Oppenheimer & Co. Inc. has been charged with fraud and unethical conduct in Secretary of the Commonwealth William F. Galvin's wide-reaching investigation into shady auction-rate securities dealings.
Galvin alleges that Oppenheimer customers in Massachusetts were unable to access nearly $56 million when the auction-rate securities market froze last February. Galvin's office said the charges against Oppenheimer are the first against a firm that may not have participated directly in fraudulent securities auctions, but sold the securities involved to its own customers.
The complaint demands that Oppenheimer return the money its customers put into the auction-rate securities market.
Galvin alleges that Oppenheimer misled and "betrayed the trust of their clients" by selling auction-rate securities as a safe, accessible investment even as the auction-rate securities market began to fail.
Galvin also accuses several Oppenheimer executives of cashing out their auction-rate securities two weeks before the market's collapse.
An auction-rate security is a long-term debt issue that allows buyers to take advantage of short-term rewards as its interest rate is set approximately every month.
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