure rules has already been scheduled.

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FINRA Issues Warning Against Hot Gold Stock Scams and Gold Investment Schemes

Thu, 01 Sep 2011 08:00:00 EST

A 2011 top investor trap, "hot" gold stock scams and gold investments schemes are all over the Internet. Investors still wary of the volatile stock market are lured to invest by aggressive sales tactics, ubiquitous marketing campaigns, and the high price of gold bullion. Unfortunately, according to a recent investor alert issued by FINRA, many of these heavily marketed "great deals" are scams.

"Many gold-related investment scams involve the stocks of gold mining and/or exploration companies," wrote FINRA. "The stock value is often based on gold reserves that are difficult to estimate, much less verify. While stock promoters regularly cite the potential value of a gold reserve, some statements can be deliberately misleading."

Last year, the SEC filed a fraud complaint against Quri Resources, Inc. (Quri), a purported mining company headquartered in Miami, Florida with operations in Ecuador, and its CEO, Jaime Santiago Gomez. The complaint accused Quri and Gomez of issuing "a series of false press releases and other misleading public statements" about Quri's gold mining activities, including the claim that the company "was ready to begin drilling on a mining project in Ecuador with a probable gold reserve worth over $1 billion." In reality, Quri had no money and no expectation of raising the funds necessary to begin the project.

To protect themselves from scams like Quri's, FINRA recommends investors investigate a marketing campaign or sales person's claims before investing in gold products, and check the SEC's EDGAR database for any available information about the company.

FINRA also suggests that investors watch out for the red flags that may signal a gold stock scam, such as:

The words "prime buyout target" in promotional materials;

"Price targets or predictions of swift and exponential growth;"

"Claims that tie stock performance to the general rise in gold prices;" and

Assertions that a mine could hold "billions in unrecovered gold," because of a neighboring mine's success.

For additional tips on avoiding gold investment schemes, read FINRA's full alert here.

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NASAA Releases 2011 Top Investor Traps and Threats

Tue, 30 Aug 2011 08:00:00 EST

The North American Securities Administrators Association Inc. recently released its top ten list of financial products and practices that con artists use to defraud investors out of their hard-earned money. This year's list of top investment frauds and investment scams is as follows:

Affinity Fraud. Affinity fraud has become increasingly prevalent in recent years. According to the NASAA, a recent national study found that 25 percent of Ponzi schemes use affinity fraud tactics. "The most commonly exploited are the elderly or retired, religious groups, and ethnic groups," warned the NASAA. "Investment decisions should always be made based on careful evaluation of the underlying merits rather than common affiliations with the promoter."

Bogus or Exaggerated Credentials. Recently, the U.S. has seen an unprecedented climb in the number of credentials available to professionals as well as an increase in the number of salespeople boasting meaningless or exaggerated professional designations. "Investors should press for full disclosure and the meaning behind all designations, and should check with their state regulator if they have any suspicions about claimed credentials," warned the NASAA.

Distressed Real Estate Schemes. The real estate crisis has led to the proliferation of investment offerings involving distressed real estate. "While many legitimate investment offerings are tied to real estate, investment pools targeting distressed real estate have become increasingly popular with con artists as well as investors," said the NASAA. "Investments in properties that are bank-owned, in foreclosure, pending short sales or otherwise in distress inevitably carry substantial risks and should be evaluated carefully."Credentials and fancy titles conjure up trust and authority in the eyes of investors, a fact that both legitimate financial professionals and con artists use to their advantage.

Energy Investments. Energy investments are volatile and risky investments, even when they're legitimate, and a total loss of principal is more common than most investors want to believe. Add to that the fact that many fraudsters use high-pressure sales tactics to convince investors of the investments' "bountiful" yields and "unparalleled" returns, and you have an investment that's simply too risky for most investors. "Energy investments tend to be poor alternatives for those planning for retirement and should be avoided by anyone who cannot afford to strike out when trying to strike it rich," the NASAA stated in the announcement.

Gold and Precious Metals. Con artists often claim that investments in gold and precious metals are sure-fire ways to earn solid, risk-free returns. This simply isn't true. According to the NASAA, this past spring saw a 30 percent decline in silver's value over a mere three-week period. And, many gold schemes involve "sales" of gold that don't even exist. For an example of a recent gold scam, click here.

Mirror Trading. A new trend in social media, mirror trading, can be used by fraudsters to launch fraudulent investment schemes, to manipulate the markets, and to misrepresent their professional credentials. "Investors [who partake in mirror trading] should not be lulled into a false sense of security, and they need to continue to objectively evaluate and carefully consider all new or popular investment platforms," warned the NASAA.

Private Placements. Much has been written on the unsuitable nature of private placement investments for the majority of investors. They're highly illiquid, risky products, and they are only marginally regulated, if at all. While there are legitimate opportunities involving private placements, these products are commonly used to mask an investment fraud.

Promissory Notes. Promissory notes are inherently risky products, and they are quickly becoming a fraudster favorite. To learn more about how promissory note fraud schemes work, read our investor article here.

Securities and Investment Advice Offered by Unlicensed Agents. Securities regulators have seen a consistent increase in investment advice being handed out by unlicensed sales agents, particularly in the insurance field. "Investors are often unaware that their insurance agent may not be licensed to give investment advice, and these recommendations too often turn out to be unsuitable or result in investors placed in under-performing products or those with hidden fees or long lock-up periods," warned the NASAA. Investors should insist on seeing a proper license before following anyone's investment advice.

Securitized Life Settlement Contracts. While there are legitimate life settlement contracts and investments, the majority of "securitized" life settlement contracts (i.e. investments that combine life settlement contracts with traditional securities) are nothing but frauds. Often they leave "victims with nothing but worthless paper issued by a bonding company that does not maintain sufficient assets to fulfill the guarantee, operates in an unregulated overseas territory or simply does not exist," said the NASAA.

To learn more, read NASAA's announcement here. To find out how to protect yourself from investment fraud, browse our investor library here.

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Recession Causes Rise in Fraud and Rise in Convictions

Mon, 29 Aug 2011 08:00:00 EST

In mid-2009, Time Magazine published an article that declared the United States was in a "boom time for scams." Two years later, that's still true.

In a recession, economic uncertainty causes many investors to look for big returns with little risk - a combination that rarely exists outside the promises of a con artist. And, with more investors desperate to believe in guaranteed, high-yield investments, schemes proliferate to an alarming degree. New ones start almost daily, while old ones (started prior to the recession) fall apart and make weekly headlines.

The rise in investment schemes that fall apart, however, gives us a good way to measure fraudulent activity during a recession: we can watch for trends in the amount of restitution ordered by the state.

In Montana, for example, only $2 million was ordered in 2008, but just two years later the state ordered restitution was a whopping $116 million ("Fraudulent securities dealings spiked in recession," Associated Press, Aug. 20, 2011).

Montana Commissioner of Securities and Insurance Monica Lindeen said this trend could be explained by understanding that a lot of big-money rackets (such as Bernie Madoff's infamous Ponzi scheme) fall apart when new investments dry up.

Montana officials say this is what happened to convicted Ponzi schemer Arthur Heffelfinger of East Helena. In 2001, Heffelfinger began running a scam that bilked investors out of $2 million. When the money ran out, and no new investments could be brought in, the scheme collapsed in 2009. Heffelfinger was sentenced to 10 years in prison, and ordered to pay $1 million in restitution.

Other fraudsters who found themselves convicted and ordered to pay restitution for investment fraud and/or theft after their schemes unraveled during the recession, include: William Arthur Sassman II, Antoinette Hodgson, Matthew and Lance La Madrid, and Dan Wise. (For more information about these schemes, click here.)

To learn how to protect yourself from investment fraud and securities scams, browse our investor library.

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A&O Entities Sentenced to Prison for $100 Million Fraud Scheme

Fri, 26 Aug 2011 08:00:00 EST

There were 800 victims, many elderly, harmed by an alleged fraud scheme that spanned the United States and Canada, costing victims $100 million. Five people from A&O Resource Management, Ltd., pleaded guilty and were sentenced in a Virginia court.

"The impact of this massive fraud on many of A&O's investor victims has been disastrous," said U.S. Attorney MacBride. "Hundreds of elderly investors invested their life savings with A&O and saw it all vanish in an instant. These investors were not looking for quick cash, just a safe alternative to invest their retirement funds. The safety, security, and no-risk nature of the investment was critical to the sales pitch, and it was all a big fat lie."

"Brent Oncale and his co-conspirators operated a sham investment company that turned fraud and deceit into a business model," said Assistant Attorney General Breuer.

A&O allegedly marketed life settlement products and terms that did not exist to investors. They supposedly painted a picture that exaggerated the actual size and safety of A&O. When regulators became suspicious, principals reportedly falsely sold the company to throw state regulators off in their investigation.

The investigation was conducted by the Virginia Financial and Securities Fraud Task Force, a partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases around the nation. The task force is an investigative arm of the President's Financial Fraud Enforcement Task Force, an interagency national task force.

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The Law Firm of David P. Meyer & Associates represents investors in stockbroker mediation, arbitration and litigation claims. Contact us toll-free at 1.866.8.BROKER or complete the online form on the top of this page to learn more about what an investment fraud attorney can do for you.

Real Estate Group Allegedly Stole, Forged, and Embezzled Investors' Money.

Thu, 25 Aug 2011 08:00:00 EST

Carl Miller, as head of Orinda Real Estate Investment Group, has reportedly been living a lavish lifestyle for a number of years. He has recently been accused of nine counts of embezzling, totaling around $1 million, from various investors; he also faces charges of theft and forgery.

Miller allegedly cheated clients out of their money by orchestrating Ponzi schemes or giving investors fraudulent information.

One of the most shocking allegations against Miller is the accusation that he embezzled $16,000 of Troop funds after acting as treasurer of Orinda Boy Scout Troop 327 until 2010. Although the money was returned after a short period, the prosecutor notes that it still constitutes a felony.

The district attorney's office launched their investigation into Miller over a year ago after investors began requesting intervention and help.

Other investors took over the $10 million fund managed by Miller after rumors of his misdeeds. Miller has pleaded not guilty and his preliminary hearing was just pushed back to September 22nd.

Miller is a part of a trend of the struggling economy, where investment firms get creative with pitching fraudulent investment schemes to vulnerable investors.

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The Law Firm of David P. Meyer & Associates represents investors in stockbroker mediation, arbitration and litigation claims. Contact us toll-free at 1.866.8.BROKER or complete the online form on the top of this page to learn more about what an investment fraud attorney can do for you.

Securities Fraud Could Impact Schools; Asked to Return Stocks

Wed, 24 Aug 2011 08:00:00 EST

Tabor Academy received $1.52 million in stock from John Mazzuto, and they even named their Mazzuto Math Wing after him. Tabor's headmaster praised Mazzuto, and said, "Appreciate is probably not a strong enough term because it is probably impossible for me to measure all that has gone into the creation of this gift." Yale University, too, received a generous gift of $1.7 million in stock from Mazzuto. A few others schools also received gifts of stock.

Unfortunately, Mazzuto recently pleaded guilty in a $110 million securities fraud case and will be sentenced next month. His New York-based Industrial Enterprises of America (IEAM) has already filed for bankruptcy and settled.

Mazzuto, along with partner James Margulies, allegedly dealt in illegally issued employee stock options. According to court documents, Mazzuto and Marguiles were using a "pump and dump" scheme with IEAM's stock via accounting fraud and were also "printing money". This allowed them to keep the company's stock high, while they took freely from the company to fund personal expenses and lavish gifts.

Yale University has already returned $1 million in stock, but Tabor Academy is still fighting to keep the Mazzuto stock. None of the schools affected were in any way aware of Mazzuto's alleged securities fraud.

The securities fraud attorneys with David P. Meyer & Associates represent victims of securities fraud nationwide in stockbroker mediation, arbitration, and litigation claims.

Stanford University and FINRA Unite to Fight Fraud

Tue, 23 Aug 2011 08:00:00 EST

The Financial Industry Regulatory Agency has teamed up with Stanford University's Center on Longevity to launch the new online Research Center on the Prevention of Financial Fraud.

Explaining the need for the Center, FINRA wrote: "Financial fraud, ranging from Ponzi schemes to online phishing scams and work from home schemes, swindles Americans out of billions of dollars each year. While emerging technologies continue to fuel the expansion and reach of financial fraud, this joint initiative will support and consolidate scientific research and connect this research to practical prevention and detection efforts."

The Research Center's goal is to serve as an interdisciplinary resource for law enforcement, government and research groups studying financial fraud in an effort to further investor education and protection. The Center also will act as a clearinghouse for news and research about financial fraud. Visitors to the website will find an overview of financial fraud, along with "fraud facts," and featured research and news articles.

Stanford faculty in psychology, economics and business will work with FINRA officials, the SEC, and other organizations to promote and establish research that answers the following questions:

Who is most susceptible to financial fraud?

How can people be effectively protected against fraud?

What techniques do fraudsters use to persuade victims?

Why do people fall victim to fraud? and

What is the economic and emotional impact of fraud in the U.S.?

"By providing a comprehensive source of information for researchers, advocates, and law enforcement agents, as well as facilitating further interdisciplinary research, the Research Center hopes to contribute to the fight against financial fraud," says the Center on its website. "The financial security of all Americans depends on their ability to protect their savings and investments for the future."

