investment fraud lawyers

Published on: May 2, 2012

Investors Beware of Pre-IPO Fraud, Warns SEC

The Securities and Exchange Commission (SEC) recently posted an alert on its website which warns investors about scams that offer shares of popular tech companies, like Facebook and Twitter, that have not yet been released to the public. According to investment fraud lawyers, while some pre-IPO shares offerings are legitimate, and are not uncommon, they are typically limited only to sophisticated investors.

Investors Beware of pre-IPO fraud, Warns SEC

According to the SEC, the U.S. security regulator is “aware of a number of complaints and inquiries about these types of frauds, which may be promoted on social media and Internet sites, by telephone, email, in person or by other means.” In recent years, pre-IPO schemes have been a cause for concern, according to the SEC. According to securities arbitration lawyers, investors may be tempted by offerings that capitalize on the popularity of media sites like Facebook.

An order in a bid to stop allegedly fraudulent securities sales of an investment vehicle was issued by the U.S. District Court for the Southern District of Florida in Miami in early April 2012. The investment vehicle claimed to hold pre-IPO shares of Facebook.

Published on: April 25, 2012

Inland Western REIT Investors Could Recover Losses

by InvestorLawyers

According to securities arbitration lawyers, investors who suffered losses as a result of their investments in the Inland Western REIT may have a valid securities arbitration claim. As a result of the company’s recent move to go public, for the first time, investors have had the opportunity to evaluate, at a publicly set price, the performance of their investment. Because this is the first time they have had this opportunity, many investors are just now realizing that they have suffered significant losses as a result of their investment in this fund.

Inland Western REIT Investors Could Recover Losses

Inland Western REIT, also known as Retail Property of America Inc. REIT, is a non-traded REIT. According to investment fraud lawyers, REITs typically carry a high commission, which motivates some brokers to make the recommendation to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent, securities arbitration lawyers say. Non-traded REITs like this one carry a relatively high dividend or high interest, which also helps make them attractive to investors. However, they are inherently risky and illiquid, which limits access of funds to investors. This can become a major problem for investors, especially retired individuals who may need to access their funds when the need arises. In addition, frequent updates of the investment’s current price are not required of broker-dealers, causing misunderstandings about the financial condition of the investment. Because frequent updates are not required, investors may believe the REIT is doing much better than it actually is. For more information on REITs, see the previous blog post, “FINRA Investor Alert: Public Non-Traded REITs.”

If you suffered losses as a result of your investment in the Inland Western REIT (also known as Retail Properties of America Inc. REIT), you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investment fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Published on: April 23, 2012

“Retirement Plan Management: Compliance, Reporting and Ethics” Author Charged with Fraud

by InvestorLawyers

Recently, Matthew D. Hutcheson, a financial advisor and radio personality, reportedly was indicted on federal charges. Investment fraud lawyers say Hutcheson, who is well known in the securities industry, has been indicted for funding his home renovations and purchasing interest in a golf and ski resort with his clients’ retirement plan funds. Hutcheson authored the “Retirement Plan Management: Compliance, Reporting and Ethics” course and hosted “The Retirement Hour with Matt Hutcheson” radio show.

“Retirement Plan Management: Compliance, Reporting and Ethics” Author Charged with Fraud

Hutcheson was a trustee and fiduciary to three multiple employer plans, according to the Boise U.S. Attorney’s Office. These plans were the National Retirement Security Plan 401(k), the Retirement Security Plan & Trust and the G Fiduciary Retirement Income Security Plan. According to the allegations against Hutcheson, he directed the G Fiduciary Plan’s record keeper to send $2,031,688 from the plan’s account via 12 wire transfers in 2010. The plan’s account was kept at Charles Schwab & Co. Inc., and the accounts that received the funds were for Hutcheson’s personal benefit or under his control.

Furthermore, in 2010 Green Valley Holdings was set up by Hutcheson, an entity that was used to acquire a ski lodge and golf course at Idaho’s Tamarack Resort. According to the complaint, he also allegedly funneled plan assets from Retirement Security Plan & Trust to help purchase an interest in the resort, amounting to $3 million.

Published on: April 20, 2012

News: FINRA Fines Goldman Sachs Over ‘Trading Huddles’

by InvestorLawyers

According to an announcement on April 12, 2012, from the Financial Industry Regulatory Authority (FINRA), Goldman Sachs & Co. has been fined $22 million for “failing to supervise equity research analyst communications with traders and clients and for failing to adequately monitor trading in advance of published research changes to detect and prevent possible information breaches by its research analysts.” A related settlement with Goldman was announced by the Securities and Exchange Commission on the same day. Securities fraud attorneys say Goldman will pay $11 million each to the SEC and FINRA.

