The Law Planet Blog

Former Chairman found guilty on securities fraud charges for $8.6 billion fraud

2009-11-20T12:06:28Z

Former McKesson executive, Charles McCall can now join the Bernie Madoff Club. Yesterday he was found guilty of investment fraud that cost investors $8.6 billion. McCall is a former Chairman of the McKesson Corp.

A San Francisco jury found him guilty of securities fraud and violating accounting rules. On a positive note he was acquitted on falsifying records. His sentencing will take place next March.

Read the Bloomberg article to learn more on the Securities charges against Mr. McCall and his former colleagues.

ormer Chairman found guilty in $8.6 billion fraud

2009-11-20T12:06:28Z

Former McKesson executive, Charles McCall can now join the Bernie Madoff Club for Investment fraud. Yesterday he was found guilty of fraud that cost investors $8.6 billion. McCall is a former Chairman of the McKesson Corp.

A San Francisco jury found him guilty of securities fraud and violating accounting rules. On a positive note he was acquitted on falsifying records. His sentencing will take place next March.

Read the Bloomberg article to learn more on the Securities charges against Mr. McCall and his former colleagues.

Financial Services Divsion - Investment Fraud Seminar a Success

2009-11-20T11:08:53Z

I am pleased to announce that yesterday our Investment Fraud Seminar in West Palm Beach was a huge success. It was held in the beautiful Phillips Point Club. The beautiful intracoastal was a great backdrop for this well attended Seminar.

The 4 hour seminar, Investing in a Post Madoff Environment: Financial Fraud: How it's accomplished, how to detect it, and how to recover from it was attended by over 100 people from South Florida. The attendees included, CPAs, Attorneys, Bankers, Financial Representatives and a host of other professionals. The Seminar was sponsored by the Financial Services Divsion of LaBovick & LaBovick, P.A.

Attorney Marc Dobin, Director of the Financial Services Division, led the discussions on how industry professionals can help prevent investment fraud.

Speakers at the Seminar included:

William Nortman, Esq., Akerman Senterfitt

Richard A. White, Turris Consulting, LLC

Moderator: Jeffrey S. Grubman, Esq, Jeffrey S. Grubman, P.A.

Topics coverd at the Seminar included areas such as: Investment fraud, Ponzi schemes, FINRA, Churning, Florida Investor Protection Act, Churning, and much more.

We look forward to sharing more information on our next educational seminar on investment and financial fraud.

If you would like to have a transcript of the seminar or more information on investment fraud, let us know.

Our vendor partner for this program, the Daily Business Review, will be publishing a printed version of the transcript in 3 - 4 weeks in their paper as a supplement.

Stay tuned...

Investing in a Post Madoff Environment: Financial Fraud Seminar for Industry Professionals

2009-11-18T11:10:13Z

In an effort to educate industry professionals on how to fight financial fraud, The Financial Services Division of LaBovick & LaBovick, P.A. is holding a Financial Fraud Seminar in conjunction with the Daily Business Review on the very relevant subject:

Investing in a Post Madoff Environment: Financial Fraud: How it's accomplished, how to detect it, and how to recover from it.

The Seminar will be held on November 19, 2009 - 8am at Phillips Point Club in West Palm Beach.

Marc S. Dobin, Esq., Director of the Financial Services Division at LaBovick & LaBovick, P.A., will be a featured speaker along with other leading Securities Industry professionals.

Featured Speakers for the Financial Fraud Seminar: Investing in a Post Madoff Environment include:

William Nortman, Esq., Akerman Senterfitt

Richard A. White, Turris Consulting, LLC

Moderator: Jeffrey S. Grubman, Esq, Jeffrey S. Grubman, P.A.

This seminar is approved by the Florida Bar for 4.0 CLE Credits and 3 CPE Credits for Accounting and Financial Professionals.