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Iowa Business Owner Permanently Barred from Selling Securities

Tue, 23 Aug 2011 08:00:00 EST

Shane A. Sterling, owner of the now defunct Sterling Wealth Management in Pleasant Hill, Iowa, has agreed to give up his brokerage license and to be barred permanently from the securities industry in a settlement with FINRA, which was reached last month, but announced only late last week.

FINRA alleged that Sterling violated securities industry regulations by engaging in a pattern of unsuitable and improper mutual fund switches in the accounts of five customers, and then falsifying documents to cover up the unsuitable transactions. Several of the investors had little investment experience and limited funds. Four out of the five were senior citizens.

According to FINRA's records, Sterling submitted approximately 51 falsified documents related to the five customer accounts to Workman Securities Corp., a company for which Sterling serviced customer accounts for a little over three years. The relationship between the companies was terminated in 2010 at Workman's request, after the improper transactions were brought to light.

In the falsified documents, Sterling allegedly claimed that the "unsolicited" investments were requested by the investors. FINRA's records show that the investments were, in fact, solicited and recommended by Sterling.

Sterling neither admitted nor denied FINRA's allegations. He did, however, consent to the findings.

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Former Nebraska City Brokers Sentenced in $20M Investment Fraud Case

Sat, 20 Aug 2011 08:00:00 EST

Former Nebraska City broker Brian Schuster was sentenced to 16 years in prison on Tuesday for his role in an investment fraud that involved the sale of more than $20 million in risky investments to hundreds of Nebraska-area investors. Rebecca Engle, also a former Nebraska City broker and Schuster's partner in the fraud, was sentenced to six years.

The two defendants were indicted in 2009 on multiple felony fraud counts. According to the Beatrice Daily Sun, Schuster agreed to plead no contest to four counts of indirect material omissions after Engle agreed to help the prosecutors with their case and to plead guilty to two charges of fraud. Schuster and Engle were each charged originally with eight counts of fraudulent acts related to the sale of securities.

According to authorities, Schuster and Engle, as registered brokers with broker-dealer Capital Growth Financial, promoted and sold risky investments in American Capital Corporation and Royal Palm for Florida-based Royal Palm Securities Group. Court documents alleged that the defendants "portrayed" the high-risk investments "in glowing terms, as can't miss deals; as safe and secure; as very profitable."

"The great majority of the investors ... were long time clients of Engle and Schuster who trusted Engle and Schuster would only recommend investments suitable for their circumstances," prosecutors alleged in the affidavit.

Last April, Schuster reached a $30 million settlement with more than 200 of the fraud's victims.

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Philadelphia-Area Business Owner Pleads Guilty to $17M Ponzi Scheme

Fri, 19 Aug 2011 08:00:00 EST

Robert Stinson, Jr., of Berwyn, Pennsylvania, pled guilty to 26 federal charges on Monday in relation to an investment scheme that defrauded at least 260 investors out of more than $17 million.

According to the FBI, Stinson's Ponzi scheme started in 2006, when he began soliciting investments through his company, Life's Good Inc. Stinson told investors their funds would be invested in one of four different real estate hedge funds, which would render fixed returns of between 10 and 16 percent. In reality, Stinson often used the funds to pay business expenses and to fund his personal lifestyle, which included the rental of a lavish mansion, and the purchase of two Mercedes Benz sedans.

A convicted criminal, Stinson's record shows multiple convictions for fraud, a fact he withheld from investors. He also neglected to mention his two bankruptcies and that the SEC had previously enjoined him from committing securities fraud. Further lies included that he was a graduate of the Massachusetts Institute of Technology, and that he possessed a "wealth of business experience."

"What makes this particularly harmful is he went after people who were investing their retirement. A number of people lost their entire retirement funds," said Assistant U.S. Attorney David Axelrod.

Stinson pled guilty to five counts of wire fraud, four counts of mail fraud, nine counts of money laundering, one count of bank fraud, three counts of filing false tax returns, two counts of obstruction of justice, and two counts of making false statements to federal agents. His sentencing is scheduled for December 13.

He faces up to 34 years in prison.

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Former Triton CEO Found Guilty on 39 Counts for $75M Ponzi Scheme

Fri, 19 Aug 2011 08:00:00 EST

This week, a federal jury found Kurt Barton, former CEO of Austin-based Triton Financial, guilty of running a $75 million Ponzi scheme that defrauded approximately 300 investors out of more than $50 million. Victims included: professional athletes David Akers and Ty Detmer, business owners, members of the Church of Jesus Christ of Latter Day Saints, a retired teacher, an Austin-area hotel owner, and Barton's own family.

Prosecutors accused Barton of raising $75 million for investments in real estate and business, and then using the funds to pay Triton's company expenses, to make Ponzi payments to other investors, and for his personal purposes. Of the funds raised, less than one third was returned to investors. At least $2 million was spent on luxury football tickets, sports cars, private jets, and clothing for Barton's family.

According to court testimony, Barton frequently lied to investors, particularly about the nature of their investments. Investigators said Barton solicited and received funds for investments in properties that never existed, and that he promised "free and clear" titles to investors for properties that were later used by Triton as collateral.

Barton's attorney defended Barton by saying that, while he certainly mismanaged the company, he never meant to defraud any of the investors. It was a defense, however, that the jury obviously didn't buy.

After six hours of deliberation, the jury found Barton guilty on 39 federal counts, including: securities fraud, wire fraud, false statements related to loans, money laundering, and conspiracy. He faces a life in prison.

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Fresno Ponzi Scheme Victims Will Probably Only Receive "Pennies on the Dollar"

Thu, 18 Aug 2011 08:00:00 EST

While restitution has been ordered in a complicated Fresno Ponzi scheme case, victims are unlikely to see much of their lost cash again. The Fresno County Superior Court has ordered $46.5 million be paid to over 1,200 investors, who are mostly from Fresno's Armenian-American community. A securities fraud attorney in the case has stated that the victims of the alleged Ponzi scheme should receive something, "but it will be pennies on the dollar."

John W. Otto allegedly ran the scheme through three companies he created: HL Leasing Inc., Heritage Pacific Leasing, and Air Fred LLC. Many arrests were made in the case, and several employees of the companies have been held liable. Otto committed suicide in 2009, further complicating the case, but his wife and two employees took part in the three-week trial for the California Ponzi scheme.

According to officials, the Ponzi scheme targeted members of both St. Paul's Armenian Church and Holy Trinity Armenian Apostolic Church. The investment fraud spread through the congregations by word of mouth once the initial investors saw returns. Unfortunately, it is alleged that the money taken in was being used to pay off previous investors instead of going into the American Express lease agreements that were promised. It is alleged that Otto's wife and employees knew about the Ponzi scheme, but kept quiet in order to fund their lavish personal expenses.

David P. Meyer & Associates represents victims of California Ponzi schemes in stockbroker mediation, arbitration, and litigation. We are respected investment fraud attorneys and have recovered millions of dollars for our clients.

Are Mortgage REITs Too Risky?

Wed, 17 Aug 2011 08:00:00 EST

For the average investor, the answer is yes.

Though many investment advisers will say new mortgage REITs are great investment vehicles for certain investors, the truth is they're simply too risky for most. Average investors are generally looking to maximize their returns while minimizing their risk. REITs are not usually appropriate for these investors.

REITs are complicated, and they carry hefty commissions, upfront costs, and ongoing fees. They're also typically focused on one type of real estate, which means they're more vulnerable to market changes than more diverse products.

Currently, for example, mortgage REITs (which use mortgage-backed securities as collateral to borrow money and buy bonds) are advertising dividends of 14 to 20 percent. But, those dividend payments are anything but stable. If the cost of borrowing goes up, or investors get worried the market will freeze, the yields could plummet. The latter is exactly what happened just a few days ago, when worries over the potential for a U.S. default sent the market into a panic. In a matter of hours, some mortgage REITs dropped almost 19 percent.

Still, despite the risks and FINRA's recent warnings about chasing high returns, advisers continue to recommend these products to clients, and investors continue to purchase them. To protect themselves, investors should fully understand how a product works - and the risks involved with the product - before they invest.

If you have purchased an unsuitable REIT, such as Apple REIT 10 or a mortgage REIT, you may have a claim for misconduct. To learn more about recovering your losses, click here.

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San Francisco Investment Scam Takes $7 Million from Family, Friends, and Girlfriend

Wed, 17 Aug 2011 08:00:00 EST

Robert Tunnell, a former San Francisco attorney, has been charged with running a California Ponzi scheme that took $7 million from victims. The victims in the alleged investment scam were mostly made up of Tunnell's family and friends, including even his girlfriend.

Officials allege that, starting in 2006, Tunnell took the guise of a skilled investor and enticed investors with promises of conservative, low-risk investments that would provide high returns. Of the $10 million he took from investors, $7 million was lost on risky investments. The remaining cash was used to pay off a bank debt and earlier investors.

Tunnell had previously been accused, among other charges, of taking $300,000 from the law firm where he was employed. He resigned from the California State Bar in 2001 and allegedly began offering to invest for family and friends, claiming he received no financial gain for doing so.

Tunnell faces 7 counts of mail fraud, 13 counts of wire fraud, and 1 count of money laundering. He is currently free on bond.

The experienced securities fraud attorneys with David P. Meyer & Associates have recovered millions of dollars for our clients and are devoted to helping victims of Ponzi schemes nationwide recover their losses.

Rhode Island Man Convicted in Providence Investment Scam

Wed, 17 Aug 2011 08:00:00 EST

Rocco DeSimone, a former Rhode Island art dealer, was convicted of money laundering and mail fraud earlier this year. He has now received a stiff sentence of 16 years in prison, which is nearly the maximum sentence, and has been ordered to pay $6 million in restitution to his victims following his release.

DeSimone's alleged investment scam involved an invention that would allow military personnel wearing gas masks or respirators to connect beverage containers to their masks. It has been alleged that DeSimone made false statements to investors and also told the inventor that he would sell the invention for a stake in the patent. DeSimone was also allegedly involved in similar schemes with other inventions. Investors were apparently brought in on false promises that the inventions were receiving buy offers from international corporations.

Many of DeSimone's alleged victims lost a lot of money in the scheme and were left with nothing. An attorney in the case commented that "justice was served today. Rocco DeSimone is a remorseless, recidivist thief. He deserves every day of the 16 years he was sentenced to today."

The law firm of David P. Meyer & Associates represents victims of Rhode Island investment fraud in stockbroker mediation, arbitration, and litigation claims. Give us a call today at 1-866-8-BROKER to discuss your recovery options.

Tropical Paradise Becomes Nightmare for Victims of $8 Million Maui Ponzi Scheme

Wed, 17 Aug 2011 08:00:00 EST

Lloyd Kimura, brother of Hawaii County Prosecuting Attorney Jay Kimura, was sentenced on July 13th for his alleged involvement in an $8 million dollar investment scam in Hawaii. According to officials, the long-running Maui Ponzi scheme was operated through Kimuri's Maui Industrial Loan & Finance Company and affected 50 investors.

It is alleged that from 1986 - 2009, Kimuri kept up the appearance of legitimacy by paying earlier investors with money brought in from new investors. Kimuri is also said to have funneled some of the investment money into his personal businesses, including Maui Industrial & Finance Company, Wailuku Tire Company, and an accounting company.

Kimuri has been sentenced to 12 years in prison without parole and will pay restitution to his victims. Because Kimuri's assets will not even come close to covering the $8 million he owes, he will be required to pay 10% of his income toward restitution after he is released. Kimuri will be serving a previously determined sentence of 20 years, which was for breaking state securities laws, at the same time.

Regarding the harsh sentence, Judge David Ezra said "The defendant clearly betrayed the trust of his clients and friends in a scheme that lasted nearly two decades. I do hope this will send the right message to individuals that they had best not engage in inappropriate conduct. ... They will not receive a slap on the wrist."

The investment fraud lawyers with David P. Meyer & Associates represent victims of Ponzi schemes nationwide in stockbroker mediation, arbitration, and litigation claims.

SEC Charges Stifle, Nicolaus & Co and Executive with Defrauding Wisconsin Schools

Tue, 16 Aug 2011 08:00:00 EST

The SEC has accused St. Louis-based brokerage firm Stifel, Nicolaus & Co. and a former senior executive of defrauding five Wisconsin school districts by selling them unsuitable, risky, and complex investments, according to an Aug. 10 SEC news release. The SEC filed the complaint in Milwaukee on Wednesday.

The SEC alleges that Stifel and Senior Vice President David W. Noack created a "proprietary program to help the school districts fund retiree benefits" through the investment of notes linked to the performance of synthetic collateralized debt obligations (CDOs), but grossly misrepresented the riskiness of the investments to the districts. (According to the complaint, Stifel and Noack said it would take "15 Enrons" for the investments to fail.)

The SEC also alleged that Stifel and Noack failed to disclose certain material facts to the districts, including the fact that certain CDO providers felt Stifel's proprietary program was too risky, and therefore declined to participate in it.

According to the complaint, the school districts set up trusts to deposit $200 million of primarily borrowed money into the notes in a series of three transactions over the last seven months of 2006. The investments were a complete failure. In addition to their losses, the school districts suffered a downgrading of their credit rates due to their inability to provide additional funds to the trusts they had established.

