A former employee of Piper Jaffray & Co., Abhishek Uppal, has been barred from the securities industry for engaging in insider trading. The Financial Industry Regulatory Authority (FINRA) made this decision following actions taken by Uppal in June of this year.
Uppal, a resident of the San Francisco area, purchased shares of SoftBrands days before the company announced it was being acquired by Golden Gate Capital and Infor Global Solutions. The resulting announcement of acquisition resulted in a doubling of SoftBrands stock price. Uppal made his purchase while he was in possession of material, nonpublic information about the pending SoftBrand acquisition. The business day following the announcement of acquisition, Uppal sold all shares of SoftBrands, therefore netting a profit.
To mask his actions from his employer, Uppal used an undisclosed securities account he held at another broker-dealer to conduct his illegal activities.
Abhishnek Uppal has neither affirmed nor denied the charges made against him, but nevertheless, is bound by the terms of FINRA’s decision.
Saturday, November 7, 2009
Friday, November 6, 2009
Florida Government Agency Target of SEC Fraud Investigation
The St. Petersburg Times has reported today that a Florida government agency is the subject of a Securities and Exchange Commission (SEC) fraud investigation. The Florida State Board of Administration (FSBA), an agency charged with managing over $100 billion in public investments including that of local governments and one million current and future retirees, is at the center of the inquiry.
The SEC is investigating whether the FSBA, in conjunction with JPMorgan Chase, Credit Suisse, and Lehman Brothers, misled the public with false statements about the liquidity and risk of some FSBA investments. The involvement of a government agency on the receiving end of an SEC inquiry is an unusual occurrence.
Though the investigation has been ongoing for over a year now, the FSBA never made public its involvement in any such SEC inquiry. The only reason it is now being reported is because of a St. Petersburg Times public records request.
The FSBA has been subpoenaed to hand over documents in connection with this ongoing investigation.
The SEC is investigating whether the FSBA, in conjunction with JPMorgan Chase, Credit Suisse, and Lehman Brothers, misled the public with false statements about the liquidity and risk of some FSBA investments. The involvement of a government agency on the receiving end of an SEC inquiry is an unusual occurrence.
Though the investigation has been ongoing for over a year now, the FSBA never made public its involvement in any such SEC inquiry. The only reason it is now being reported is because of a St. Petersburg Times public records request.
The FSBA has been subpoenaed to hand over documents in connection with this ongoing investigation.
Thursday, November 5, 2009
J.P. Morgan Settles Unlawful Payment Scheme in Alamaba Bond Failure
J.P. Morgan Securities Inc. and two of its former managing directors have been charged with committing unlawful actions in connection with the Jefferson County, Alabama bond failure. The charges, which stem from a Securities and Exchange Commission (SEC) investigation, are the second instance of SEC enforcement actions arising out of the Jefferson County’s bond offerings and swap transactions.
The former J.P. Morgan managing directors, Charles LeCroy and Douglas MacFaddin, made more than $8 million in payments to friends of Jefferson County commissioners. After these payments had been made, said County commissioners voted to select J.P. Morgan as managing underwriter of the Jefferson County bond offering. In addition, J.P. Morgan’s affiliated bank was given the contract as swap provider for the transactions.
The situation was exacerbated by J.P. Morgan failing to disclose the payments or the conflicts of interest in any confirmation agreements or offering documents. The cost of the $8 million in payments, however, was passed on to the county in the form of higher interest rates on the swap transactions.
As summed up by Robert Khuzami, Director of the SEC’s Division of Enforcement, “The transactions were complex but the scheme was simple. Senior J.P. Morgan bankers made unlawful payments to win business and earn fees.” The business and earned fees, however, have cost J.P. Morgan quite a substantial sum.
This particular SEC charge was settled with J.P. Morgan with the broker-dealer firm paying a penalty of $25 million. In addition, J.P. Morgan will make a payment of $50 million to Jefferson County and forfeit over $647 million in claims it says the County owes under the swap transactions.
Birmingham Mayor Larry Langford and two others were the target of the prior enforcement action arising out of the SEC investigation. Langford has been found guilty in a parallel case and is currently awaiting sentencing.
For more information on Aidikoff, Uhl, & Bakhtiari’s current investigation regarding this matter, please click here.
The former J.P. Morgan managing directors, Charles LeCroy and Douglas MacFaddin, made more than $8 million in payments to friends of Jefferson County commissioners. After these payments had been made, said County commissioners voted to select J.P. Morgan as managing underwriter of the Jefferson County bond offering. In addition, J.P. Morgan’s affiliated bank was given the contract as swap provider for the transactions.
The situation was exacerbated by J.P. Morgan failing to disclose the payments or the conflicts of interest in any confirmation agreements or offering documents. The cost of the $8 million in payments, however, was passed on to the county in the form of higher interest rates on the swap transactions.