Seminar Description:
Just over one year after Lehman Brothers disappeared, how does a professional help clients navigate the ever-changing financial industry landscape? Is the "great deal" your client brought to you the next Microsoft or the next Madoff? This Financial Fraud Seminar will feature speakers with an average of 20 years of securities industry and regulatory experience. They will discuss investment fraud techniques, discovery, prevention and what to do if you have a client who is a victim.

Florida Investor Protection Act takes center stage against Securities Fraud

2009-11-18T10:05:51Z

Not a minute too soon, Florida Governor Charlie Crist, signed the Florida Investor Protection Plan, Florida House Bill 483, into law, effective July 1, 2009. As we mentioned in a previous post on The Law Planet Blog, this was a new day for Florida investors. In the wake of fraudulent Ponzi Schemes such as, the Bernie Madoff Ponzi Scheme and the new Scott Rothstein Ponzi Scheme, investors need extra protections against investor fraud.

Yesterday, the law blawg, LawUpdates.com, wrote an excellent commentary on the Florida Investor Protection Act

The post gives background on "blue sky laws" and how states regulate securities transactons within their state. The authors provide a clear and concise analysis of Florida's Investor Protection Act that sheds light on how in Florida, the AG and government agencies have more authority to fight investor fraud.

The following excerpt from LawUpdates.com sheds llight on new authority under the new Investor Protection Act:

Specifically, the IPA authorizes the Attorney General, with permission from the state’s Office of Financial Regulation (the “OFR”), to investigate and bring securities fraud actions – criminal and/or civil—against anyone violating the anti-fraud provision under the Florida Securities and Investor Protection Act (“SIPA”). The AG has the ability to seek restitution for victims and obtain other civil penalties. The Florida Department of Law Enforcement has the ability to pay rewards for original information in money laundering investigations under the new law.

As the authors of the LawUpdates.com further point out:

Florida’s IPA has yet to be tested in court. It’s possible that a firm or broker-dealer offering securities in Florida and impacted under this new law will file a court action claiming that federal laws preempt the state’s efforts against it.

All eyes are on Florida once again, for taking Center Stage, on such a significant issue. Time will tell how the new Investor Protection Act will stand up against preemption. We will keep the faith that JUSTICE WILL PREVAIL.

Kudo's to our lawmakers for taking a bold step and passing the Florida Investor Protection Act.

If your gold is rusting, you’ve got a problem

2009-11-03T23:31:09Z

As readers of this blog know, my sister is a bankruptcy lawyer. She was recently appointed the trustee of a bankrupt jeweler who appears to have been selling gold bars to customers. Or at least they thought they were buying gold bars.

She had a conversation with a customer of the jeweler who told her how glad he was that he was not ripped off. After all, he had his gold bars at his home. He then proceeded to ask her if it was normal for gold to show rust. When I heard that question, I could not contain myself.

I’ve said this before, folks, there’s no magic bullet. If the events of the past 2 years have demonstrated anything, it’s that the so-called “experts” couldn’t find their butts with two hands and a road map. Ponzi schemers take advantage of every investor’s dream – the next Microsoft or Google is out there waiting to be discovered. Or that the next genius has found an undiscovered investing technique.

Ultimately, the wheels come off and the investors find themselves hoping that the gaudy baubles purchased by the crook can be sold for ten cents on the dollar. That’s what’s happening to the Madoff investors right now.

Bottom line – if you think your gold will rust, don’t buy it. If you’re told that the gold is “special,” you’re being lied to.

Wamu Investment fraud case moves forward

2009-10-30T10:15:35Z

Earlier this week, Seattle Federal District Court Judge Marsha Pechman, ruled that the case against several former Washington Mutual executives and Deloitte & Touche could move forward. She dismissed some of the claims, however, denied defense requests to dismiss any defendants.

In May 2009, Judge Pechman, dismissed the initial 388 page plaintiff complaint as “verbose” and “disorganized”. In her earlier decision, she wrote the following: “The Court remains mystified at counsel’s failure to allege cohesive claims, submit helpful briefing, or prepare a response to the court's inquiry in advance of oral argument. Plaintiffs' counsel cannot expect the court to engage in the necessary analysis when counsel is not prepared to do so."