"Stifel and Noack abused their longstanding relationships of trust with the school districts by fraudulently peddling these inappropriate products to them. They were clearly aware that the school districts could ill afford to bear the risk of catastrophic loss if these investments failed," said Elaine C. Greenberg, Chief of the SEC Division of Enforcement's Municipal Securities and Public Pensions Unit.

The SEC's complaint listed the five defrauded school districts as: Kenosha Unified School District No. 1, Kimberly Area School District, School District of Waukesha, West Allis-West Milwaukee School District, and School District of Whitefish Bay.

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Citigroup Fined $500K for Failure to Supervise Sales Assistant

Tue, 16 Aug 2011 08:00:00 EST

This week, FINRA fined Citigroup $500,000 for failure to supervise Tamara Moon, a former registered sales assistant at the firm's branch office in Palo Alto, California.

Moon was barred from the industry in 2009 after she misappropriated $850,000 from at least 22 customers over a period of eight years. She also falsified account records and engaged in unauthorized trades. Many of her victims were elderly and vulnerable individuals, including a senior with Parkinson's disease. Moon committed these deeds while working as a registered sales assistant for Citigroup Global Markets.

In the 2009 news release, which announced FINRA's actions against Moon, Susan L. Merrill, FINRA Executive Vice President and Chief of Enforcement, said: "Firms have an obligation to supervise all of their personnel, including sales assistants who have access to confidential customer account information. The sales assistant in this case violated investors' trust by using her knowledge of customer accounts to prey upon the firm's most vulnerable customers."

In this week's release, FINRA said Citigroup was partially responsible for Moon's actions because the firm failed to detect and investigate the "red flags" that should have alerted the firm to Moon's misappropriation of customer funds.

"Tamara Moon used her knowledge of Citigroup's lax supervisory practices at the branch to take advantage of some of the firm's most vulnerable customers, including the elderly. Citigroup had reason to know what she was doing and could have stopped her," said Brad Bennett, Executive Vice President and Chief of Enforcement.

Citigroup compensated Moon's victims for their losses in 2009.

For more information, read the 2009 release here or this week's release here.

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California Investment Scam Results in Securities Fraud Charges and Prison Time

Mon, 15 Aug 2011 08:00:00 EST

Gary Mountain, 61, has pleaded no contest to five counts of felony securities fraud in San Jose. The charges come in connection with an alleged $1.2 billion real estate investment scam that affected over a dozen people.

Officials say the investment scam was operated through Mountain's California Star Properties. As a licensed real estate agent, Mountain allegedly obtained a commercial building and a hospital and convinced victims to invest in the properties. Mountain paid very little for the properties, as both were seriously dilapidated. In fact, the city had the commercial building torn down for being a "structural catastrophe." The hospital was also in bad shape and was subject to a balloon payment of at least six figures.

According to court documents, Mountain then convinced his victims to invest in these properties. In at least one case, the victim was convinced to sell her own home at a loss and invest in Mountain's properties instead. The victim was a 68-year-old woman who has since passed away.

A five year prison sentence has been ordered in the case, and Mountain will likely also be required to pay compensation to his victims.

The investment fraud lawyers with David P. Meyer & Associates are devoted to helping victims of Ponzi schemes and other investment scams recover their losses. We have over 50 years of collective experience representing clients in California and nationwide in stockbroker mediation, arbitration, and litigation claims.

Securities Fraud Case Is Second Accusation for Former Fraudster

Thu, 11 Aug 2011 08:00:00 EST

Barry Minkow, who has already served seven years of prison time for an investment scam in the past, is now facing sentencing in a new securities fraud case against him. He faces a potential five years in prison this time around, but has started a campaign for leniency in his case, including writing letters to the US District Judge in Miami and filing testimonials.

Minkow has been accused of being involved in the manipulation of stock for Lennar Corp. Minkow admitted in March of this year that he wanted to bring the Florida company's stock price down and that he made illegal bets that the shares would go down. Minkow apparently wanted to collect cash and stocks from Lennar Corp. in exchange for his retraction of accusations made against them. Lennar fought back, and Minkow has been ordered to pay the company $585 million.

After his original prison sentence for investment fraud in the 1980's, Minkow started his Fraud Discovery Institute, in which he touted himself as a fraud-detection specialist and government informer. He also became the pastor of Community Bible Church in San Diego. Unfortunately, he's been accused of funneling church funds into his Fraud Discovery Institute, as well.

Minkow claims that he has "deep character flaws" and expresses regret and a desire to change. Minkow claims to suffer from multiple ailments in his campaign for leniency, including Attention Deficit Disorder, migraines, and hormone issues. Minkow believes that these disorders "will tax the medical services of the Bureau of Prisons." Minkow also cites his two learning-disabled sons as a reason for leniency in his case.
The investment fraud attorneys with David P. Meyer & Associates help victims of Florida investment scams recover losses through stockbroker mediation, arbitration, and litigation.

FINRA's Announces Plan to Allow FINRA Arbitration for Investment Advisers

Thu, 11 Aug 2011 08:00:00 EST

In Jan., the SEC submitted a recommendation to Congress that offered an expansion of the Financial Industry Regulatory Authority's (FINRA) powers of oversight to include some registered investment advisers as one method for improving the regulatory system. The suggestions for improvement were required by the 2010 Dodd-Frank financial reform law.

Yesterday, FINRA officials announced that the organization will "definitely offer dispute resolution to investment advisers" if Congress votes to expand its authority as recommended by the SEC, and that is now has a plan for how to do so ("UPDATE: Investment Advisers Could Arbitrate Through Finra Under New Plan," Dow Jones Newswires, Aug. 11, 2011).

The debate on whether or not FINRA should be allowed to expand its regulatory oversight to include investment advisers has been a long and heated one. Advocates for the expansion say that FINRA's new powers would streamline the arbitration process and make it more consistent. It also would likely help bolster the enforcement efforts of an expanded, but underfunded and severely resource-limited, SEC.

InvestmentNews, the industry's "leading news source for financial advisers," has said that the expansion of FINRA's oversight is "logical and offers the greatest hope of assuring that investors are protected from unscrupulous advisers, shady business practices and even from their own worst instincts."

Linda Fienberg, president of Finra's dispute resolution unit, said Wednesday that the new plan could be implemented within nine months of Congressional approval. Whether Congress will approve the expansion remains to be seen.

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Gainesville Man Pleads Guilty in Florida Ponzi Scheme Case

Wed, 10 Aug 2011 08:00:00 EST

David Lewalski, formerly of Gainesville, pleaded guilty in a federal court to mail fraud connected to an alleged Florida Ponzi scheme on 07/29/2011. According to the US Attorney's office,
Lewalski used his Botfly LLC company to bilk investors in Florida and nationwide out of $30 million.

Allegedly, Lewalski and others brought investors in with potential earnings of 10% monthly by trading on the foreign currency market. Only a small portion of the money was actually invested, however, and did not bring in much in the way of profits. Lewalski apparently used the money from new investors to pay prior investors, which accounted for about $15 million. Additionally, Lewalski is said to have used the cash for his own lavish lifestyle, including real estate, private jets, expensive cars, clothing, and jewelry.

At maximum, Lewalski faces a 20-year prison term for his involvement in this Florida investment scam.
If you have been the victim of a Florida Ponzi scheme, call the experienced investment fraud lawyers with David. P. Meyer & Associates today at 1-866-8-BROKER. We have recovered millions of dollars in losses for our clients through stockbroker mediation, arbitration, and litigation.

Former Wachovia Broker Receives 6.5 Year Sentence for $8.4M Investment Scam

Tue, 09 Aug 2011 08:00:00 EST

William Kevin Harrison, a former Wachovia securities broker, has been sentenced to over six years (78 months) in prison for stealing more than $7 million of client money for personal use. He has also been ordered to pay $8.41 million in restitution.

Harrison's sentence brings closure to a case that began in February 2010, when he was charged with devising and implementing an investment scheme designed to defraud more than two dozen account holders and Wachovia Securities out of millions of dollars. He pled guilty to federal mail fraud charges on Feb. 8, 2010.

For a period of just over three years, Harrison secretly withdrew funds from his clients' brokerage accounts and IRAs, and either deposited the funds into an account he opened under his wife's name or used the money for personal purchases, according to a DOJ news release issued by the office of the United States Attorney for the Middle District of North Carolina.

Most of the money ($7 million) was lost through speculative investments. Harrison used the rest of the stolen funds to build a new house, to purchase cars, and to pay for other personal expenditures. When the defrauded clients questioned Harrison about the transfers, he lied to them and said their funds had been deposited into new accounts opened under their names and would be deposited back into their regular accounts at a later time. (For more information, read the release here.)

His sentence will begin on Sept. 16.

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Plan to Trade that Structured Product? Think again.

Mon, 08 Aug 2011 08:00:00 EST

Plan to trade that structured product? You're not alone. A recent SEC report indicates that many investors are reselling structured products, often to their disadvantage and at a loss.

Generally speaking, structured products are designed to be "buy and hold" investments, which means they weren't designed to be resold or traded. In fact, according to an article on SmartMoney.com, the majority of the products can only be sold back to the issuing bank, typically at a price much lower than what the investor initially paid. (For more information, read the SmartMoney.com article here.)

Joseph Borg, the director of the Alabama Securities Commission, says the products' illiquidity should be a factor in determining suitability for investors. "There's an obligation on behalf of a sales person to advise clients that they may be restricted when they try to liquidate on secondary markets and they may have some serious costs," said Borg in the SmartMoney.com article.

The SEC is concerned that many investors are trading the securities at inopportune times (either just after they are issued or just before they mature) and suffering because they don't understand that trading increases the cost of the complicated, risky securities. In addition, the SEC's report indicates that broker-dealers often omit material facts about structured products when offering them to investors and tend to recommend the products regardless of suitability. (To learn more, click here.)

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

Complaint Filed Against Investment Adviser, Principal, and Affiliates in Salinas Case

Mon, 08 Aug 2011 08:00:00 EST

The SEC filed a complaint recently in the now infamous investment scam that allegedly involved Houston AAU coach David Salinas.

David Salinas, now deceased, was a Houston money-manager and alleged con man who recently made headlines due to a reputed scam that cost 21 coaches, a Texas church, a New Mexico athletic director, and other investors a total of more than $50 million. The SEC was investigating Salinas prior to his death, but had not filed any complaints or made any comments about the case until now.

Monday's complaint was filed against Houston investment adviser Select Asset Management LLC ("Select Asset"), its principal Brian A. Bjork, Select Asset Fund I, LLC, Select Asset Prime Index Fund, LLC, the estate of recently deceased J. David Salinas, and two Salinas business firms.

The complaint alleges that Bjork and Salinas solicited investments in two fraudulent securities schemes. Bjork and Salinas allegedly "promised investors safe, fixed income from highly rated corporate and other bonds" in the first scheme, but never actually purchased the bonds. In the second scheme, Bjork and Select Capital allegedly solicited investments in two private funds managed by Bjork, Select Asset, and Select Capital. The complaint accuses the defendants of commingling investor assets, making undisclosed transfers, and failing to conduct due diligence.

An estimated 152 investors were defrauded in the two schemes, which together raised a total of approximately $52 million. The SEC is seeking emergency relief, disgorgement plus prejudgment interest, penalties, and the imposition of permanent injunctions.

For more information about the case, click here. To read the SEC litigation release, click here.

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SEC's New Database Streamlines Tips and Complaints Process to Better Protect Investors

Mon, 08 Aug 2011 08:00:00 EST

The SEC's new $21 million "Tips, Complaints, and Referrals" (TCR) Database recently made headlines for its role in a complaint filed against several China Voice executives accused of defrauding investors out of $8.6 million in a Ponzi scheme. (See Reuters: "EXCLUSIVE - SEC builds new tips machine to catch the next Madoff.")

As reported by Reuters, the SEC had been investigating China Voice Holding Corp., a small telecom firm, for more than three years, but had been unable to build a solid case against the company. Last November, a single phone call routed through an initial version of the TCR Database enabled the Commission to file a suit against the China Voice executives within five months.

The Database is widely viewed as the SEC's response to accusations that the Commission flubbed its role in the investigation of the catastrophic fraud perpetrated by Bernie Madoff. As reported in the article, the SEC received early tips about the investment scheme, but mismanaged the information.

Now, SEC Chairman Mary Schapiro hopes the TCR Database will help redeem the Commission's reputation. The Database is designed to allow approximately 2,300 SEC employees to view and add to a tip or complaint once it has been entered into the system.

A "key tool" in enforcing securities violations, the official version of the TCR Database was launched in March. So far, whistleblowers and investor advocates are pleased with the streamlined process. Most tipsters who have submitted tips under the new process report that they received a call back from an SEC attorney within a few days, sometimes sooner.

For more information, read the Reuters article here.

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The Grass Isn't Always Greener, Warns FINRA, Stop 'Chasing Return.'

Wed, 03 Aug 2011 08:00:00 EST

FINRA recently issued an investor alert aimed at investors who were "chasing return" in search of higher and more consistent returns than those currently offered by fixed-income investments and stocks.

"Chasing return," according to FINRA, is when an investor puts his or her assets into "riskier and sometimes esoteric products that promise higher yields and returns than they can obtain in more traditional investments." Examples include: high-yield bonds, floating-rate loan funds, and structured products, all of which have seen a substantial increase in sales over the past few years.

FINRA's concern is whether investors understand the high level of risk associated with higher-yield products.

"The relationship between risk and return in the investment world is quite robust. The promise of higher return is almost always associated with greater risk and an increased possibility of investment losses," warned FINRA.

