Potential arbitration claims against certain of the securities brokerage firms with which Kenneth McLeod was associated during the time he engaged in the Ponzi scheme as alleged and described in the SEC's Complaint filed against his estate in June 2010.
The SEC's Complaint alleges that McLeod, through his benefits consulting firm, Federal Employee Benefits Group, Inc., and his registered investment adviser, F&S Asset Management Group, Inc., solicited government employees to invest in a government bond fund that did not exist. McLeod lured many of his investors through retirement benefits seminars he gave at government agencies nationwide, raising at least $34 million since 1988 from an estimated 260 investors around the country, according to the SEC.
While engaged in the alleged Ponzi scheme, McLeod was associated with several FINRA registered securities brokerage firms which, under the securities laws, had an obligation to reasonably supervise his activities.
Saturday, October 30, 2010
Friday, October 29, 2010
Aidikoff, Uhl & Bakhtiari Investigates Bank of America Structured Products
Aidikoff, Uhl & Bakhtiari launches investigation on behalf of investors that purchased Bank of America structured investments which were represented as protecting principal. The investments the firm is investigating includes:
Bank of America (Basket EAGLES) Equity Appreciation Growth Linked Securities
Bank of America Return Linked Notes
Bank of America CYCLES (Capital Protected Equity Performance Linked Securities)
Bank of America EAGLES (Equity Appreciation Growth Linked Securities)
Bank of America Strategic Equity Exposure Performance Linked Securities
Bank of America Columbia Strategic Cash Portfolio
Bank of America (Basket EAGLES) Equity Appreciation Growth Linked Securities
Bank of America Return Linked Notes
Bank of America CYCLES (Capital Protected Equity Performance Linked Securities)
Bank of America EAGLES (Equity Appreciation Growth Linked Securities)
Bank of America Strategic Equity Exposure Performance Linked Securities
Bank of America Columbia Strategic Cash Portfolio
Wednesday, October 20, 2010
Messing With J.R., the Postscript
Many people on Wall Street were surprised when an arbitration panel awarded Larry Hagman, who played the rapacious oil baron J.R. Ewing in the 1980s hit series “Dallas,” won $11.6 million in a securities arbitration case against Citigroup.
His broker, Lisa Detanna, was also surprised. She recently sent a letter about the case to hundreds of clients at Morgan Stanley Smith Barney, where she now works. Citigroup sold a controlling stake in its brokerage arm to Morgan Stanley in 2009.
“Nothing to me is more important to me than the trust and confidence of my clients,” she wrote last week. “Even if there is no appeal, I want you to know that I, too, am deeply disappointed and astonished by the ruling.”
The ruling against Citigroup Global Markets, released earlier this month, includes $1.1 million in compensatory damages for Mr. Hagman and his wife and $10 million in punitive damages to be donated to the charities of Mr. Hagman’s choice. Citigroup must also pay about $460,000 in legal fees and other costs. It is the largest award given to an individual this year, according to the Financial Industry Regulatory Authority, or Finra, which oversaw the arbitration.
According to a recent column by Gretchen Morgenson, a DealBook colleague, Mr. Hagman and his wife moved their account to Ms. Detanna in 2005.
Ms. Morgenson wrote that documents produced in the Hagmans’ case show Ms. Detanna began upending the couple’s portfolio, taking it from a conservative blend of 25 percent stocks and 75 percent fixed income and cash to the opposite: 75 percent stocks and the rest cash and bonds.
This happened even though the Hagmans told her that they needed income-producing investments that would preserve their principal, according to the documents. Ms. Detanna also sold Mr. Hagman a $4 million life insurance policy that required onerous annual premium payments of $168,000.
When the market fell, Mr. Hagman’s lawyer Philip M. Aidikoff argued that the account’s losses were far larger than they would have been had Ms. Detanna maintained the conservative portfolio. And the life insurance policy, which Mr. Hagman did not need and was therefore unsuitable according to his lawyer, generated losses of almost $437,000 when sold, Ms. Morgenson reported. The losses included an exit fee of $168,610, which Citigroup extracted when Mr. Hagman sold the policy.
A Morgan Stanley spokeswoman declined to comment on the letter and said Ms. Detanna was not available to comment.
A Citigroup spokesman said: “We are disappointed and disagree with the panel’s finding, and we are reviewing our options.”
His broker, Lisa Detanna, was also surprised. She recently sent a letter about the case to hundreds of clients at Morgan Stanley Smith Barney, where she now works. Citigroup sold a controlling stake in its brokerage arm to Morgan Stanley in 2009.
“Nothing to me is more important to me than the trust and confidence of my clients,” she wrote last week. “Even if there is no appeal, I want you to know that I, too, am deeply disappointed and astonished by the ruling.”
