Broker Fraud

Former LFTC and LRAIC Broker Settles CFTC Charges that He Defrauded Investors

Published on: January 30, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Leslie Weiner, a former broker for Liberty Financial Trading Corp. (LFTC) and Liberty Real Assets Investment Corp. (LRAIC), has agreed to pay $170,000 in penalty and restitution to settle charges made by the Commodity Futures Trading Commission (CFTC) that he defrauded investor clients.

The CFTC says that LRAIC, LFTC, and Weiner engaged in fraudulent soliciting practices to persuade investors to open accounts. The CFTC has accused Weiner of “false and misleading solicitations.” The CFTC had filed its complaint in the U.S. District Court for the Southern District of Florida on September 21, 2004.

The consent order, issued on January 8, found that Weiner, when working for LFTC and then later LRAIC, made sales solicitations that misrepresented the risks involved in trading commodity options and did not disclose customer accounts’ actual performance records or the fact that both companies had poor track records when it came to trading commodity options.

K.W. Brown & Company, K.W. Brown Investments, & 21st Century Advisors Are Held Liable in $4.5 Million Cherry-Picking Scam

Published on: January 21, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. District Court for the Southern District of Florida has found K.W. Brown & Company, K.W. Brown Investments, 21st Century Advisors, the companies’ owner Kenneth Brown, his spouse Wendy Brown, and representative Michael Cimilluca liable for their involvement in a cherry-picking scam that earned them $4.5 million and cost investors $9 million. The three of them were also found liable for violating federal securities laws.

According to the Florida Court, from September 2002 up until at least June 2006, Brown and his friends took part in a fraudulent cherry-picking scheme that helped him and his friends earn millions of dollars in illegal gains while clients lost money as a result.

Industry regulators had warned Brown that he needed to put in place procedures and policies that would prevent this type of illegal activity, yet the oversights persisted. A Securities and Exchange examination staff had discovered a number of violations in June 2003, including undisclosed conflicts of interest and breaches of fiduciary duty.

Prosecutors Say Smart Online Inc. CEO Scammed Investors to Drive Up Shares

Published on: November 29, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Prosecutors charged former Smart Online Inc. CEO Dennis Nouri, his brother Reza, and brokers Ruben Serrano and Alain Lustig on charges of conspiracy to commit fraud and securities fraud. The four men allegedly took part in a scam, in which they sold stocks to investors to drive up Smart Online shares.

US Attorney Michael Garcia is also accusing Dennis and Reza, also Smart Online employee, of bribing the brokers to sell the stock aggressively so that the stock’s price would go up. The brothers were also charged with commercial bribery and wire fraud.

The SEC complaint said that Dennis Nouri paid over $170,000 to the brokers, who sold over 267,000 shares to investors. The investors did not know about these payments. The complaint says that Dennis Nouri covered up the bribes by calling them “consulting fees.”

Former InterSecurities Brokers Investigated for Fraud

Published on: October 5, 2007 | by Shepherd Smith Edwards & Kantas, LLP

The Florida Office of Financial Regulation and the Florida Department of Law Enforcement are investigating Michael O. Traynor and his son, Matthew O. Traynor, former brokers at InterSecurities, Inc. Complaints from at least a dozen investors allege that the Traynors defrauded clients out of approximately $8 million.

In addition to an affiliation with InterSecurities, Inc., the Traynors are reported to have been affiliated with or operated under the firm names of Mariner Financial Services, Western Reserve Life, Association of Professional College Advisors, Inc., College Advisors Group, Inc., LifeTime Advisors, Inc. and LifeTime Advisors Group, Inc. Michael Traynor was licensed in securities and insurance and represented himself as a financial planner and certified college planning specialist.

According to reports, many of the investors were first in contact with the Traynors through their church and were lured to invested funds into accounts entitled “Freedom Bond Account,” “7 Day Freedom Money Market,” as well as “CGU Broker Services” and “Allianz Broker Services”. Apparently, statements on these accounts were falsified to indicate assets, income and profits which did not exist.

Oppenheimer Fined $1 Million for Abuse of Widow – Later Told She “Only Had Herself to Blame”

Published on: July 10, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Massachusetts securities regulators fined Oppenheimer & Company, Inc. a million dollars for failing to supervise its representatives and ordered the company to also pay $135,000 to the victim, the difference between the losses she sustained and the amount Oppenheimer earlier paid her.

Oppenheimer was charged with failing to supervise a broker as he allegedly engaged in acts including theft, fraud, churning and unauthorized trading in the account of an elderly couple. The firm consented to the order without admitting or denying the claims. The broker is currently under indictment for securities fraud.

After her husband died, personnel at the elderly woman’s bank raised concerns over the activity which had occurred in the couple’s brokerage account. The widow approached Oppenheimer and claims were ultimately filed in arbitration. Oppenheimer then responded by saying she “only has herself to blame for any losses or other injury she may have suffered.” The arbitration claims were later resolved with Oppenheimer paying less than was lost.