In the alert, FINRA recommended that investors ask themselves several important questions before deciding the grass is greener in higher-yield products, and changing their investments. Importantly, investors should truly understand how the investment operates, the fees involved, and the investment's level of risk. Finally, investors should consider whether the investment might be an investment scam.

"Legitimate investments that promise returns of 30, 50 or even 100 percent per year without any risk to your principal simply do not exist. Always independently verify who you are dealing with and whether the seller of the investment is licensed to do business with you," said FIRNA.

For more information, read the alert here.

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Illinois State's Jankovich and Other Coaches Conned in Salinas' Investment Fraud

Tue, 02 Aug 2011 08:00:00 EST

Tim Jankovich, men's basketball coach at Illinois State, invested $184,000 with David Salinas, the now infamous Houston money-manager who reputedly scammed nearly two dozen coaches, a Texas church, a New Mexico athletic director, and numerous other investors out of nearly $55 million. According to Sports Illustrated, Jankovich was one of 21 coaches who invested with Salinas.

Salinas, chairman of the J. David Financial Group, committed suicide on July 17. Prior to his death, he had been under investigation by the SEC.

According to an article by Sports Illustrated, Salinas solicited investments by promising investors their funds would be invested conservatively in a variety of U.S. corporate bonds. Allegedly, the bonds never existed, and Salinas issued fraudulent statements to investors in order to cover up the scam. (For more information, read the article here.)

"[Salinas] was a close friend and somebody I thought we could trust," a college basketball coach and investor in Salinas' bonds told SI. "The hardest part for me is knowing I was deceived for so long."

Salinas was not a registered investment adviser. No information can be obtained from the SEC at this time.

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Connecticut Man Pleads Guilty to Securities Fraud in $10 Million Investment Scheme

Mon, 01 Aug 2011 08:00:00 EST

Gregory P. Loles pled guilty in federal court on Tuesday in connection to a multi-million dollar investment scheme that authorities say defrauded a number of Connecticut investors, including a church, out of more than $10 million. Total losses were at least $8.7 million, according to the Department of Justice.

Loles, of Easton, Conn., owned Apeiron Capital Management. The firm was a registered investment adviser and broker dealer from 1995 through 1998. When the firm's registration status was cancelled, Loles acted as if nothing had changed. In fact, according to a Department of Justice News Release, Loles continued to falsely represent Apeiron as a registered investment management firm and to solicit investors on the firm's behalf.

In his plea, Loles admitted to soliciting more than $10 million from numerous investors, many of whom were acquaintances and friends from his church. He told investors he would invest their funds through Apeiron in securities that would provide a "safe" and "steady" return, including in "Arbitrage Bonds," which didn't exist. Lole's church also entrusted its endowment fund and Building fund to Aperion.

As with many other investment schemes, Loles never actually invested any of the investors' funds. Instead, he diverted the funds for personal uses. He also transferred a portion of the funds to a group of companies for which he was the majority owner and managing member, including: Farnbacher Loles Motor Sports, Farnbacher Loles Racing, and Farnbacher Loles Street Performance. To cloak the investment fraud, Loles issued fake account statements to investors and occasionally paid "returns" to investors with other investors' funds.

Loles pled guilty to mail fraud, wire fraud, securities fraud, and money laundering before U.S. District Judge Mark R. Kravitz in New Haven, Conn. Sentencing has been scheduled for Oct. 14, 2011. Loles has been in custody since his arrest on Dec. 15, 2009. He faces a potential combined sentence of 80 years, plus restitution.

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Federal Prison Sentence for Man Involved in Chicago Investment Fraud

Thu, 28 Jul 2011 08:00:00 EST

Scott Ross, of Woodstock, was sentenced to six years in federal prison and must pay restitution after pleading guilty in March to one count of mail fraud. Ross was accused of using his Harbor Wealth Management LLP to sell various investments, one of which was supposedly involved in developing new computer monitor technology. Ross allegedly made false statements to his clients about the risks involved in the investments and his own business and investment background. It is stated that Ross was paying himself a $319,000 yearly salary and also making payments to previous investors who complained, essentially creating a Ponzi scheme.

Ross will begin serving his six year sentence on October 18th this year, but officials say it's unlikely that his victims will see much of the $3.7 million in restitution they are owed. Ross' assets, both personal and business, have already been liquidated and distributed to victims. The assets were liquidated for $2.7 million.

If you have been the victim of a Chicago Ponzi scheme, contact the experienced FINRA arbitration lawyers with David P. Meyer & Associates. We have the knowledge and experience you need to get the results you deserve through stockbroker mediation, arbitration, and litigation.

Christian Radio Host Pat Kiley Indicted on Charges of Investment Fraud

Thu, 28 Jul 2011 08:00:00 EST

Christian Radio Host Patrick "Pat" Kiley of "Follow the Money" has been indicted for his alleged role in a multi-million dollar Ponzi scheme orchestrated by Trevor Cook. The U.S. Attorney's Office in Minnesota filed criminal charges against Kiley, along with Jason Bo-Alan Beckman and Gerald Joseph Durand, on July 19.

According to authorities, Kiley solicited investors for Cook's firms, including Universal Brokerage Services, through his radio program, which was produced out of one of Cook's homes. On the program, Kiley allegedly represented himself as a senior economist and a financial adviser.

According to the Star Tribune, Kiley denies that he drew in his listeners in order to perpetuate Cook's scheme. Instead, he insists he believed the foreign currency trading program was a legitimate opportunity. He further stated that his statements about his economic and financial aptitude and experience were part of a script written by Cook. Kiley said he had no choice but to read it. (To learn more about Kiley's comments, read the article here.)

The SEC filed a civil complaint against Kiley and Cook in November 2009. The SEC's complaint made the same allegations as the criminal charges filed last week by the U.S. Attorney's Office. The SEC's case against Kiley is still pending. (For additional details, read the SEC Litigation Release here.)

In August of 2010, Trevor Cook pled guilty to mail fraud and tax evasion for the $194 million foreign currency investment scheme. He also admitted to being the chief orchestrator. He was ordered to pay $155 million in restitution and sentenced to 25 years in federal prison.

Kiley, Beckman, and Durand are each charged with conspiracy, 11 counts of mail and wire fraud, and six counts of money laundering. Kiley has been released on a $100,000 unsecured bond.

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Pressman Pleads Guilty to $6 Million Ponzi Scheme in Pennsylvania

Tue, 26 Jul 2011 08:00:00 EST

Ira J. Pressman, of Bala Cynwyd, pled guilty to fraud and money laundering in federal district court on Friday for his role in orchestrating a multi-million dollar Ponzi scheme that lasted about four years.

Federal prosecutors claimed that Pressman, through his newly founded company PJI Distribution Corp., solicited investors for what he promised were "no risk" opportunities that would reap returns of up to 100 percent. While some of the investment opportunities were legitimate, most were not.

Authorities alleged that Pressman would offer investors "close out deals" through either a telephone call or an email. Once an investor agreed to invest in the deal, Pressman would send a fake purchase order and sales contract to the investor. The investor would then review the documents and wire funds to PJI.

According to authorities, Pressman collected $20 million from 20 investors over the course of the investment scheme. Once Pressman was unable to make payments to the investors in December of 2010, the Ponzi scheme collapsed. Investor losses were approximately $6 million.

Pressman pled guilty to one count each of wire fraud, mail fraud, and money laundering. He faces a potential prison sentence of up to 121 months. Sentencing is scheduled for Nov. 9.

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Richmond Man Gets 8 Years for Ponzi Scheme

Fri, 22 Jul 2011 08:00:00 EST

Earlier this week, Julius Everett Johnson was sentenced to eight years and one month in prison for the operation of a "complex" Ponzi scheme that defrauded more than 150 investors in Virginia and North Carolina out of approximately $9 million.

This was "not a run-of-the mill fraud," according to prosecutors.

In fact, according to authorities, Johnson's Ponzi scheme was a so large and complex that he needed to keep "detailed records to track into which of the multiple business and bank accounts he had stashed each investor's money," ("Ponzi scheme operator sentenced to 8 years," Richmond Times-Dispatch, July 19, 2011).

Like most investment schemes, many of Johnson's victims were elderly investors who lost their life savings in the scheme, and at least three of the victims were in their late eighties/early nineties.

According to court documents, Johnson solicited investments with promises that funds would be invested in certain specific companies and would reap returns of 6 to 10 percent over a period of one to four years. Instead of investing the funds as promised, Johnson used most of the money to repay earlier investors. (For more information about the case, click here.)

Johnson pled guilty to fraud and other charges in April. The companies involved in the scheme were owned by Johnson and included: Virginia Group Benefits, Mid-Atlantic Insurance, Benefit Contractors Administrators, Inc., River City Cleaners, Roberts Awning LLC and Norvell Awning, LLC.

About our law firm:

The Ohio-based law firm of David P. Meyer & Associates represents individuals in Ohio and throughout the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1-866-827-6537 for more information or complete the online form on the top of this page and we will respond promptly.

Top Ten Warning Signs of Investment Fraud

Wed, 20 Jul 2011 08:00:00 EST

Tales of investment fraud continue to dominate the headlines. To protect yourself from becoming a victim of the next scheme, watch out for these warning signs.

That "golden opportunity" may be an investment scam if:

1. It promises "guaranteed" returns;
2. It promises high returns for little or no risk;
3. It's being pitched by a leader in your community or a fellow group member, such as ethnic, racial, religious, or other groups;
4. It involves a reverse merger stock or your money has to be sent overseas;
5. It involves "break-through" technology;
6. It's tied to a current natural disaster;
7. It's unregistered, or it's being pitched by an unregistered adviser or salesperson;
8. It lacks documentation, such as prospectuses, offering statements, or financial reports;
9. It's difficult to understand; and/or
10. The pitch comes with high-pressure sales tactics that push you to purchase immediately.

If you believe you have been the victim of an investment scheme, you should contact an experienced investment fraud attorney immediately. Failure to do so may result in an inability to recover losses. A skilled attorney will take the time to go through your options and determine the best course of action.

For more information, contact us toll-free at 1-866-827-6537 or complete the online form at the top of this page and we will respond promptly.

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JP Morgan Pays $153.6 Million after Accusations of Securities Fraud

Tue, 19 Jul 2011 08:00:00 EST

The Securities & Exchange Commission (SEC) accused JPMorgan Chase & Co.'s Wall Street division of securities fraud for selling mortgage-backed securities that were doomed to fail. JP Morgan has agreed to pay a $153.6 million settlement, but has neither admitted nor denied the charges.

The security, known as Squared CDO 2007-1, was sold to investors in 2007, just before the decline of the housing market. The security was backed by a hedge fund involved with residential mortgages in the US. Allegedly, the hedge fund had an interest in seeing the investment fail. JPMorgan Chase & Co. did not inform investors of the role played by the hedge fund.

Robert Khumazi, director of enforcement for the SEC, stated, "By failing to disclose this, we allege that JP Morgan acted negligently, in violation of securities laws."

Of the money paid in the settlement, the majority will go to victims of the Squared 2007-1 investment, including the nonprofit Thrivent Financial for Lutherans.

If you, too, have been the victim of securities fraud and need answers, contact an experienced securities fraud lawyer with David P. Meyer & Associates today at 1-866-8-BROKER. We are experienced FINRA arbitration attorneys and would be happy to answer any questions you might have.

West Virginia Investment Fraud on the Rise

Mon, 18 Jul 2011 08:00:00 EST

Authorities in West Virginia have recently released a warning for consumers to be aware of certain scams. In the current economic environment, the state is seeing a huge jump in the incidence of fraud and investment scams. It is of utmost importance for West Virginians to be careful with their cash and look out for suspicious activity when it comes to investments and other opportunities.

Chris Hedges, Senior Assistant Attorney General, warns that not all scams are run by people who appear shady. He reminds us that "It doesn't have to be someone who you would mistrust. It could be a contractor having hard times or someone cleaning homes, or even a personal caregiver for children. They're ordinary everyday people who might have come under hard times to help cover their losses."

Credit card fraud, identity theft, and natural gas drilling fraud are among the most common schemes. Hedges states that credit card fraud is so prevalent because it is "easy to commit." West Virginia real estate scams and other investment scams are also a concern, especially those that promise high returns and no taxes.

US Attorney Booth Goodwin says, "Fraud can be devastating. It can cripple a small business working hard to meet day-to-day business obligations or bankrupt a small family trying to survive on a limited income." It is recommended that investors keep an eye on account statements and be vigilant in doing research before handing money to any company they haven't done business with in the past.

If you have been the victim of an investment scam, a West Virginia investment fraud attorney may be able to help you recover your losses. We have over 50 years of collective experience representing investors in stockbroker mediation, arbitration, and litigation claims.

Two Florida Men Indicted for Ohio Ponzi Scheme that Devastated Investors

Fri, 15 Jul 2011 08:00:00 EST

In a federal criminal indictment, Edward Allen and David Olson, both of Florida, were charged with close to 30 counts of wire fraud and conspiracy for an alleged Ponzi scheme that spanned several states. Ohio residents in Youngstown, Niles, Girard, Columbiana, and several other cities were affected in the investment scam. A civil lawsuit filed by the Securities and Exchange Commission (SEC) is also underway.