News: FINRA Fines Goldman, Sachs over “Trading Hurdles”

Goldman established “trading huddles” as a business process in 2006, according to FINRA’s statement. These “trading huddles” were designed to allow weekly meetings for research analysts, in which they would share trading ideas with traders for the firm. These traders worked with clients and, occasionally, equity salespersons. In addition, analysts apparently discussed specific securities while they were considering changing the conviction list status or published research rating of the security. Clients had access to the “trading huddle” information and were not restricted from direct participation through calls placed by analysts to high priority clients of the firm.

Unsurprising to investment fraud lawyers, a significant risk was created by trading huddles: material non-public information could be disclosed by analysts. Such information includes conviction list status and rating changes. Despite this risk, Goldman failed to have adequate controls to monitor communications before and after the trading huddles. Furthermore, an adequate monitoring system was not in place to detect possible trading in advance of conviction list and research rating changes in proprietary or employee training, institutional customer or client-facilitation and market-making accounts. Had these practices been allowed to continue, insider trading could have resulted, according to securities fraud attorneys.

Published on: April 19, 2012

Broker Sentenced for Fraud; Investors Could Recover Losses

by InvestorLawyers

Former securities broker Gregory Bartko has been found guilty of fraud and sentenced to 23 years in prison. Allegedly, Bartko defrauded 200 investors in a scheme that took $3.3 million from his clients. Bartko’s sentencing took place April 4 in the Federal District Court in Raleigh, North Carolina. According to stock fraud lawyers, Bartko’s victims may be able to recover losses through a Financial Industry Regulatory Authority (FINRA) arbitration claim.

Broker Sentenced for Fraud, Investors Could Recover Losses

Together with Scott Hollenbeck, Bartko’s fraud took place through the sale of unregistered securities. Hollenbeck, a Kernersville, North Carolina resident, was a member of Gospel Light Baptist Church and used his religions connection to target church members. Hollenbeck made false promises of 12 to 14 percent guaranteed interest rates through a fund that was owned by Bartko, the Caledonia Fund.

In April 2004, North Carolina’s secretary of state’s office issued a cease and desist order. Despite the order, Hollenbeck and Bartko continued to raise money for another fund developed by Bartko, the Capstone Fund. According to stock fraud lawyers, the money raised from investors was used for Hollenbeck’s and Bartko’s personal use.

Published on: April 18, 2012

Investors Who Sustained Losses as a Result of Retail Property of America Inc. REIT May Have Claim

by InvestorLawyers

According to securities arbitration lawyers, investors who sustained losses as a result of Retail Properties of America Inc. Real Estate Investment Trust (REIT) may be able to recover losses through Financial Industry Regulatory Authority (FINRA) arbitration. Formerly known as Inland Western REIT, Retail Properties of America is the third-largest shopping center REIT in the nation. The investment’s recent IPO offering had some disastrous results for investors.

Investors Who Sustained Losses as a Result of Retail Property of America, Inc. REIT May Have Claim

Recent reports show that the $8 offering price of Retail Properties came only as a result of reverse-stock-split engineering. Furthermore, this price is significantly less than the $10 to $12 expected pre-offering price. Investors who originally paid $10 per share for the REIT are actually receiving a split-adjusted value of $3 per share. Investment fraud lawyers say this 70 percent decline may result in significant losses that could be recovered through securities arbitration.

Retail Properties is a non-traded REIT. According to investment fraud lawyers, REITs typically carry a high commission, which motivates some brokers to make the recommendation to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Non-traded REITs like this one carry a relatively high dividend or high interest, which also helps make them attractive to investors. However, they are inherently risky and illiquid, which limits access of funds to investors. This becomes a major problem for investors, especially retired individuals, who may need to access their funds when the need arises. In addition, frequent updates of the investment’s current price are not required of broker-dealers, causing misunderstandings about the financial condition of the investment. Because frequent updates are not required, investors may believe the REIT is doing much better than it actually is. For more information on REITs, see the previous blog post, “FINRA Investor Alert: Public Non-Traded REITs.”

Published on: April 13, 2012

Investors Who Suffered Municipal Bond Losses May Have Valid Securities Arbitration Claim

by InvestorLawyers

Investment fraud lawyers are investigating potential claims on behalf of investors who suffered losses as a result of municipal bond purchases. Two of the bonds currently being investigated are the TW Tax Advantage Fund and Harrisburg.

Investors Who Suffered Municipal Bond Losses May Have Valid Securities Arbitration Claim

The TW Tax Advantage Fund, created by First Republic Investment Management, is a complicated, high-risk municipal arbitrage bond. Investment fraud lawyers are attempting to determine whether the necessary due diligence was performed by brokerage firms prior to the offering the investment for sale to their clients. Furthermore, broker-dealers may not have properly disclosed the features and risks of this complicated product. Shortly after the fund’s creation, it collapsed. As a result, investors of the fund suffered significant losses.