As summed up by Robert Khuzami, Director of the SEC’s Division of Enforcement, “The transactions were complex but the scheme was simple. Senior J.P. Morgan bankers made unlawful payments to win business and earn fees.” The business and earned fees, however, have cost J.P. Morgan quite a substantial sum.
This particular SEC charge was settled with J.P. Morgan with the broker-dealer firm paying a penalty of $25 million. In addition, J.P. Morgan will make a payment of $50 million to Jefferson County and forfeit over $647 million in claims it says the County owes under the swap transactions.
Birmingham Mayor Larry Langford and two others were the target of the prior enforcement action arising out of the SEC investigation. Langford has been found guilty in a parallel case and is currently awaiting sentencing.
For more information on Aidikoff, Uhl, & Bakhtiari’s current investigation regarding this matter, please click here.
Wednesday, November 4, 2009
Kenneth Neely - Ponzi Scheme Operator Pleads Guilty
A former St. Charles County stockbroker has admitted to a Ponzi scheme that cost investors hundreds of thousands of dollars.
The stockbroker, 56-year-old Kenneth Neely of St. Peters, pleaded guilty Wednesday to mail fraud in U.S. District Court in St. Louis. He will be sentenced in January.
Meanwhile, Secretary of State Robin Carnahan announced that her office has issued a cease and desist order shutting down the Ponzi scheme.
Carnahan says Neely directed his clients from two different brokerage firms to invest in a nonexistent real estate investment trust.
Regulators have accused Neely of defrauding at least 25 investors of more than $600,000.
The stockbroker, 56-year-old Kenneth Neely of St. Peters, pleaded guilty Wednesday to mail fraud in U.S. District Court in St. Louis. He will be sentenced in January.
Meanwhile, Secretary of State Robin Carnahan announced that her office has issued a cease and desist order shutting down the Ponzi scheme.
Carnahan says Neely directed his clients from two different brokerage firms to invest in a nonexistent real estate investment trust.
Regulators have accused Neely of defrauding at least 25 investors of more than $600,000.
Madoff Auditors Consent to Partial Judgment According to Securities and Exchange Commission
The Securities and Exchange Commission today announced that Bernard Madoff's auditors have agreed not to contest the SEC's charges that they enabled Madoff's fraud by falsely stating they audited the convicted fraudster's financial statements in accordance with the relevant accounting and auditing standards.
On November 3, 2009, the SEC submitted to the Honorable Judge Louis L. Stanton, a federal judge in the Southern District of New York, the consents of David G. Friehling and Friehling & Horowitz, CPA'S, P.C. ("F&H") to a proposed partial judgment imposing permanent injunctions against them. Friehling and F&H consented to the partial judgment without admitting or denying the allegations of the SEC's complaint, filed on March 19, 2009. If the partial judgment is entered by the Court, the permanent injunction will restrain Friehling and F&H from violating certain antifraud provisions of the federal securities laws.
The proposed partial judgment would leave the issues of the amount of disgorgement, prejudgment interest and civil penalty to be imposed against Friehling and F&H to be decided at a later time. For purposes of determining Friehling's and F&H's obligations to pay disgorgement, prejudgment interest and/or a civil penalty, the proposed partial judgment precludes Friehling and F&H from arguing that they did not violate the federal securities laws as alleged in the Complaint.
In its complaint, the SEC alleges that Friehling and F&H enabled Madoff's Ponzi scheme by falsely stating, in annual audit reports, that F&H audited Bernard L. Madoff Investment Securities LLC's ("BMIS") financial statements pursuant to Generally Accepted Auditing Standards (GAAS). F&H also made representations that BMIS' financial statements were presented in conformity with Generally Accepted Accounting Principles (GAAP) and that Friehling reviewed internal controls at BMIS. The complaint alleges that all of these statements were materially false because Friehling and F&H did not perform a meaningful audit of BMIS and therefore had no basis to form an opinion about the firm's financial condition or internal controls.
On November 3, 2009, the SEC submitted to the Honorable Judge Louis L. Stanton, a federal judge in the Southern District of New York, the consents of David G. Friehling and Friehling & Horowitz, CPA'S, P.C. ("F&H") to a proposed partial judgment imposing permanent injunctions against them. Friehling and F&H consented to the partial judgment without admitting or denying the allegations of the SEC's complaint, filed on March 19, 2009. If the partial judgment is entered by the Court, the permanent injunction will restrain Friehling and F&H from violating certain antifraud provisions of the federal securities laws.
The proposed partial judgment would leave the issues of the amount of disgorgement, prejudgment interest and civil penalty to be imposed against Friehling and F&H to be decided at a later time. For purposes of determining Friehling's and F&H's obligations to pay disgorgement, prejudgment interest and/or a civil penalty, the proposed partial judgment precludes Friehling and F&H from arguing that they did not violate the federal securities laws as alleged in the Complaint.