The two are accused of running a real estate investment scam from an office in Boardman that took in at least 100 investors from nine states. The pair allegedly offered a real estate rehabilitation opportunity and "promised" investors returns of 20% - 45% annually. The charges state that Allen and Olson used investors' money to bring in new investors and that investors never saw the "promised" high returns.
Our own David P. Meyer, working as an attorney for the civil case, said, "These two gentlemen got our clients involved in a lot of real estate deals that went bad so the devastation was significant for all of these clients. Many folks lost their entire life savings and will be digging out of this financial nightmare for the rest of their lives."

Both Olson and Allen are due in federal court in Youngstown on July 12th.

The Ohio securities fraud attorneys with David P. Meyer & Associates have represented investors nationwide in stockbroker mediation, arbitration, and litigation claims. In light of this and other similar cases, we wish to remind investors that education is prevention. Always do your research before investing, especially if it sounds "too good to be true".

"Bad Boy of Wall Street" Accused of $140 Million Investment Fraud

Wed, 13 Jul 2011 08:00:00 EST

Ross Mandell, although he strongly denies it, has been accused of an investment scam that took $140 million from investors. Mandell is the former CEO of Sky Capital, and self-proclaims that he is "one of the bad boys of Wall Street."

The charges revolve around accusations that he directed his brokers to pressure investors into buying shares of certain companies and also to buy shares without the investors' consent. Reportedly, Mandell convinced his brokers to comply through incentives, such as visits to prostitutes and trips to strip clubs. Mandell then used some of the investors' cash to fund his own lavish lifestyle.

Mandell has denied these accusations through his website, videos posted to the popular video site YouTube, and other media outlets. He is also actively promoting a reality television show based on his predicament. In the pitch for the show, Mandell describes his plans for a "perfect life;" however, he says "I've just got one small problem. I've been indicted by the US government for conspiracy and securities fraud."

Mandell's attorney attempted to have the information regarding the adult entertainment incentives thrown out, believing it could bias the jury. Judge Paul Crotty denied the attempt, saying whether it was prostitution or otherwise, "whatever it is, I'm going to allow."

At the law firm of David P. Meyer & Associates, we are experienced FINRA lawyers who represent victims of investment fraud nationwide in mediation, arbitration, and litigation claims. Contact us today at 1-866-8-BROKER to schedule a FREE consultation.

Convicted Fraudster Pleads Guilty to Yet Another Investment Scam

Tue, 05 Jul 2011 08:00:00 EST

Eighteen years after Michael Joseph Krzyzaniak pled guilty to operating an investment scheme for which he served 72 months in federal prison, he was back in court entering yet another plea. Last Tuesday, Krzyzaniak (also known as Michael Crosby) pled guilty to orchestrating four separate investment schemes that bilked individual investors out of $20 to $50 million.

According to a news release issued by the United States Attorney's Office, Krzyzaniak solicited investments in a series of business projects, which included a golf club resort in California, an alternative energy project in Colorado, and a NASCAR-type racing track in Minnesota, that were continually left unfinished.

Krzyzaniak admitted to making false statements about the projects, such as the progress made on each project, the status of regulatory approval, and the types of various financing sources available to him. He further admitted to misappropriating investor funds and using the money for personal purposes.

A sentencing date has not yet been scheduled, but Krzyzaniak faces a potential 20 years in prison for the investment scheme. He also faces an additional 5 years in prison for tax evasion.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.827.6537 for more information or complete the online form on the top of this page and we will respond promptly.

Raymond James Agrees to Buy Back $300M Worth of Auction-Rate Securities

Fri, 01 Jul 2011 08:00:00 EST

Broker-dealer Raymond James has agreed to buy back $300 million in auction-rate securities and to pay a $1.7 million fine as part of a settlement with the SEC and eight states: Florida, Texas, Indiana, Missouri, New York, North Carolina, Pennsylvania, and South Carolina ("Raymond James to Pony Up $300M to Buy Back ARS," InvestmentNews, June 29, 2011).

This settlement is only one of many that have been reached over the past few years. Investigations into the auction-rate securities market and the methods of the securities' major underwriters have been underway since February of 2008 when the $330 billion auction-rate securities market crashed. (For more information about the crash, click here.)

Dispute documents state that Raymond James' financial advisers and registered representatives sold auction-rate securities as "highly liquid" "cash equivalents," according to the InvestmentNews article. Unfortunately for investors who purchased the securities, that liquidity was an illusion. In fact, approximately $130 billion worth of investor money remains stuck in the frozen market even today. (For more information, click here.)

Under the terms of the settlement agreement, Raymond James has 30 days to extend an offer to repurchase the $300 million in auction-rate securities.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.827.6537 for more information or complete the online form on the top of this page and we will respond promptly.

Warnings Keep Pouring In On Risks of Structured Products

Mon, 27 Jun 2011 08:00:00 EST

Warnings against structured products abound these days. Recently, officials for both the SEC and FINRA warned investors against the products, and called the payout structures "difficult to understand" and the products themselves "expensive, risky, complex and illiquid." (For more information about the regulators' warnings, click here.) Industry experts and investor advocates are also issuing consumer warnings, saying the products are too complex, too expensive, and unsuitable for most investors.

AARP Magazine published an article earlier this year entitled "Structured Products: The Hidden Cost" in which writer Lynn Brenner wrote: "With this investment [structured products], all you own is the issuer's IOU and part of the bet. If the issuer gets into financial trouble, or the bet goes sour, you can lose money - often, a lot."

In an interview with Bloomberg last year, Christopher Whalen the managing director and co-founder of the research firm Institutional Risk Analytics said, "Brokers are paid more to sell structured notes than some other financial products because the securities aren't standardized."

The Motley Fool has even joined in. In a June 8 article, Selena Maranjian reminded investors that the main reason broker-dealers and other financial firms love structured products is that they make more money on them than on simple stock and mutual fund transactions, which is probably why more than 8,000 of the products were sold last year.

Despite the warnings, aggressive sales tactics and misleading marketing ploys continue to push investors toward the products. Before investing, however, the SEC advises individual investors to read the issued alerts to make sure they fully understand the true nature of the products. Remember, regardless of what your broker may say, there really is a lot to lose.

About our law firm:

The law firm of Meyer & Associates LPA has a proven track record in recovering losses for investors in these types of cases. We represent individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind.

Contact us toll-free at 1.866.827.6537 for more information or complete the online form on the top of this page and we will respond promptly.

Former Football Player Pleads No Contest to Nebraska Securities Fraud

Fri, 17 Jun 2011 08:00:00 EST

Brian Schuster, a former Nebraska football player, pleaded no contest to securities fraud charges on May 17^th as part of a plea agreement. Schuster initially faced eight felony counts of intentional securities fraud in Nebraska. Prosecutors amended the plea agreement so that the charges were based on inadvertent omissions instead of intentional acts.

Schuster, along with Rebecca Engle, allegedly sold high-risk investments in several Florida companies to seniors who were looking for conservative investments. They are said to have failed to fully explain the risks to investors and ended up taking $20 million from more than 100 people. Engle pleaded guilty to two charges of fraud.

Nebraska Attorney General Jon Bruning stated that, "more than 100 Nebraskans trusted Mr. Schuster and Ms. Engle to invest money they had worked a lifetime to save. They both deserve to pay for their crime of swindling money from Nebraska seniors."

The trial was moved to Beatrice from Otoe County due to the large number of victims involved, creating conflicts of interest.

The investment fraud lawyers with David P. Meyer & Associates have represented victims of securities fraud nationwide. We are committed to helping victims of affinity fraud, Ponzi schemes, and other types of investment fraud recover their losses.

Fort Lauderdale Man Allegedly Involved in $800 Million in Florida Ponzi Scheme

Thu, 16 Jun 2011 08:00:00 EST

A Florida Ponzi scheme involving a prominent attorney allegedly bilked investors out of at least $800 million. Michael J. McNerney, a Fort Lauderdale lawyer and legal counsel for Mutual Benefits Corporation, pleaded guilty on Wednesday May 18^th to a charge of conspiracy to commit mail and wire fraud. U.S. Attorney Wifredo Ferrer stated that McNerney allegedly "defrauded investors by providing 'legal cover' to what was essentially nothing more than a Ponzi scheme. McNerney abused his position of trust and used his law license to help commit this massive fraud."

The scheme revolved around the alledged sale of viatical settlements to investors by Mutual Benefits Corp. These were based on life insurance policies on the elderly or terminally ill. The investors were told they would collect when the person died within a set amount of time. However, Mutual Benefits Corp. has been accused of providing inaccurate estimates of how long the insured would live, and ultimately running a Ponzi scheme. In reality, most of the life insurance policies did not mature and most of the investors were never paid.

McNerney is only one of ten individuals who have pleaded guilty in the scheme. The case dates back to 2008, involves millions of documents, and is growing ever more complex. It could be another two years before the alleged leaders of the scheme go to trial.

If you have been the victim of a Fort Lauderdale Ponzi scheme, contact the investment fraud lawyers with David P. Meyer & Associates. We represent victims of Florida securities fraud in stockbroker mediation, arbitration, and litigation.

"Billionaire Boys Club" Member Arrested for MI Ponzi Scheme after Fleeing to Italy

Wed, 15 Jun 2011 08:00:00 EST

John Bravata, the chairman of BBC Equities, LLC, was arrested in New York City on May 5^th as he exited a plane returning from Italy. Bravata now faces criminal charges for a Michigan investment scam in which he allegedly took $50 million from 440 different investors. Previously, only one civil claim had been filed.

Bravata, whose company has been called the "Billionaire Boys Club" by authorities, has now been charged with wire fraud. Although the criminal complaint does not specifically mention the civil complaint's Ponzi scheme, he is accused of misleading investors regarding how their money would be invested, the returns expected, and how secure their money actually was. He is also accused of lying about how much money he would personally make in the deal.

In the previous civil complaint, the SEC said Bravata used investors' money for cars, boats, cosmetic surgery, and his luxury home. He is also said to have used money from new investors to pay off prior investors. The criminal complaint alleges he used less than half of the $50 million to actually invest.

Prosecutors alleged that Bravata fled to Italy to avoid charges, and that he had been in Italy for a while. Prosecutors want Bravata to be detained in NYC as a flight risk. His assets have been frozen and he is under a restraining order.

The investment fraud lawyers with David P. Meyer & Associates represent investors nationwide in stockbroker mediation, arbitration, and litigation claims.

How Are Unlisted REITs like Apple REIT 10 Potentially Unsuitable for Me?

Tue, 14 Jun 2011 08:00:00 EST

If you read our previous blog post, you probably already understand the general risks of REITs. However, you may still have questions about what makes an unlisted REIT like Apple REIT 10 specifically risky for the average investor.

Here are a few things to keep in mind when you hear that an unlisted REIT is a “low risk” opportunity:

Unlisted REITs draw higher commissions and fees. Because about 10% - 15% of your investment goes into paying commissions, upfront costs, and ongoing fees, the REIT needs to deliver a much larger return to compensate.
Unlisted REITs are more difficult to sell. Unlisted REITs do not trade on national exchanges and can be difficult to sell, especially when things start going wrong and share repurchase programs disappear.
The value of unlisted REITs may be inaccurate. A publicly traded REIT is subject to daily market fluctuations, but an unlisted REIT has no active market and may appear artificially stable. By the time an unlisted REIT is revalued, it’s too late.

Although unlisted REITs may have a place as a small percentage of an experienced investor’s overall portfolio, targeting inexperienced or elderly investors who are looking for a low-risk opportunity is inappropriate and may constitute investment misconduct.

If you have lost money or had your investments frozen in the Apple REITs recommended by David Lerner Associates, contact an experienced FINRA lawyer today at 866-827-6537 or by filling out our online form at the top of this page.

Apple REIT 10 & Other REITs: What are the Risks?

Mon, 13 Jun 2011 08:00:00 EST

In light of the recent FINRA allegations against David Lerner Associates for their alleged Apple REIT 10 fraud, we thought it would be a good time to talk about the increase in sales of these securities and how REITs may be unsuitable investments for the average investor.

It bears repeating here that you should always expect a high risk with a high-yield investment. Although REITs do sometimes offer very high returns, don’t be convinced that this comes with little or no risk. Be aware that:

REITs generally focus on one type of real estate, like the hotels of the Apple REIT 10. This makes the investment particularly vulnerable to market changes in certain sectors.
REITs may be concentrated in a specific location or community. If something goes wrong in that specific location, REIT investors nationwide are affected.
REITs can be complicated. It can be very difficult for an investor to figure out exactly what the REITs are investing in, and the research required is prohibitive.

The FINRA lawyers with David P. Meyer & Associates are available to speak with you about your investment fraud case at 1-866-8-BROKER. We are knowledgeable and experienced FINRA attorneys who are devoted to representing stockbroker mediation, arbitration, and litigation cases nationwide. If you’re unsure if you need to speak to an attorney, we recommend you take a look at our FREE book, Five Signs of Investment Fraud… And What to Do If It’s Happened to You.

CDs Not As Safe As Many Investors Believe

Fri, 10 Jun 2011 08:00:00 EST

Most investors assume CDs are entirely risk-free. And, thanks, in part, to the volatility of the stock market over the past several years that means CD purchases are on the rise. But, that assumption is incorrect. There are risks associated with CDs, particularly higher-yield CDs purchased through a deposit broker, that investors don't always understand.