Securities arbitration lawyers are also investigating Harrisburg municipal bond. The general-obligation bond payments were missed for the first time by Harrisburg’s insolvent capital. Furthermore, its receiver is seeking approval for an asset sales plan. Reportedly, Harrisburg’s debt load is five times more than its general-fund budget and it missed bond payments amounting to $5.27 million. The bond payments were due on March 15. These payments were for bonds issued in 1997, amounting to $51.5 million.

Published on: April 12, 2012

Investors of Odyssey Partnership, BGK Income, Opportunity Fund Could Recover Losses Through Securities Arbitration

by InvestorLawyers

Investment fraud lawyers are investigating certain private placements in potential securities arbitration claims. Two of these private placements are the BGK Income and Opportunity Fund. Allegedly, some of the broker-dealers that recommended these private placement investments could be liable for investor losses.

Investors of Odyssey Partnership, BGK Income and Opportunity Fund Could Recover Losses Through Securities Arbitration

Because of the high commission paid by private placements (often as high as 10 percent), stockbrokers often make improper recommendations in order to earn the commission. If this fraud has occurred, a securities fraud attorney can help investors recover their losses through Financial Industry Regulatory Authority (FINRA) securities arbitration.

Another investment currently being investigated by securities fraud attorneys is the Odyssey Limited Partnership investment. Odyssey Operating Partnership II Ltd. apparently raised $30 million from investors through limited partnership unit sales. In addition, through secured note sales, Odyssey Residential Inc., Odyssey Residential II LLC, Odyssey Property III LLC and Odyssey Diversified VI LLC raised more than $69 million. These partnerships are only appropriate for sophisticated investors and involve substantial risks. Any investment recommendations made to unsophisticated investors could be considered unsuitable.

Published on: April 9, 2012

Cornerstone Core Properties REIT Investors Could Recover Losses

by InvestorLawyers

According to investment fraud lawyers, investors who sustained significant losses because of their investment in Cornerstone Core Properties REIT may be able to recover losses through Financial Industry Regulatory Authority (FINRA) arbitration. Full-service brokerage firms who sold Cornerstone are now being investigated. Pacific Cornerstone Capital Inc., the sponsor of the Cornerstone REIT, is only one of the firms included in this investigation by securities arbitration lawyers.

Cornerstone Core Properties REIT Investors Could Recover Losses

Investors in the Cornerstone REIT received a letter in March which stated that the share price of their investment had suffered a 72 percent decline, dropping from $8.00 to $2.25. As a result of this decline, significant damages have been suffered by the investors of Cornerstone REIT.

Investment fraud lawyers have stated that as an illiquid, non-traded investment, Cornerstone REIT was not a suitable investment for all investors. FINRA rules have established that firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation. Furthermore, brokerage firms must, before approving an investment’s sale to a customer, conduct a reasonable investigation of the securities and issuer.

Published on: April 6, 2012

Improper Variable Annuity Sales Practices Lead to Fine, Restitution Order by FINRA

by InvestorLawyers

The Financial Industry Regulatory Authority (FINRA) recently fined one of the United States’ largest independent broker-dealers, Cadaret Grant. Grant must pay a $200,000 fine in addition to restitution to investors because of improper sales practices of variable annuities to elderly investors. According to investment fraud lawyers, improper sales of variable annuities are a common cause for securities arbitration claims.

Improper Variable Annuity Sales Practices Lead to Fine, Restitution Order by FINRA

According to investment fraud lawyers, variable annuities are popular investment vehicles for retirement. Essentially, they are insurance contracts that are joined with an investment product. They have insurance-like properties but function as tax-deferred savings vehicles by providing a tax deferral using the insurance policy. The combination of the investment product and insurance contract provides four appealing features: a tax deferral on earnings, the ability to name a beneficiary for the account, the ability to use your life expectancy to receive payments for life and the ability to receive guarantees based on the insurance component. However, variable annuities are also a common vehicle for investment fraud, according to securities arbitration lawyers.

One of the registered representatives for Cadaret Grant sold 13 elderly clients unsuitable death benefit riders to variable annuities from 2006-2008, according to FINRA’s decision announcement. All 13 of the clients were age 77 or older. Apparently, the death benefit was only effective through age 80. Furthermore, despite the fact the death benefit did not apply beyond age 81, it cost the clients 25 additional basis points in fees for the duration of the policy. Apparently, four of the clients could not benefit from the rider in any way.