In the revised 267 page complaint, submitted by the plaintiff’s counsel, Judge Pechman, finds that it is cogent and concise”. The heart of the case involves Washington Mutual’s residential lending practices and alleges that greed to raise the bank’s stock price is a major factor in why proper standards were ignored to meet consumer demand.

This case is on behalf of individuals who purchased securities issued by Wamu or its subsidiaries from October 19, 2005 to July 23, 2008 (the “Class Period”).

After reading the complaint, one can see that there are several issues on who should be held accountable for protecting Wamu investors from fraud. Many lawyers are involved in this legal battle that can last for several years.

Fraudsters Beware: Investors will hold you accountable for your actions and justice will be served.

SEC Enforcement Division needs to make massive changes according to Office of Inspector General Report

2009-10-02T11:29:13Z

According to a recent report issued by the Office of the Inspector General (OIG), the Securities and Exchange Commission’s (SEC) enforcement division needs to improve its processes and procedures for investigating and managing the fight against securities fraud. The main example cited in the report was the most current and most blatant example of the SEC’s failure to properly investigate securities fraud complaints - Bernard Madoff’s multi-billion-dollar Ponzi scheme. The report issued by the OIG stated that complaints about Mr. Madoff’s possible involvement in securities fraud were received by the SEC as long ago as 1999. Even though complaints of alleged fraud were made to the SEC in regard to Mr. Madoff, SEC staff failed to recommend that the SEC take action on these complaints.

The purpose of the OIG’s report was to determine the SEC enforcement department’s shortcomings and to identify those areas in which the department needs to make improvements to better fight securites fraud. The goal of the report was to bolster SEC enforcement measures in an effort to prevent another securities fraud case with such far-reaching implications and consequences as the Madoff case. It is the SEC’s job to protect investors from securities fraud. When the department fails to properly carry out its job duties the ramifications can spell disaster for investors.

The following systemic problems within the SEC’s enforcement department were identified in the OIG’s report: staff’s failure to thoroughly review complaints; due diligence was not exercised regarding complaints; inexperienced staff conducted unsupervised investigations; complaints were not sufficiently reviewed; staff failed to seek assistance from other departments and divisions; staff did not verify information with independent third-party representatives; administrative tasks were not completed in a timely manner. According to the OIG report, additional areas in which staff felt changes needed to be made and information clarified included: case handling procedure, program priorities, and working relationships.

The report issued by the OIG offered 21 recommendations to the department in order to create a more effective program. These recommendations focused on management control, establishment of formal guidelines, and a review of existing policy and procedures. The Director of Enforcement at the SEC stated that these measures would be implemented.

To read more on the this of OIG Recommendations view the following: Office of Inspector General (OIG) Audit on SEC - Program Improvements Needed within the SEC's Enforcement Division, Housingwire.com

Lowes Home Improvement settles overtime class action suit for nearly $30 million

2009-09-29T23:29:10Z

The world's second largest home improvement retailer, Lowes Home Improvement, will see “off the clock” in an entirely new light, after the recent, class action lawsuit settlement of $29.5 million. It is important to note that Lowes Home Improvement does not does not admit to any wrongdoing and believes it is in compliance with all laws and regulations.

It is hard to believe that a retailer so large would think that they could get away with all of the allegations brought against them. Some of the Plaintiff’s claims against Lowe’s Home Improvements include: making the Plaintiff’s work “off the clock” when not clocked in and requiring them to work after they clocked out, locking plaintiff's in the Lowe’s Home Improvement stores at the end of their shifts and not giving uninterrupted rest breaks and/or meal breaks as required by law. After all of these allegations, it is not hard to believe that the defendant did not pay the plaintiff’s the required overtime.