Most CDs are purchased directly from FDIC-insured banks by individual investors, which means the CDs are backed by the U.S. government for up to $250,000 per investor as long as the investor holds no other FDIC insured accounts at the issuing bank. (The U.S. government guarantee only covers up to $250,000 per customer per bank - regardless of number of accounts or products owned by the customer, which means that an individual could hold more money at one bank than is covered by the guarantee. For more information about the ins and outs of FDIC coverage, click here.)

Some investors, however, choose to purchase CDs through a deposit broker (i.e. brokered CDs). Brokered CDs often offer higher-yields because the deposit broker can negotiate a higher rate of interest by arranging to bring a certain number of deposits to the issuing institution. These higher yields often attract investors and convince them to purchase their CDs through deposit brokers, many of whom are brokerage firms and independent salespeople.

While a higher-yield CD sounds like an investor's best bet, it could mean becoming a victim of fraud.
The SEC has issued a warning to investors about the potential risks associated with brokered CDs. (Read the SEC's investor alert here). According to the SEC, deposit brokers are not required to meet any licensing or certification requirements and they are not examined, approved, or licensed by any state agency. Basically, anyone can say he or she is a deposit broker, especially a con artist.

To protect themselves, the SEC recommends investors ask:

What are my financial goals? How will the purchase of this CD meet those goals?
What's the deposit broker's background? Are there any complaints against him or her?
What institution is issuing the CD? Is it FDIC insured? Do I already have accounts with the issuer that will put me over the FDIC guarantee?
When does the CD mature?
Are there any call features? (A "callable" CD means the bank could terminate or "call" your CD if interest rates fall.)
What's the interest rate and how will I be paid?
Will the interest rate change?
Are there penalties for early withdrawal?

The SEC also recommends investors ask for a copy of the exact title of the CD and ensure that all of the information (such as the identity of the issuer and the owner) is correct. Investors should verify that the title reflects that the deposit broker is merely acting as an agent for the investor. Legitimate titles should read something like: "ABC Brokerage as Custodian for Investor's Name." If there are multiple owners, the title will likely not list each owner's name but may simply read "for Customers."

Remember: The ultimate reason for purchasing a CD is that the FDIC insurance protects you from loss. If the CD isn't covered by the FDIC program or if the deposit broker cannot prove that it is, then don't buy the CD, no matter what rate of return the broker promises. Shop around until you find a guaranteed CD that better fits your needs.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

Regulators Warn Investors Against Structured Notes

Thu, 09 Jun 2011 08:00:00 EST

Structured notes with principal protection are hot products these days. The financial crisis of 2008 left many investors with crippling losses, and the desire to find a safer place to invest their life savings. Marketed as a safer, high-yield alternative to low-yield savings accounts and CDs, structured notes were seen as the perfect safe haven.

But, as we discussed in a recent blog post, the products, often marketed with reassuring language like "principal protection," "minimum returns," or "capital guarantees," are complex and carry greater risk than investors realize. Regulators agree.

Lori J. Schock, Director of the SEC's Office of Investor Education and Advocacy says, "Structured notes with principal protection contain risks that may surprise many investors and can have payout structures that are difficult to understand."

John Gannon, FINRA's Senior Vice President for Investor Education says: "The current low interest rate environment might make the potentially higher yields offered by structured notes with principal protection enticing to investors, but retail investors should realize that chasing a higher yield by investing in these products could mean winding up with an expensive, risky, complex and illiquid investment."

According to a recent investor alert, investors should be aware of the following risks when considering structured notes with principal protections:

The principal protection promise is only as good as the issuer's credit worthiness. If the issuer goes bankrupt, you could lose your entire investment.
Limitations to the principal protection promise may apply. In most cases, you're only eligible for the protections if you hold the product to its maturity date.
The products have the potential to be highly illiquid. Don't bet that you'll be able to sell the product to a third party if you need funds earlier than the maturity date.
Returns aren't guaranteed. You may earn more than the typical fixed-rate bond, but you could earn less or nothing.
There can be hidden costs and fees associated with the products that will cost you money and lessen your return.

For additional information, read FINRA's investor alert here.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

FINRA Pursues Claim Against David Lerner Associates

Thu, 02 Jun 2011 08:00:00 EST

David Lerner Associates (DLA) has been accused of investment fraud. DLA has been accused of selling illiquid real estate investment trust shares to unsophisticated and elderly investors without taking into account whether the investments were suitable for them.

According to the Financial Industry Regulatory Authority (FINRA), the Syosset, New York-based brokerage firm misled individuals who invested in the $2 billion Apple REIT Ten offering. The unsuspecting investors purchased more than $300 million of shares in the REIT.

DLA allegedly provided misleading information about distribution rates for a series of predecessor securities to investors. FINRA claims that the figures provided did not show that the distributions far exceeded income and that the distributions were funded by debt that increased leverage in the REITs.

In a statement, DLA has denied the FINRA allegations.

According to FINRA, DLA has sold nearly $6.8 billion of Apple REIT shares to more than 122,000 investors since 1992. Since 1996, DLA has generated over $600 million from those sales, accounting for approximately 60 percent of DLA’s business.

About Our Law Firm

The law firm of David P. Meyer & Associates represents clients who have been harmed by investment fraud. We have written a book that you can order for FREE entitled, Five Signs of Investment Fraud…And What to Do if it’s Happened to You.

If you have lost money or have had your investments frozen in the Apple REIT recommended by David Lerner Associates, contact an investment fraud attorney by calling toll free 866-827-6537 or filling out our online form. We represent all of our clients on a contingency fee basis and we never request a retainer of any kind for these cases.

Details Emerge Regarding FINRA Lawsuit Against David Lerner

Thu, 02 Jun 2011 08:00:00 EST

In its formal complaint, the Financial Industry Regulatory Authority (FINRA) has accused the Syosset, New York-based brokerage firm, David Lerner Associates (DLA) of investment fraud.

FINRA cites that DLA marketed real estate investment trust shares to unsophisticated and elderly investors by using misleading information to lure unsuspecting investors to the $2 billion Apple REIT Ten offering. DLA allegedly failed to take into account whether the shares were suitable for its customers.

FINRA sued DLA on Tuesday, May 31, 2011, accusing the firm of misleading investors and offering unsuitable products in the $2 billion real estate fund. FINRA claims that DLA should have conducted more due diligence on the offering. DLA has argued against FINRA’s accusations.

In a statement, DLA denies the accusation.

Last year, FINRA accused DLA of overcharging customers on sales of mortgage securities and municipal bonds. That case is still pending.

We Can Help

Contact an experienced investment fraud lawyer at the law firm of David P. Meyer & Associates, if you have lost money or had your funds frozen in the Apple REIT recommended by David Lerner. Our firm represents clients nationwide in securities litigation, arbitration and mediation claims. All of our cases are handled on a contingency fee and we never request a retainer of any kind for these cases. Obtain your free case evaluation by calling toll free 866-827-6537 or filling out our online form.

Be sure to order our free book, Five Signs of Investment Fraud…And What to Do if it’s Happened to You.

Apple REIT Ten: Center of FINRA Complaint With David Lerner Associates

Thu, 02 Jun 2011 08:00:00 EST

This week, the Financial Industry Regulatory Authority (FINRA) filed a complaint against David Lerner Associates regarding the investment company’s sale of Apple REIT Ten. In the complaint, FINRA alleges that the company misled customers when marketing Apple REIT Ten and that they targeted “unsophisticated and elderly” investors when looking to sell shares.

What is Apple REIT Ten?

Apple REIT Ten is one of a number of non-listed, public Real Estate Investment Trusts (REITs) that have been sold by David Lerner Associates, the sole underwriter, founder, and manager. Throughout the past five months, $300 million in Apple REIT Ten shares, which are invested in hotels across the country, have been sold out of an open $2 billion offering. Over the past nine years, David Lerner Associates have sold shares of nine other Apple REIT securities for a profit of $600 million.

What are the complaints against Apple REIT Ten?

According to allegations outlined by FINRA in yesterday’s disciplinary complaint, David Lerner Associates used the valuations and distribution rates of the closed Apple REITs to sell shares of Apple REIT Ten – distribution rates that FINRA believes were financed by debt. In addition, in the last seven years, Apple REITs have been valued at a constant price regardless of significant changes in the real estate market. Instead of investigating these very strange valuations and distribution rates, the investment company used them to sell Apple REIT Ten.

What Can Apple REIT Ten investors do to recover their money and get out?

Unfortunately, an estimated 122,000 people have invested in Apple REITs since 1992. If you lost money or have your investments frozen in the Apple non-traded REITs sold by David Lerner Associates, contact our law firm today by calling toll free 866-827-6537 and speak with an experienced investment fraud attorney or fill out our online form.

All of our cases are handled on a contingency fee basis and we never request a retainer of any kind in these cases.

Be sure to order our free book, Five Signs of Investment Fraud…And What to Do if it’s Happened to You.

David Lerner Associates In Trouble For Securities Law Violations Before

Thu, 02 Jun 2011 08:00:00 EST

Yesterday, FINRA, an independent securities firm regulator, released a complaint against David Lerner Associates regarding their suspicious Apple REIT Ten marketing and solicitation practices. The allegations of misconduct against the New York investment company are far from the first.

In 2004, David Lerner Associates was caught allegedly overcharging customers for commissioned (front-loaded) mutual funds. They were fined over $32,000 by FINRA.
In 2006, the investment company was investigated regarding the commissions generated through the sales of variable annuities. They were fined $400,000.
In 2010, David Lerner Associates was accused of overcharging customers regarding the sale of municipal bonds and mortgage securities. The securities misconduct case is still pending.
Just seven months ago, the company was once again disciplined for allegedly failing to provide information regarding variable life insurance policies and annuity contracts. They paid a $255,000 fine.

In addition to the above fines by FINRA, David Lerner Associates has also been forced to pay former clients after FINRA arbitration. These client claims have involved breach of contract, negligence, the omission of facts, and the sale of unsuitable investments, among other various acts of investment misconduct.

If you believe you have lost money with David Lerner Associates, contact an experienced investment fraud lawyer today about your possible claim. For a free case evaluation call us toll free at 866-827-6537 or fill out our online form.

Be sure to order our free book, Five Signs of Investment Fraud…And What to Do if it’s Happened to You.

Morgan Stanley Smith Barney Allows Brokers to Use Twitter, LinkedIn

Wed, 01 Jun 2011 08:00:00 EST

Last year, FINRA issued Regulatory Notice 10-06 regarding the use of blogs and social networking websites such as Facebook, Twitter, and LinkedIn by brokers to communicate with the public. The Notice made clear that the use of such "Web 2.0" tools would be subject to applicable federal securities laws and self-regulatory organization (SRO) rules, including the supervision, suitability, and record retention rules.

Brokerage firms have been slow to allow use of social networking sites in light of FINRA's strict compliance guidelines. But now, Morgan Stanley Smith Barney expects to be the first major brokerage to allow its brokers to use such social networking sites. As reported by Reuters, initially 600 MSSB advisors will be allowed almost full use of LinkedIn and restricted use of Twitter. MSSB plans to expand the program to the firm's entire force of 17,800 advisors within six months.

To comply with FINRA's compliance guidelines, MSSB will install technology to capture and retain all communications on approved social networking sites.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

FINRA Cautions Against Stock-Based Loan Programs

Wed, 01 Jun 2011 08:00:00 EST

Stock-based loan programs allow investors to obtain "non-recourse" loans from third-party lenders (typically unregistered and unregulated) by pledging fully paid stock as collateral. Generally, the pledged stock is transferred to the lender at the time the loan is obtained. "Non-recourse" means the lender's only recourse in the event of default is to collect the pledged stock, regardless of whether the stock has increased or decreased in value.

In an investor alert issued this week, FINRA said it has recently brought a number of enforcement actions against firms for activities related to stock-based loan programs. According to the self-regulatory organization, common marketing ploys tout the programs as a way for investors to "leverage" an existing or new stock purchase to buy new financial products, or as a way to "tap the value" of an existing portfolio without tax consequences or sales fees. As with most marketing campaigns, the risks of the products are left for investors to discover on their own.

According to FINRA, stock-based loan programs can be both costly and dangerous for investors. Some of the biggest risks to consider include:

the possibility that the lender may not return the stock after the loan is repaid;
the possibility that the lender may sell the "pledged" stock immediately after transfer;
possible tax consequences, if the IRS considers the transaction a taxable event; and
potential fees and charges associated with the transaction, especially if the proceeds are used to purchase an annuity or other financial product.

FINRA cautions investors who wish to obtain a stock-based loan to conduct a thorough investigation of the program. Investors should be able to answer the following questions:

Are the lenders and promoters registered?
What happens to the stock once it is pledged as collateral?
What are the costs and risks of purchasing a financial product with the proceeds?
Are there restrictions on the use of the proceeds?

For additional information, read the alert or contact FINRA at (240) 386-4357.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

SEC Probes Big Banks' Forex Trading Activities

Tue, 31 May 2011 08:00:00 EST

The SEC is probing deeper into the foreign-exchange trading activities of big "custody" banks undertaken on behalf of institutional investors, particularly public pension funds ("SEC Deepens Probe of Forex Trading," Wall Street Journal, May 24, 2011).

As reported by the WSJ, both Bank of New York Mellon Corp. and State Street Corp. are currently under investigation by the SEC due to allegations that the banks misrepresented the manner in which they would carry out foreign-exchange trades. A whistleblower group has sued both banks, and claims that Bank of New York and State Street have improperly priced currency trades for certain customers.