In its complaint, the SEC alleges that Friehling and F&H enabled Madoff's Ponzi scheme by falsely stating, in annual audit reports, that F&H audited Bernard L. Madoff Investment Securities LLC's ("BMIS") financial statements pursuant to Generally Accepted Auditing Standards (GAAS). F&H also made representations that BMIS' financial statements were presented in conformity with Generally Accepted Accounting Principles (GAAP) and that Friehling reviewed internal controls at BMIS. The complaint alleges that all of these statements were materially false because Friehling and F&H did not perform a meaningful audit of BMIS and therefore had no basis to form an opinion about the firm's financial condition or internal controls.
Tuesday, November 3, 2009
Inland Western and Inland American REIT In Trouble
With $1.4 billion of debt maturing in the second half of 2009, observers expected Inland Western Retail Real Estate Trust to cut its dividend to conserve cash to help refinance this debt. This nonlisted REIT had been paying an annualized dividend of $0.64 per share which translates to a 6.4% yield based on the price ($10) at which the company sold shares in its public offerings. Sure enough, the REIT has reported in an S.E.C. filing that it will be cutting its annualized dividend rate by 70% to only about $0.19 per year. This is a much larger reduction than some analysts had anticipated and is sure to alarm these shareholders who will be made aware of this change in mid-April. The extent of this pay-out cut was apparently required to amend the REIT’s credit agreement which permits it to pay out only the minimum amount required to maintain its REIT status. Another amendment to the credit agreement prohibits the REIT from redeeming any shares until March 31, 2010.
The REIT had already suspended share redemptions “indefinitely” in October 2008 upon reaching the 5% buyback limit. At this point, the only place these shareholders can sell these shares is the secondary market. But shares prices for Inland Western have plummeted in recent months, and the price will only go lower with the dividend being slashed.
An Inland Western related company, Inland American has left investors with little recourse. Inland American has become less than liquid with secondary price quotes much lower than the $10 per share the company was offering through a buyback program.
The REIT had already suspended share redemptions “indefinitely” in October 2008 upon reaching the 5% buyback limit. At this point, the only place these shareholders can sell these shares is the secondary market. But shares prices for Inland Western have plummeted in recent months, and the price will only go lower with the dividend being slashed.
An Inland Western related company, Inland American has left investors with little recourse. Inland American has become less than liquid with secondary price quotes much lower than the $10 per share the company was offering through a buyback program.
Monday, November 2, 2009
McGinn, Smith & Co., Inc. Income Notes
We are investigating the issuance and sale of certain income notes by McGinn, Smith & Co., Inc., including:
McGinn, Smith & Co., Inc.
Capital Center, 99 Pine St., 5th Fl., Albany, NY 12207
Security(ies) — 6.0% secured senior notes due 2006
Issuer of security(ies) — First Advisory Income Notes, LLC
Address of issuer — Same as above
State or country in which organized — New York
McGinn, Smith & Co., Inc.
Capital Center, 99 Pine St., 5th Fl., Albany, NY 12207
Security(ies) — 7.75% secured senior subordinated notes due 2008
Issuer of security(ies) — First Advisory Income Notes, LLC
Address of issuer — Same as above
State or country in which organized — New York
McGinn, Smith & Co., Inc.
Capital Center, 99 Pine St., 5th Fl., Albany, NY 12207
Security(ies) — 10.25% secured junior notes due 2010
Issuer of security(ies) — First Advisory Income Notes, LLC
Address of issuer — Same as above
State or country in which organized — New York
McGinn, Smith & Co., Inc.
Capital Center, 99 Pine St., 5th Fl., Albany, NY 12207
Security(ies) — One unit consisting of secured senior and unsecured
junior notes
Issuer of security(ies) — First Independent Income Notes, LLC
Address of issuer — Same as above
State or country in which organized — New York
McGinn, Smith & Co., Inc.
Capital Center, 99 Pine St., 5th Fl., Albany, NY 12207
Security(ies) — 6.0% secured senior notes due 2006
Issuer of security(ies) — First Advisory Income Notes, LLC
Address of issuer — Same as above
State or country in which organized — New York
McGinn, Smith & Co., Inc.
Capital Center, 99 Pine St., 5th Fl., Albany, NY 12207
Security(ies) — 7.75% secured senior subordinated notes due 2008
Issuer of security(ies) — First Advisory Income Notes, LLC
Address of issuer — Same as above
State or country in which organized — New York
McGinn, Smith & Co., Inc.
Capital Center, 99 Pine St., 5th Fl., Albany, NY 12207
Security(ies) — 10.25% secured junior notes due 2010
Issuer of security(ies) — First Advisory Income Notes, LLC
Address of issuer — Same as above
State or country in which organized — New York
McGinn, Smith & Co., Inc.
Capital Center, 99 Pine St., 5th Fl., Albany, NY 12207
Security(ies) — One unit consisting of secured senior and unsecured
junior notes
Issuer of security(ies) — First Independent Income Notes, LLC
Address of issuer — Same as above
State or country in which organized — New York
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