While Former Merrill Lynch & Co. Stockbroker is Found Guilty of Witness Tampering, Seven Other Defendants are Acquitted in “Squawk Box” Securities Fraud Case Involving A.B. Watley Employees

Published on: July 7, 2007 | by Shepherd Smith Edwards & Kantas, LLP

In the U.S. District Court for the Eastern District of New York, a jury issued its verdict in the “squawk box” front running case. Seven people were acquitted of securities fraud, while Timothy O’Connell, a former Merrill Lynch & Co. stockbroker was found guilty of making false statements and of witness tampering. The judge, however, declared a mistrial for the one remaining conspiracy count to commit securities fraud against O’Connell. He faces up to 15 years in prison for the convictions, and prosecutors have announced that they will retry the conspiracy charge.

According to prosecutors, O’Connell, and the two other broker defendants, David Ghysels-a former Lehman Brothers broker-and Kenneth Mahaffy-a former Merrill Lynch & Co. brokers, purposely placed off-the-hook phones that were active next to internal speaker systems at their firms.

The purpose of doing this was to let a number of former A.B. Watley employees, including ex-president Robert Malin, former proprietary trading supervisor Keevan Leonard, former compliance director Linus Nwaigwe, and former CEO Michael Picone, listen in while large orders about to be made by institutional clients were broadcast over the boxes.

Stockbrokers and Their Firms: The Story of Bad Apples from Bad Orchards

Published on: June 24, 2007 | by Shepherd Smith Edwards & Kantas, LLP

As a former Vice President and registered representative at several major brokerage firms for 20 years, I witnessed Wall Street in action. My assessment of Wall Street is that the majority of the 600,000+ registered representatives at over 5,000 brokerage firms are fairly honest people who seek the best interest of their clients. Unfortunately, there are some “bad apples” in that barrel – brokers who seek to line their own pockets with little regard for their clients.

Yet, it is not so much the apples but the “orchard” that is most troubling today. When I began my investment career in 1970, those running investment firms sought to take care of their clients and maintain their firm’s image. Over the following 20 years, I witnessed their profit motive increasingly outstrip those goals.

Today, it is clear that most financial firms pay little more than lip-service to their clients’ welfare. In the past decade, those who run these firms have discovered an important fact: Crime pays on Wall Street! The best example is the widespread research scandal which led to massive investigations, fines and lawsuits.

Defendants Ordered to Pay $14 Millions Over Alleged Prime Bank Scheme

Published on: June 22, 2007 | by Shepherd Smith Edwards & Kantas, LLP

A U.S. District Court in Indiana entered a permanent injunction against several defendants charged by the SEC over their alleged involvement in a $32 million prime bank scheme. They were also ordered to pay $14 million in disgorgement, plus other sanctions

The SEC issued a release saying these defendants, including First National Equity LLC, P.K. Trust & Holding Inc., Worldwide T&P Inc. and several individuals, had raised approximately $32 million using while using misrepresenting and omissions to sell interests in a purported system to trade of various financial instruments, including notes.

Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. To learn whether our firm can assist you or your firm, contact us to arrange a free confidential consultation with one of our attorneys.

Barclays Bank and its Former Trader to Pay Over $11 Million To Settle SEC Insider Trading Claims

Published on: June 11, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Barclays Bank PLC and a former proprietary trader for Barclays’ U.S. Distressed Debt Desk agreed to pay a total of $11.69 million to settle Securities and Exchange Commission charges they traded on inside information received while on the creditors committees for six bankrupt companies. Neither admitted or denied the SEC’s claims.

The SEC filed an action in a U.S. District Court in New York claiming the bank and its former agent illegally traded millions of dollars of bond securities while aware of material nonpublic information received through six bankruptcy creditors committees. The six bankrupt debtors were Galey & Lord Inc., Pueblo Xtra International Inc., Desa International Inc., Archibald Candy Corp., Conseco Inc., and United Airlines.

The SEC charged that, for example, the defendants made 82 illegal trades in notes and other securities of United Airlines. In some instances “big boy letters” were issued, but neither Barclays nor its trader ever revealed the inside information to the counterparties, according to the SEC. (A “big boy letter” is an agreement in which the buyer of securities agrees not to sue the seller while acknowledging the seller may possess confidential information the buyer does not have.)

Survey Shows 43% of Investors Can Easily be Scammed

Published on: May 30, 2007 | by Shepherd Smith Edwards & Kantas, LLP

A large percentage of U.S. investors could be convinced to invest into a “guaranteed return” investment scam, according to a poll by “Money-Track,” a public-television series, and Investor Protection Trust, an investor education group.

The poll surveyed investors regarding eight basic investment principles, such as the definition of diversification and inquiring into to the background of financial professionals. When presented with questions to determine their fraud tolerance only 1% of the 1255 persons surveyed responded correctly on all eight principles.

Given investment swindle scenarios, such as the opportunity to invest into an options-trading system which guaranteed returns of at least 100%, 43% of investors responded indicating they would take the bait.