At issue is the fact that foreign-exchange trading typically does not fall under direct SEC jurisdiction, because private agreements reached between the banks and the banks' clients tend to give the banks wide discretion over trading fees. The SEC is using its authority to investigate whether the banks violated securities laws in executing the Forex trades to probe into the banks' currency trading activities.

For more information, read the WSJ article here.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

FINRA Chief Tells Wall Street: Don't Skimp on Compliance

Sat, 28 May 2011 08:00:00 EST

FINRA Chief Executive Richard Ketchum addressed a room full of Wall Street executives this week at FINRA's annual conference. His primary message, according to Reuters, was that FINRA expects firms to comply with the new industry standards created by the wide-sweeping 2010 Dodd-Frank financial reform law.

In particular, Ketchum reminded firms that their brokers must "truly understand the products they sell." Firm approval alone won't satisfy suitability requirements anymore, he said.

"To all of you in legal and compliance, let me say this specifically: This is not the time to reduce your commitment to compliance investment," said Ketchum (as quoted by Reuters).

In Feb., James Shorris, FINRA's executive vice president and executive director of enforcement, said Regulation D private placements were going to be one of FINRA's top focuses in 2011. Ketchum reiterated that focus at the conference.

Additional concerns mentioned included the sale of structured products, such as reverse convertibles, principle protected notes, and exchange-traded funds.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

San Diego Ponzi Scam Results in 30-Year Prison Sentence

Fri, 27 May 2011 08:00:00 EST

Thanh Viet "Jeremy" Cao, of Orange County, was sentenced to 30 years in prison on May 16th after convictions of mail and wire fraud. It is said to be one of the most severe punishments ever given for San Diego financial crime. Almost 200 people were taken in by the alleged scheme, supposedly netting Cao $12.4 million.

Cao allegedly ran a series of Ponzi schemes over a period of six years. He brought clients in with promises of high-yield investments such as real estate, mortgages, and international transactions. Some of these victims were reeled in through San Diego investment seminar scams. Much of the money came out of clients’ retirement and college savings, leaving many of the victims in complete financial ruin. When the victims asked for more information about their money, Cao is said to have often become threatening.

Beyond the investment scam charges, Cao also has a history of convictions in Orange County for threatening to murder a former business associate and his family. Cao also began filing false liens against investigators, judges, and prosecutors when his businesses came under scrutiny in 2007.

Judge Larry A. Burns states that the severe sentence in this case came after considering Cao's conduct, which showed a "pattern of belligerence and obstruction.”

The investment fraud attorneys with David P. Meyer & Associates represent investment fraud victims nationwide in stockbroker mediation, arbitration, and litigation claims.

SEC Proposes Rule to Ban Felons and "Bad Actors" from Private Placement Offerings

Fri, 27 May 2011 08:00:00 EST

The U.S. Securities and Exchange Commission proposed a rule which would disqualify Regulation D offerings (private placements) if they involve certain "felons or other bad actors." The proposal is part of the SEC's implementation of the Dodd-Frank Wall Street Reform law.

The proposed rule would eliminate the Regulation D exemption if the issuer or any other person covered by the rule had a "disqualifying event." Such events include criminal convictions, court injunctions and restraining orders, suspension or expulsion from a self-regulatory organization (like FINRA), and certain Commission disciplinary orders, among other things.

The Commission is seeking public comments on the proposed rule through July 14, 2011. To read the SEC's press release, see the text of the proposed rule, or submit comments, click here.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

Want Great Returns? Win a Seat in Congress.

Fri, 27 May 2011 08:00:00 EST

According to an academic study published this year, stocks held by members of the U.S. House out-earn the market by an average 6 percent annually. That's either really lucky or really unfair.

In a recent Huffington Post article, Dan Froomkin speculates that the above-average returns that members of the U.S. Congress see from their stock holdings may be the result of biased voting and trading on non-public information.

And, it's not just the House. The researchers involved in this year's study conducted one five years ago that analyzed the stock returns for members of the U.S. Senate. According to that study, stocks held by U.S. Senators outperform even those held by U.S. Reps - an average of 10 percent per year over the market.

Yet, despite the indications that these abnormally positive returns may be obtained unfairly, neither federal law nor Congress' codes of conduct restrict the financial actions of senators or representatives.

"House rules don't require them to divest themselves of common stocks when they assume office, don't prevent them from trading freely while in office - and don't require them to recuse themselves from votes that could affect their own interests," writes Froomkin. (For more, read the entire article here.)

H.R. 1148 (the Stop Trading on Congressional Knowledge Act) was recently re-introduced by Rep. Timothy Walz (D-MN) and several Democratic co-sponsors. Unsurprisingly, no actions have been taken on the bill since March 29, when it was referred to the House Ethics committee.

Also not surprising - 100 percent of the users on OpenCongress.org support the passage of the bill.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

SEC Votes to Adopt New Whistle-Blower Program

Fri, 27 May 2011 08:00:00 EST

On Wednesday, the SEC voted 3-2 to adopt the new whistle-blower program included in last year's Dodd-Frank financial reform law.

Under the new rules, tipsters who provide information that leads to $1 million or more in penalties will receive up to 30 percent of the money the SEC recovers through the enforcement action. (For more information about the program, click here.) That could mean a lot of money. As mentioned by The Associated Press, if a whistleblower had been responsible for the SEC's $550 million settlement with Goldman Sachs, the tipster could have received up to $165 million.

Critics of the program have been voicing opposition to its implementation for months, and it is clear that attitudes remain divided. The SEC's two Republican commissioners voted against the program, and others in the industry continue to speak out against it.

After the vote, the U.S. Chamber of Commerce said (as quoted by the AP):

"The SEC has chosen to put trial-lawyer profits ahead of effective compliance and corporate governance. This rule will make it harder and slower to detect and stop corporate fraud, by undermining (internal) compliance systems."

Most investor advocates and financial regulators, however, disagree. According to James Kaplan, of Audit Integrity, more than 90 percent of the SEC's enforcement actions come from tips by whistleblowers. The new program's increased protections and higher financial rewards should mean the SEC will receive substantially more tips, which means more actions will be filed in the fight to stop corporate fraud.

The new rules will go into effect in approximately two months. Tips received from July 2010 to now will also be eligible for an award under the new rules.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

Five Tips to Help You Avoid Investment Fraud

Thu, 26 May 2011 08:00:00 EST

In an article published on NevadaAppeal.com, Deborah Jaquith, Director of Communications, AARP Nevada State Office, offered five tips to help investors avoid investment fraud:

Watch for warning signs. These often include promises of overly high returns, risk-free investments, or "special offers." (For more "red flags," read our article on common investment fraud tactics.)
Review investment products and accompanying documentation carefully. Our attorneys have written repeatedly on how important it is that investors thoroughly understand a product before they invest in it. Make sure you understand what you're investing in, how the product expects to make a profit, and what the risks are. And, remember, missing documentation is often a warning sign of fraud. Every investment opportunity should come with a prospectus or offering circular of some kind. When in doubt, check the product's registration with your state's securities regulator.
Do your own research. You should always investigate a broker, brokerage firm, investment adviser, or other financial professional before investing. For information on how to conduct due diligence online, click here.
Check your own comfort level. Don't discount your intuition. How do you feel about the investment product and the person selling it? If you get a twinge of doubt, pay attention. Conduct additional research or walk away. Safe is usually better than sorry.
Help others. Sometimes the best way to learn is to get involved and teach others how to avoid investment fraud. To learn how you can help, read Jaquith's article or go to Createthegood.org.

About our law firm:

The law firm of Meyer & Associates LLC has a proven track record in recovering losses for investors in these types of cases. We represent individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind.

Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

FINRA Suspends Pinnacle Partners and its President Over Alleged "Boiler Room"

Wed, 25 May 2011 08:00:00 EST

Recently, FINRA announced that it had indefinitely suspended Pinnacle Partners Financial Corporation, of San Antonio, Texas, and its President, Brian K. Alfaro, for failure to comply with a Temporary Cease and Desist Order.

As mentioned in our previous blog in December, FINRA sought a Temporary Cease and Desist Order against Pinnacle Partners and Brian K. Alfaro, for allegedly operating a "boiler room." A "boiler room" is a place in which stockbrokers and salespeople call potential investors and use high-pressure and misleading sales tactics to persuade them to invest in speculative (and sometimes fraudulent) securities products. FINRA alleges that Pinnacle Partners and Alfaro have operated a boiler room since 2008 and use it to raise money for eight unregistered private placements in oil and gas interests that Alfaro also ran.

The Temporary Cease and Desist Order was issued by FINRA in January. However, despite this, according to FINRA, Pinnacle continued to "market oil and gas offerings through material misrepresentations, with the intent to deceive investors." As quoted in the article, FINRA suspended the pair because they posed "a serious risk to the investing public."

The Texas State Securities Board issued a Consent Cease-and-Desist Order against Alfaro and Pinnacle in March.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

Brother and Sister Face Charges in Alleged Real Estate Ponzi Scheme

Tue, 24 May 2011 08:00:00 EST

Joseph LaCoste and his sister Angela McCoy face charges of federal securities fraud, mail and wire fraud, and bank fraud. Their real estate scheme is said to have taken place over a short period of time between April 2006 and December 2007 through LaCoste’s Albany-based company, Willamette Development Services.

The two allegedly took nearly $5.3 million from investors in the real estate scam. LaCoste and McCoy were to use this money for multiple high-end development projects. The investors were supposedly told they would receive high interest rates and a return of principal within three years. None of the promised real estate developments were reportedly ever completed, and investors are estimated to have lost their entire principal of $5,272,000. Willamette Development Services was declared insolvent in 2008.

The pair also faces accusations of lying to investors regarding where the money was going, how far along development projects actually were, and also about commissions and fees that would be received.

Both LaCoste and McCoy have pleaded not guilty to the charges.

If you are in search of an experienced investment fraud lawyer to assist you in recovering losses suffered in a Ponzi scheme, contact the law firm of David P. Meyer & Associates. We have over 50 years of collective experience and a proven track record you can trust. Contact us today at 1-866-8-BROKER, or use our convenient online contact form.

Michigan Investment Advisor Loses License; Accused of Investment Scam

Tue, 24 May 2011 08:00:00 EST

An investment advisor in Kalamazoo, MI was charged with wire fraud May 16th in Grand Rapids. Joseph Fabian, the former owner of Fabian and Associates, LLC, allegedly took $4.3 million from clients in an investment scam. He also owns American Surplus Salvage, which is based in Kalamazoo.

One client, Diane Wieandt of Kalamazoo, supposedly lost $300,000 in the alleged fraud. There are said to be many other clients also involved in the case. Officials report that Fabian allegedly told victims that he would be investing their money in bank certificates of deposit, but actually pocketed the money for himself.

These charges come after several other allegations. It was reported in November of 2010 that Fabian had lost his license as a financial advisor in 2009, but continued to act as a licensed financial advisor. Not long after, in January 2011, Fabian was under investigation for possible embezzlement. Fabian could face 20 years in prison if convicted of felony wire fraud.

If you have lost money in an investment fraud scheme, you need the experience and attention David P. Meyer & Associates offers. We are securities fraud attorneys who represent clients all over the nation in stockbroker mediation, arbitration, and litigation. Contact us today at 1-866-8-BROKER, or use the confidential online contact form at the top of this page.

Branchburg Woman's Alleged Investment Scam Bilks 50 out of $7 Million

Mon, 23 May 2011 08:00:00 EST

Sandra Ventis, owner of Systematic Financial Associates, pleaded guilty on April 26th to counts of securities fraud and transacting criminal property. Ventis allegedly operated Systematic Financial Services, a second company, solely to front an investment scheme that targeted the Branchburg-based investment advisor’s clients. She apparently took $7 million from investors in the scam, which she is said to have used to pay gambling debts, take exotic vacations, and pay her own personal expenses. She also is said to have used the money to cover operating expenses and to pay off previous investors in a Ponzi scheme fashion.

Ventis allegedly told investors she was using their money to fund loans to doctors for pension plans in the form of promissory notes. Some investors were encouraged to sell off other securities in order to invest in the scheme. She admitted to making up or forging doctor’s names in order to keep up the promissory note fraud.

Ventis faces a maximum of 20 years in prison with a five million dollar fine for the count of securities fraud, and ten years with a 250,000 fine for the count of transacting in criminal property.

The investment fraud lawyers with David P. Meyer & Associates represent stockbroker mediation, arbitration, and litigation claims nationwide. Call us today at 866-827-6537. As a special bonus to our website visitors, we are offering a FREE copy of our legal book, Five Signs of Investment Fraud and What to Do If It’s Happened to You.

FINRA Panel Rules Against Raymond James - Issues $1.5 Million Award to Investors

Mon, 23 May 2011 08:00:00 EST

In 2010, an elderly couple, Hurshel and Mildred Tyler of Texas, filed a claim against Raymond James that accused one of the firm's Texas branches of fraud, concealment, and unsuitable sales. Hurshel Tyler is now 87 years-old. His wife, Mildred, suffered from Alzheimer's disease and died during the arbitration proceedings.

On May 10, a FINRA arbitration panel awarded the man and his deceased wife's estate $1.5 million.