The ruling against Citigroup Global Markets, released earlier this month, includes $1.1 million in compensatory damages for Mr. Hagman and his wife and $10 million in punitive damages to be donated to the charities of Mr. Hagman’s choice. Citigroup must also pay about $460,000 in legal fees and other costs. It is the largest award given to an individual this year, according to the Financial Industry Regulatory Authority, or Finra, which oversaw the arbitration.
According to a recent column by Gretchen Morgenson, a DealBook colleague, Mr. Hagman and his wife moved their account to Ms. Detanna in 2005.
Ms. Morgenson wrote that documents produced in the Hagmans’ case show Ms. Detanna began upending the couple’s portfolio, taking it from a conservative blend of 25 percent stocks and 75 percent fixed income and cash to the opposite: 75 percent stocks and the rest cash and bonds.
This happened even though the Hagmans told her that they needed income-producing investments that would preserve their principal, according to the documents. Ms. Detanna also sold Mr. Hagman a $4 million life insurance policy that required onerous annual premium payments of $168,000.
When the market fell, Mr. Hagman’s lawyer Philip M. Aidikoff argued that the account’s losses were far larger than they would have been had Ms. Detanna maintained the conservative portfolio. And the life insurance policy, which Mr. Hagman did not need and was therefore unsuitable according to his lawyer, generated losses of almost $437,000 when sold, Ms. Morgenson reported. The losses included an exit fee of $168,610, which Citigroup extracted when Mr. Hagman sold the policy.
A Morgan Stanley spokeswoman declined to comment on the letter and said Ms. Detanna was not available to comment.
A Citigroup spokesman said: “We are disappointed and disagree with the panel’s finding, and we are reviewing our options.”
Monday, October 18, 2010
Colorado Based Ponzi Scheme Snares Quarterback
Hall of Fame quarterback John Elway was among 65 investors named in an alleged Ponzi scheme case against a former hedge fund manager in Colorado, according to the Denver Post.
The Denver district attorney charged 42-year-old Sean Mueller with violating the state's Organized Crime Control Act, securities fraud and two counts of theft.
Authorities told the paper that Mueller allegedly ran a Ponzi scheme where he lured new investors to pay off old ones. Officials believe that the losses total in the tens of millions.
According to an affidavit filed by the district attorney's office, 65 people -- including former Denver Broncos quarterback Elway -- invested nearly $71 million with Mueller since 2000.
It is not known how much Elway potentially lost in the alleged scheme. His agent and spokesman declined to comment to the Denver Post.
The Denver district attorney charged 42-year-old Sean Mueller with violating the state's Organized Crime Control Act, securities fraud and two counts of theft.
Authorities told the paper that Mueller allegedly ran a Ponzi scheme where he lured new investors to pay off old ones. Officials believe that the losses total in the tens of millions.
According to an affidavit filed by the district attorney's office, 65 people -- including former Denver Broncos quarterback Elway -- invested nearly $71 million with Mueller since 2000.
It is not known how much Elway potentially lost in the alleged scheme. His agent and spokesman declined to comment to the Denver Post.
Wednesday, October 6, 2010
Morgan Keegan Loses $9.2 Million FINRA Case
Morgan Keegan, a unit of Regions Financial Corp (RF.N), was accused of inducing investors to invest in funds that were unsuitable given their high levels of exposure to risky "subprime" mortgage assets. Customers also alleged they were encouraged to reinvest dividends in the funds.
The $9.2 million award by the Financial Industry Regulatory Authority panel was the largest yet handed down against Morgan Keegan. The investors had asked for $10.5 million in damages.
All 18 investors were customers of Houston broker Russell Stein, a veteran who started his career at Merrill Lynch in 1969 and worked at Morgan Keegan from May 2001 until March 2008, according to FINRA records.
The $9.2 million award by the Financial Industry Regulatory Authority panel was the largest yet handed down against Morgan Keegan. The investors had asked for $10.5 million in damages.
All 18 investors were customers of Houston broker Russell Stein, a veteran who started his career at Merrill Lynch in 1969 and worked at Morgan Keegan from May 2001 until March 2008, according to FINRA records.
Monday, October 4, 2010
Micro Cap Stock Manipulation - Exit Only and CX2 Technologies
The Securities and Exchange Commission announced today that it charged four individuals and one entity involved in a scheme to manipulate the market in two separate microcap stocks - Exit Only, Inc. and CX2 Technologies, Inc.
