The Law Planet Blog

If you are a Mcfee, Inc., investor, we have good news for you. The Securities and Exchange Commission has announced distribution of approximately $67 million to over 16,000 investors in connection with McAfee, Inc. financial fraud settlements.

The Fair Fund was created after McAfee (formerly Network Associates, Inc.), agreed to pay approximately $50 million in penalties and disgorgement to settle SEC charges in 2006 that it defrauded investors by overstating its revenues and earnings.

Investor questions regarding the distribution can be answered by calling 1-800-893-4359. Information regarding the distribution also can be obtained at McAfeeSECsettlement.com.

The Boston-based State Street Bank and Trust Company was charged by the Securities and Exchange Commission with misleading its investors about their exposure to subprime investments while selectively disclosing more complete information to specific investors.

The State Street Bank agreed to pay over $300 million to settle the securities fraud charges. Investors that lost money during the subprime market meltdown in 2007, may be entitled to these funds. This payment is in addition to nearly $350 million that State Street previously agreed to pay to investors in State Street funds to settle private claims.

According to Robert Khuzami, Director of the SEC's Division of Enforcement,

"Investigating potential securities law violations arising out of the credit crisis remains a high priority for the SEC Enforcement Division."

State Street also was ordered to cease and desist from any further violations of certain securities laws. The SEC's enforcement action took into account the company's remediation and its cooperation, including:

* Replacement of key senior personnel and portfolio managers.
* Conducting a review of its procedures and revised its risk controls.
* Entering into private settlements with harmed investors.
* Recent agreement — pursuant to a limited privilege waiver — to provide information it was not otherwise obligated to provide to enable the SEC to assess the potential liability of individuals with respect to certain investor communications.

Click on the following lnk to read more on the State Street Investor settlement of $300 million

SEC order and settlement against State Street Bank and Trust Company

Last week, the Massachusetts Securities Division’s Enforcement Section filed a complaint against Securities America, Inc. (Securities America) claiming that the company omitted information and mislead investors. In the complaint, Massachusetts claims that Securities America violated a state securities act in connection with the sale of millions of dollars worth of Medical Notes to investors.

According to the state of Massachusetts, Securities America sold investors roughly $697 million worth of Medical Capital notes issued by Medical Capital Holdings, Inc. (Medical Capital). Securities America offered the notes to investors in a number of private placements, meaning the securities were considered too risky to be solicited or sold to the general public. The complaint alleges that Securities America did not properly disclose the material risks associated with the notes prior to selling them to investors.

In a statement concerning the issue, Massachusetts Secretary of the Commonwealth, William Galvin, said:

“Our investigation showed that Securities America ignored their own due diligence analysts and sold these notes to unsophisticated investors without telling them the risks involved. People invested their life savings, while this dealer hid from them the truth of what they were getting into.”

In addition to allegedly misleading investors by Securities America, since August of 2008, Medical Capital has been in permanent receivership and has defaulted on every one of its outstanding note obligations. This means that approximately $1.079 billion of notes are in default, leaving millions of investors’ dollars – including the life savings of many – frozen. The civil complaint also seeks restitution for investors whose dollars are now illiquid.

From approximately 2003 to 2009, Medical Capital issued over $1.7 billion in Medical Capital notes. Acting as a placement agent between the notes and investors, Securities America handled the sale of roughly 37 percent of the total notes issued, or $697 million.
In connection with the sale of the notes in Massachusetts alone, Securities America received nearly $30 million in compensation. This does not include the untold millions of dollars worth of compensation received from countless more allegedly mislead investors in other states.

Although Massachusetts filed this complaint on behalf of investors within its state lines, this case of financial fraud affects investors throughout the United States. If you invested in Medical Capital notes using Securities America, please contact an attorney experienced in securities fraud immediately to discuss protecting your rights under the law.

Click on the following link to read the official complaint filed by the Commonwealth of Massachusetts

Click on the following link to read the Boston Herald’s article, State seeks restitution for securities of America investors.

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.

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...

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.

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.

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?

The trial for USA v Tzolov and Butler 08-370 started this week in New York's U.S. District Court for the Eastern District.

The case involves two former Wall Street brokers that worked for Credit Suisse Group AG, Eric Butler and Julian Tzolov. They were charged with fraudulently dealing in subprime mortgage-backed auction rate securities (ARS) for corporate clients who specifically requested much safer investments.

The trial seems to be a pass the blame for the defense. The prosecution's argument is that the brokers mislead clients about auction rate securities deals, because of greed in trying to earn millions of dollars in commissions for risky investments instead of much safer investments such as government-guaranteed student loans. The defense cites an entirely different argument, they attribute the losses of the investments to the collapse of the real estate market instead of GREED.

It is important to note that one of the brokers, Tzolov, saw the writing on the wall and recently struck a deal with the prosecution. Eric Butler, pleaded not guilty, and decided to try his luck with a jury. His former partner in crime, Tzolov, struck a deal after pleading guilty, and will be a witness for the prosecution. His testimony should really be interesting.

According to a recent article published by Reuters

"The defendant and his partner promised something better, a better opportunity," U.S. prosecutor Greg Andres said in opening arguments to the jury.

"They did not honor that promise. They invested in securities the clients didn't ask for and didn't want."

This is an important trial to watch regarding investment fraud. The defense is trying to blame the market for the loss of the investors, instead of what seems to plague many Wall Street brokers and others accused of Securities and Investment fraud: GREED.

This makes me think of a statement from the famous fictional villain, Gordon Gekko, in the Oliver Stone movie Wall Street, "Greed is Good". I imagine that people such as Bernie Madoff, Michael Milken, Robert Allen Stanford, Arthur Nadel would all agree that "Greed carries a high price tag".

What will happen in the USA v Tzolov and Butler 08-370 case and the fate of former broker Eric Butler's fate? Time will tell...

Stay tuned...