]]> After seven long tedious years of litigation, set backs and appeals, the plaintiff’s patience and commitment finally paid off. One can’t leave out the fact that the Plaintiff’s counsel was prepared to take Lowes Home Improvement to court after speaking thousands of Lowe’s employees. It is also important to note a very important decision 2003 decision, Parris vs. Superior Court (Lowe’s HIW) 104 Cal.App.4th 285. As they say, the stars aligned and everything came together for the Plaintiff’s in this simple case that started out with allegations from two former employees that claimed they were required to work before and after their normal shifts, but were not paid for working the extra time.

Employees have rights. When are the large companies going to learn this critical piece of information? If you want to learn more about employees rights on overtime, wage and hour requirements (fair pay), and other employment related issues, visit the following for more information on employment law. To read more on the Lowe’s Home Improvement class action settlement, visit the following legal Blog Courtside by Findlaw.

Judge rejects SEC and BofA Settlement of $33 million for Merrill takeover

2009-09-15T11:19:17Z

Unfortunately, yesterday was not a great day for the SEC and the Bank of America legal team. Their $33 million agreed upon settlement regarding the BofA taking over Merrill Lynch was rejected by Southern District of New York Judge Jed S. Rakoff

Judge Rakoff entered strong words towards the SEC and Bank of America settelement in his 12-page order, in Securities and Exchange Commission v. Bank of America Corp., 09 Civ. 6829. The judge stated the following: "Overall, indeed, the parties' submissions, when carefully read, leave the distinct impression that the proposed Consent Judgment was a contrivance designed to provide the SEC with the façade of enforcement and the management of the Bank with a quick resolution of an embarrassing inquiry -- all at the expense of the sole alleged victims, the shareholders."

He continues to further scold the SEC with additional statements:

"When a federal agency such as the SEC seeks to prospectively invoke the Court's own contempt power by having the court impose injunctive prohibitions against the defendant, the resolution has aspects of a judicial decree and the Court is therefore obligated to review the proposal a little more closely, to ascertain whether it is within the bounds of fairness, reasonableness, and adequacy -- and, in some certain circumstances, whether it serves the public interest."

Judge Rakoff deems the settlement "neither fair, nor reasonable, nor adequate."

Click here to read more on the SEC and BofA settlement from the New York Law Journal.

FINRA Arbitration against Ameriprise Financial Services

2009-08-26T11:08:31Z

LaBovick & LaBovick, PA filed a FINRA arbitration against Ameriprise Financial Services, (NYSE: AMP), formerly known as American Express Financial Advisors (AEFA) for stockbroker misconduct and negligence. The claim alleges that Deborah Amilowski, Financial Advisor for Ameriprise Financial Services, failed to properly advise a Senior investor on risks associated with unsuitable products for a person of that age, at the time of the initial investment and negligence in properly identifying the beneficiary resulting in additional loss to the trust.

The FINRA Statement of Claim, filed on August 13, 2009, stated that Ms. Amilowski, recommended a RiverSource variable annuity as an initial investment to a 77 year old investor at the time of purchase, thus ineligible for a guaranteed death benefit. This investment was too risky for someone of this age.

"Ameriprise Financial had the perfect opportunity to fix the problem, but compounded the error through their negligence and failure to act in the best interest of the client. Brokerage firms and their advisors must act with their client's best interest first. It is not acceptable for a firm to take advantage of Senior investors for profit," stated Marc S. Dobin, Esq., Director of Financial Services, LaBovick & LaBovick, PA.

Click on the following link to learn more on the FINRA Arbitration claim against Ameriprise Financial.

I love Dilbert

2009-08-26T10:59:05Z

Broker using stolen identity pleads guilty

2009-08-06T21:42:18Z

6 years ago, I handled a case against Securities America (Now Ameriprise) where the broker used a stolen identity. In fact, he used two stolen identities. The second one was a law school classmate of his, who then spent years straightening out the mess.

Fast forward to today. A broker, using the name Joseph Bonnano, in Ohio entered a guilty plea related to the falsehoods one must tell in order to propagate a stolen identity, in this case Timothy Hyde. In the prior case that I handled, much money was missing and lost. Investment News reports - that, at least for now, no money was lost.