The Commission's complaint, filed in federal district court in Philadelphia, alleges that, from at least January 2008 through March 2008, Mark Johnson of Baltimore, Maryland, Mark Manoff of Wayne, Pennsylvania, Leonard Gotshalk of Ashland, Oregon, and Kyle Gotshalk of Canyon Country, California, the President and Chief Executive Officer of Exit Only, Inc., engaged in a scheme to manipulate the market for the purpose of artificially inflating each company's stock price and to create the false appearance of an active and liquid market. The defendants entered into agreements with individuals they believed would generate purchases of each company's stock in exchange for the payment of cash kickbacks. Unbeknownst to the defendants, they had actually entered into agreements with a witness secretly cooperating with the government and an undercover Special Agent of the Federal Bureau of Investigation (FBI). The complaint alleges that, to effectuate this scheme, defendants provided information regarding press releases before being issued to the public, nonpublic shareholders lists, and paid cash kickbacks to generate purchases of 539,000 shares of stock in Exit Only, Inc. and CX2 Technologies, Inc.
The Commission's complaint, filed in federal district court in Philadelphia, alleges that, from at least January 2008 through March 2008, Mark Johnson of Baltimore, Maryland, Mark Manoff of Wayne, Pennsylvania, Leonard Gotshalk of Ashland, Oregon, and Kyle Gotshalk of Canyon Country, California, the President and Chief Executive Officer of Exit Only, Inc., engaged in a scheme to manipulate the market for the purpose of artificially inflating each company's stock price and to create the false appearance of an active and liquid market. The defendants entered into agreements with individuals they believed would generate purchases of each company's stock in exchange for the payment of cash kickbacks. Unbeknownst to the defendants, they had actually entered into agreements with a witness secretly cooperating with the government and an undercover Special Agent of the Federal Bureau of Investigation (FBI). The complaint alleges that, to effectuate this scheme, defendants provided information regarding press releases before being issued to the public, nonpublic shareholders lists, and paid cash kickbacks to generate purchases of 539,000 shares of stock in Exit Only, Inc. and CX2 Technologies, Inc.
Sunday, October 3, 2010
Raymond Thomas Sentenced
The Securities and Exchange Commission ("SEC") announced that on September 23, 2010, the Honorable John R. Adams of the United States District Court for the Northern District of Ohio sentenced Raymond Thomas to 6 years in prison and ordered Thomas to pay almost $1 million in restitution in connection with his conviction for one count of mail fraud and one count of filing a false tax return. Thomas's conviction stemmed from his role in a fraudulent offering scheme that defrauded at least 26 investors. Thomas was charged on June 3, 2010 and pleaded guilty on July 6, 2010.
Previously, on October 22, 2008, the SEC filed a civil injunctive complaint alleging that Thomas and his company, Strictly Stocks Investment Company, Inc. ("Strictly Stocks") operated a fraudulent offering scheme that raised at least $620,000 from at least 26 investors, many of whom were retired police officers and firefighters, while acting as unregistered investment advisers. The complaint alleged that Thomas and Strictly Stocks told investors that their funds would be invested in stocks and options. The complaint also alleged that Thomas instead misappropriated the funds and, among other things, used the funds to support his own private business ventures, including a limousine company and a title company, and for his own personal use. The complaint alleged violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act").
On February 23, 2009, the Court entered a judgment against Thomas and Strictly Stocks. The Order permanently enjoined Thomas and Strictly Stocks from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act. The Order further required Thomas and Strictly Stocks to pay disgorgement in the amount of $621,000, plus prejudgment interest of $95,406.67. Thomas and Strictly Stocks were also each ordered to pay a civil penalty in the amount of $130,000 and $650,000, respectively. Subsequently, on June 10, 2009, the SEC issued an administrative order barring Thomas from association with any investment adviser.
Previously, on October 22, 2008, the SEC filed a civil injunctive complaint alleging that Thomas and his company, Strictly Stocks Investment Company, Inc. ("Strictly Stocks") operated a fraudulent offering scheme that raised at least $620,000 from at least 26 investors, many of whom were retired police officers and firefighters, while acting as unregistered investment advisers. The complaint alleged that Thomas and Strictly Stocks told investors that their funds would be invested in stocks and options. The complaint also alleged that Thomas instead misappropriated the funds and, among other things, used the funds to support his own private business ventures, including a limousine company and a title company, and for his own personal use. The complaint alleged violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act").
On February 23, 2009, the Court entered a judgment against Thomas and Strictly Stocks. The Order permanently enjoined Thomas and Strictly Stocks from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act. The Order further required Thomas and Strictly Stocks to pay disgorgement in the amount of $621,000, plus prejudgment interest of $95,406.67. Thomas and Strictly Stocks were also each ordered to pay a civil penalty in the amount of $130,000 and $650,000, respectively. Subsequently, on June 10, 2009, the SEC issued an administrative order barring Thomas from association with any investment adviser.