According to a Dow Jones Newswire, a former Raymond James Financial Services Inc. independent contractor, Paul Davis, sold the elderly couple life insurance and then arranged for $2 million in loans in their name against the policy. The loan money was then used to purchase variable annuities, which Davis later advised them to exchange. The switch cost them more than $140,000 in surrender fees.

According to the Tylers, Davis had Hurshel Tyler sign paperwork before he executed transactions, but he never explained that he was using the life insurance policy as collateral to take out loans that he would then use to purchase securities on the couple's behalf. As stated in the claim: 87-year-old Hurshel "was not always aware of what he was signing."

A reason for the panel's decision wasn't given. Out of the total award, $1.3 million was for compensatory damages. The rest covered expenses, penalties, and legal fees.

About our law firm:

The law firm of Meyer & Associates LLC has a proven track record in recovering losses for investors in these types of cases. We represent individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind.

Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

Operators of Michael Franks LLC Charged with Running $16 Million Ponzi Scheme

Thu, 19 May 2011 08:00:00 EST

Last week, Michael Morawski and Frank Constant were charged in federal court with operating an alleged $16 million Ponzi scheme that defrauded more than 300 investors. The two men (of Sleepy Hollow and West Dundee, respectively) ran Michael Franks LLC, a now defunct real estate investment company located in suburban Palatine, just outside of Chicago.

According to the charges, Morawski and Constant, through Michael Franks, offered the public two types of investments, one of which was a real estate-based "fund" that typically offered an annual interest rate of between 8 and 30 percent. The "funds" were executed using promissory notes. The charges also claim that Morawski and Constant "continually" made Ponzi-style payments to previous investors. Additional charges include: failure to disclose poor project performance, and the misuse of investor funds to pay wages, commissions, and various personal expenses.

The FBI asserts that, in November of 2010, "Morawski and Constant turned over Michael Franks, its real estate projects, and investment funds to a company called Commercial Recovery Assets to act as a private trustee/receiver." According to reports by federal agents, most of the properties held by Michael Franks have now gone into foreclosure. The FBI believes investors will lose "much, if not all, of the principal they invested in Michael Franks."

Morawski and Constant have each been charged with one count of mail fraud and one count of wire fraud. If convicted, they could each face up to 40 years in prison, plus mandatory restitution.

(For additional details, read the FBI press release.)

About our law firm:

The law firm of Meyer & Associates LLC has a proven track record in recovering losses for investors in these types of cases. We represent individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind.

Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

FINRA Launches a New Public-Access Disciplinary Actions Database

Wed, 18 May 2011 08:00:00 EST

On Monday, FINRA announced the launch of a new public-access disciplinary actions database that is available for free on the organization's website.

According to the announcement, the new FINRA Disciplinary Actions Online Database allows users to "search for actions by case number, document text, document type, action date (by date range), a combination of document text and action date, individual name and Central Registration Depository (CRD®) number, or firm name and CRD number."

Prior to the database's launch, investors and other interested parties had to contact FINRA directly to obtain information and copies of documents related to disciplinary actions. The online database streamlines that process by allowing users to search for information seven days a week and immediately read, print, or download relevant documents, including Letters of Acceptance, Waivers and Consent (AWCs), settlements, National Adjudicatory Council decisions, Office of Hearing Officers decisions and complaints.

In addition, FINRA's BrokerCheck reports will now include direct links to the disciplinary actions contained in the FINRA Disciplinary Actions Online Database. This will greatly aid investor research into particular firms or brokers by enabling them to view all of FINRA's information on an individual broker or brokerage firm at one time. To access the database directly, click here.

About our law firm:

The law firm of Meyer & Associates LLC has a proven track record in recovering losses for investors in these types of cases. We represent individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind.

Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

SEC Says: More Money Needed to Fight Investment Fraud

Tue, 17 May 2011 08:00:00 EST

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act granted the Securities and Exchange Commission new authority over various financial activities, including: hedge funds, credit-rating agencies, and the derivatives market. (For more info on the law, see our June 28, 2010 blog post). According to SEC Chairman Mary Schapiro, however, the agency won't have enough money to implement the law's financial reforms next year unless Congress increases the SEC's budget by more than $200 million ("SEC Requests More Money To Fight Fraud," NPR, May 14, 2011).

As reported by NPR, the SEC hopes to hire 500 new employees to help handle the increased workload generated by the Dodd-Frank Act. In addition to expanding the SEC's authority, the Act requires the SEC to draft 100 new rules and to conduct 20 studies. (One such study, which will examine the effectiveness of existing investor education programs, is currently pending. For more info, click here.) According to Schapiro, the SEC's current budget simply doesn't provide enough resources to implement the reforms and adequately monitor the industry.

Despite the tips and complaints that are going unaddressed, Schapiro's fight to gain increased funding may be difficult. Some congressional leaders don't support the effort, including U.S. Representative Jo Ann Emerson. Still, the agency does have its supporters, including U.S. Representative Barney Frank and President Obama, who are both advocating for more money for the commission. Which side will win remains to be seen, but it is likely that a continued lack of funding will hamper the SEC's efforts to protect investors.

About our law firm:

The law firm of Meyer & Associates LLC has a proven track record in recovering losses for investors in these types of cases. We represent individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind.

Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

LA Times: Hedge-Fund Manager Raj Rajaratnam Should Be a Warning to Wall Street

Mon, 16 May 2011 08:00:00 EST

According to the LA Times, Wednesday's conviction of hedge-fund manager Raj Rajaratnam should serve as a warning to Wall Street that the citizens of the U.S. are hungry for accountability and that the law applies to everyone - even billionaires.

Preet Bharara, the United States attorney for Manhattan, agrees. In a May 11 article published by the NY Times, Bharara said: "The message today is clear - there are rules and there are laws, and they apply to everyone, no matter who you are or how much money you have."

Rajaratnam, a native of Sri Lanka, founded New York-based Galleon Management LP, one of the world's largest hedge funds prior to Rajaratnam's arrest. On Oct. 16, 2009, Rajaratnam was arrested at his home in Manhattan and charged with 14 counts of securities fraud and conspiracy. The same day, the SEC charged Rajaratnam and his firm "with engaging in a massive insider trading scheme that generated more than $25 million in illicit gains."

In his defense, Rajaratnam's attorneys claimed he was "simply doing the sort of research that is the hallmark of successful Wall Street firms" (LA Times). Unfortunately for the defendant, the jury didn't buy it. Prosecutors were able to prove that Rajaratnam's firm "routinely" violated securities laws, and, on Wednesday, the jury found Rajaratnam guilty on all 14 counts.

Rajaratnam's sentencing is scheduled for July 29; he will remain on house arrest and electronic monitoring until then. He faces up to 25 years in prison.

About our law firm:

The law firm of Meyer & Associates LLC has a proven track record in recovering losses for investors in these types of cases. We represent individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind.

Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

Life Partners Faces Potential SEC Action in Sale of Life Settlements

Mon, 16 May 2011 08:00:00 EST

The SEC may file a civil action against Life Partners Holdings, Inc. for allegedly misleading public shareholders and investors about the accuracy of the firm's life-expectancy estimates ("Life Partners Could Face SEC Action," Wall Street Journal, May 14, 2011). The firm, which has sold billions of dollars in life settlements (financial transactions in which a policy holder sells a no longer wanted or needed life insurance policy to an investor, and the investor receives the benefits upon the insured's death) markets a return of 10 to 15 percent on the policies.

According to the WSJ article, Life Partners bases the promoted returns on a life-expectancy calculation that is rarely accurate. Research by the Journal showed that the vast majority of people insured by the policies brokered by Life Partners lived beyond what the calculation predicted. Unfortunately for investors - who use the company's life-expectancy estimates to predict returns before they purchase a particular policy - this could mean a substantially smaller return than expected.

Numerous lawsuits have been filed against Life Partners since the errors in the calculation were brought to light in an article published by the WSJ last December. SEC staff is expected to recommend that the Commission file an "injunctive" action against the company and its two top officers.

About our law firm:

The law firm of Meyer & Associates LLC has a proven track record in recovering losses for investors in these types of cases. We represent individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind.

Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

FINRA Warns of Investment Scams in the Wake of the Japan Tragedy

Thu, 12 May 2011 08:00:00 EST

You might want to think twice before investing in a company claiming to offer a product or service linked to the crisis in Japan. The Financial Industry Regulatory Authority (FINRA) issued an alert on May 4th cautioning investors to be on the lookout for companies seeking to capitalize through disaster-related investment scams.

FINRA identified several types of suspicious crisis-related claims from companies in poor financial condition or promising huge gains. These included companies offering:

New radiation detection technology;
Earthquake-resistant building development;
Radioactive waste cleanup.

In an official statement on May 4th, John Gannon, the FINRA Senior Vice President for Investor Education, stated “FINRA's Office of Fraud Detection and Market Intelligence is on heightened alert when natural disasters occur and actively monitors for potential fraudulent investment schemes. Unfortunately, natural disasters are opportunities for ruthless perpetrators to concoct get-rich-quick schemes leveraging the media attention paid to rescue and relief efforts.”

The official FINRA alert also contains tips for spotting and avoiding these potential scams.

At the law firm of David P. Meyer and Associates, we are investment fraud attorneys who represent investors nationwide. Contact us today at (866) 827-6537 or use our confidential online contact form.

Be sure to order our FREE book, Five Signs of Investment Fraud… And What to Do if it's Happened to You.

SEC Says 12(b)-1 Fees Not Forgotten as Revision Gets Pushed Back Once Again

Mon, 09 May 2011 08:00:00 EST

The SEC's long history of voicing concern over 12(b)-1 mutual fund fees while neglecting to actually do anything to revise them has continued unabated this year. In July of 2010, the SEC cited concerns over investor awareness and understanding of the fees as cause for change.

"Despite paying billions of dollars, many investors do not understand what 12b-1 fees are, and it's likely that some don't even know that these fees are being deducted from their funds or who they are ultimately compensating," said Mary Schapiro (as quoted by the Washington Post).

The fees, which can range from 0.25 to 1 percent of a fund's net assets are considered operating expenses but are often used to compensate brokers and others who sell fund shares. The proposal, which InvestmentNews said garnered more than 2,400 comment letters, included a requirement for clearer disclosures. It also included a change that would treat any 12(b)-1 fees over 0.25 percent as assets that must be paid over time.

As of May 2011, the proposal has not yet been enacted. But, according to a May 6 InvestmentNews article, Mary Schapiro says the commission remains focused on the fees and expects to revisit the issue of revision some time this summer. Ms. Schapiro also said that the commission plans to take the comment letters into account in its decisions over reform. She did not comment on whether the 2010 proposal would be re-issued.

About our law firm:

The law firm of Meyer & Associates LLC has a proven track record in recovering losses for investors in these types of cases. We represent individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind.

Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

SEC Shuts Down California Man and Alleges Day Trading Scheme Targeted Seniors

Mon, 09 May 2011 08:00:00 EST

On May 5, the SEC obtained an emergency order to halt an alleged securities fraud scheme that the commission said was being perpetrated by Robert C. Butler.

According to a litigation release, the SEC is alleging that Butler, of Bermuda Dunes, California, stole just under half ($1.6 million) of $3.3 million raised from at least 17 investors, the majority of whom were senior citizens. The SEC further alleges that the other half of the funds was lost through Butler's trading activities.

Butler, according to the SEC, "dazzled investors with his multiple computer screens and a purported proprietary trading program" and "promised exorbitant returns." He is also accused of falsifying account statements in order to conceal the investment fraud, and hiding his 1998 bankruptcy from investors.
According to the SEC's complaint, Butler refuses to return investor funds and continues to lie to existing investors, telling them that repayments "are forthcoming." Butler also continues to solicit funds from new investors.

The Honorable Margaret Morrow, United States District Judge, froze Butler's assets at the SEC's request. A hearing is scheduled for May 11, 2011.

About our law firm:

The law firm of Meyer & Associates LLC has a proven track record in recovering losses for investors in these types of cases. We represent individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind.

Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

Edward May Pleads Guilty to $35 Million Ponzi Scheme

Fri, 06 May 2011 08:00:00 EST

Edward May, founder of E-M Management Co. LLC (E-M), pled guilty last week to a ten-year, $35 million Ponzi scheme ("Edward May pleads guilty to operating Ponzi scheme that bilked investors out of $35 million," Crain's Detroit Business, April 29, 2011). Investors defrauded in the investment scheme resided in states throughout the country, including: Michigan, California, Florida, Illinois, New York, Ohio and New Jersey.

According to the article, May - through E-M - solicited investments in his LLCs by claiming that the companies held telecommunications contracts with several major hotel chains. The contracts supposedly guaranteed income of $30,000 - $100,000 per month to each company. Unfortunately for investors, the contracts never existed, and investments in the company were used to make Ponzi-style payments to previous investors.

May was indicted in October of 2009 on 59 felony counts of mail fraud. Two years before the indictment, in 2007, the SEC filed a complaint against May. In the complaint, the SEC alleged that May, through E-M, solicited as much as $250 million in a fraudulent investment scheme. May was also accused of making false promises to investors, which included a "guarantee" that they would receive, at a minimum, returns paid in monthly payments for the first 20 to 24 months after the initial investment was made. On January 7, 2010, a U.S. District Court judge issued a final judgment against May, which included an order to pay $37 million in disgorgement.

May's plea confessed to all 59 counts of fraud. He is scheduled to be sentenced on August 11.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.