When I handled the Securities America case, they tried to say that the broker, even though he used a phony name, was properly registered. He wasn’t of course, since he did not use his real name.

The Ohio broker’s clients may have the right to rescission – to pick the trades they don’t like and ask for their money back. So if you’re a client of Joseph Bonnano, also known as Timothy Hyde, you may be able to get second chance.

The one interesting thing we learned from the earlier case is that FINRA collects fingerprints but does not run each set of prints through a database like you see on CSI (even though there’s poetic license there as well). Instead, they just compare names and social security numbers to see if anything pops up on the national criminal database. That’s how an identity thief gets registered as a stockbroker.

Barry Kaye – King of Life Settlements – is under fire

2009-08-06T04:02:33Z

Barry Kaye, who allegedly made his fortune in the life settlement market is facing more bad news. First, he was forced to reduce his contribution to Florida Atlantic University to $5,000,000 from his planned $16,000,000. Now Investment News is reporting, that the Ohio Department of Insurance is investigating his life settlement sales in that state. The article reports that he has been sued by an 81 year-old life settlement investor for a failed transaction.

A life settlement begins with the purchase of a high value life insurance policy by an investor. The investor can either pay with their own cash or borrow the cash from a willing borrower, usually a financial institution. So, either using their own, or someone else’s, cash the investor pays the premiums for two years, to avoid the contestability period. At that point, the policy becomes a free asset and can be sold. It was commonly believed that policies had higher values in the resale market than their cash value.

The problem, not surprisingly, is that the entire transaction was based on the availability of willing buyers. Like many great ideas of 2001-2007, these ideas don’t look so good in 2008 and 2009. The new owner of the policy has to pay the premiums, a significant sum in many cases. So the original investor ends up with no buyer, a policy they didn’t need but were convinced that they did, and possibly a significant loan that they don’t want, can’t afford and expected to be able to repay upon sale of the insurance policy. Oops.

No free lunches people. This was too good to be true and it was a sham to begin with. But the sellers of these schemes should have known better and made better disclosures.

Allen Stanford complains about poor conditions in Jail while awaiting trial

2009-08-05T02:03:08Z

After all of the grief that Stanford caused to investors he swindled $7 billion from, can you believe he is complaining about intolerable conditions in jail. His $500,000 bail was revoked because he was considered a flight risk by the Judge.

The WSJ shared his Stanford's complaint to the Judge asking for a transfer in the article "Allen Stanford on His Life in Jail: ‘Conditions Are Intolerable". Jail is not supposed to be a walk in the park or a country club experience.

Texas Billionaire Allen Stanford shared the following through his Attorney, Dick DeGuerin:

1. For at least a week, during the hottest part of the summer, with outside temperatures of 100 [degrees] or more, the place where Allen Stanford is being held as a pretrial detainee has had no air conditioning and for part of that time was without power altogether.
2. Allen Stanford is housed in a single cell with between eight to ten other men. For part of the time last week, they were in total darkness and so far (this motion is prepared on Sunday, July 26) the cell has been without air conditioning for at least a week. There are no windows for light or ventilation and the conditions are intolerable.

3. Allen Stanford urgently asks the Court to transfer him to the Federal Detention Center in downtown Houston run by the Bureau of Prisons and renews his request for transfer, both because of the oppressive conditions under which he is suffering, as well as the impossible conditions for preparing for his complex trial.

4. Regarding the inability of Allen Stanford to consult with his lawyers, the discovery in this case is by electronic means and none of the visiting conditions at the Joe Corley Detention Facility allow the use of electronics. Allen Stanford will be denied his constitutional right to review the evidence in his case if he is detained pretrial at the Joe Corley Detention Facility.

5. Counsel for Allen Stanford has tried to address the conditions with the Marshal’s Service and the Joe Corley Detention Facility, but thus far to no avail. See Exhibit A, a letter to United States Acting Marshal Saenz.

Respectfully Submitted,
Dick DeGuerin

He should not get preferential treatment. Let us know what you think of Stanford's current conditions. Is this fair or cruel and unusual treatment?