Saturday, October 2, 2010
Downey man charged with running alleged Ponzi scheme
A Downey man has been charged with running a Ponzi scheme and related mortgage scam that took in more than $20 million.
Juan Rangel, who used Spanish-language TV, radio and newspaper ads to advertise his businesses, was already in custody — he was convicted last year of bribing a Bank of America bank manager. In addition to Rangel, two other men were arrested in connection with the alleged mortgage scam.
Rangel, 46, faces a maximum of 95 years in federal prison from last year's conviction and up to 232 years in prison if convicted of running the alleged Ponzi and mortgage scams. He did not have a lawyer as of Thursday evening to represent him on the new charges.
A federal grand jury indictment alleges that Rangel and his company, Financial Plus Investments, promised investors annual returns of 60%, and in some cases 100%, from the profits from real estate and lending deals.
Juan Rangel, who used Spanish-language TV, radio and newspaper ads to advertise his businesses, was already in custody — he was convicted last year of bribing a Bank of America bank manager. In addition to Rangel, two other men were arrested in connection with the alleged mortgage scam.
Rangel, 46, faces a maximum of 95 years in federal prison from last year's conviction and up to 232 years in prison if convicted of running the alleged Ponzi and mortgage scams. He did not have a lawyer as of Thursday evening to represent him on the new charges.
A federal grand jury indictment alleges that Rangel and his company, Financial Plus Investments, promised investors annual returns of 60%, and in some cases 100%, from the profits from real estate and lending deals.
Friday, October 1, 2010
FINRA Proposes to Permanently Give Investors the Option of All-Public Arbitration Panels
The Financial Industry Regulatory Authority (FINRA) will file a rule proposal next month that would allow all investors filing arbitration claims the option of having an all-public panel, greatly increasing investor choice in the FINRA arbitration program. The rule proposal, which will be filed for approval with the Securities and Exchange Commission (SEC), would expand to all investor claims a two-year-old FINRA pilot program that gives investors filing an arbitration claim against certain firms the option of choosing an all-public panel.
"Giving each individual investor the option of an all-public panel will enhance confidence in and increase the perception of fairness in the FINRA arbitration process," said Richard Ketchum, FINRA Chairman and Chief Executive Officer. "All investors will have greater freedom in choosing arbitration panels, and any investor will have the power to have his or her case heard by a panel with no industry participants."
If approved by the SEC, the rule would give investors the option of choosing an arbitration panel that has two public arbitrators and one non-public arbitrator, as is now the case, or choosing to have their case heard by an all-public panel. The current pilot program involves 14 firms that agreed voluntarily to a set number of investor cases that did not involve individual brokers. The proposed rule would apply to all investor disputes against any firm and any individual broker. It would not apply to arbitration disputes involving only industry parties.
Since the Public Arbitrator Pilot Program began in October 2008, slightly more than 60 percent of investors eligible to participate have opted in, resulting in almost 560 cases to date. Investors opting into the pilot, given the power to eliminate all non-public arbitrators, still chose to have one non-public arbitrator on their panel about 50 percent of the time. The pilot program was originally set to conclude after two years. However, the participating firms agreed recently to extend the pilot program for an additional year while the rule making process goes forward.
FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing and enforcing rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and registered firms. Currently, there are roughly 6,200 FINRA arbitrators – 2,700 are non-public and 3,500 public. For more information, please visit www.finra.org.
"Giving each individual investor the option of an all-public panel will enhance confidence in and increase the perception of fairness in the FINRA arbitration process," said Richard Ketchum, FINRA Chairman and Chief Executive Officer. "All investors will have greater freedom in choosing arbitration panels, and any investor will have the power to have his or her case heard by a panel with no industry participants."
If approved by the SEC, the rule would give investors the option of choosing an arbitration panel that has two public arbitrators and one non-public arbitrator, as is now the case, or choosing to have their case heard by an all-public panel. The current pilot program involves 14 firms that agreed voluntarily to a set number of investor cases that did not involve individual brokers. The proposed rule would apply to all investor disputes against any firm and any individual broker. It would not apply to arbitration disputes involving only industry parties.
Since the Public Arbitrator Pilot Program began in October 2008, slightly more than 60 percent of investors eligible to participate have opted in, resulting in almost 560 cases to date. Investors opting into the pilot, given the power to eliminate all non-public arbitrators, still chose to have one non-public arbitrator on their panel about 50 percent of the time. The pilot program was originally set to conclude after two years. However, the participating firms agreed recently to extend the pilot program for an additional year while the rule making process goes forward.
FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing and enforcing rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and registered firms. Currently, there are roughly 6,200 FINRA arbitrators – 2,700 are non-public and 3,500 public. For more information, please visit www.finra.org.
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