Investment Advisers

San Antonio Spurs’ Tim Duncan Addresses $20M-Plus Texas Securities Case Against His Former Financial Adviser

Published on: June 18, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Earlier this year, our securities law firm published a blog post reporting that San Antonio Spurs’ Tim Duncan had filed a Texas securities case against financial representative Charles Banks. Duncan contends that due to unsuitable recommendations made to him by Banks, he allegedly lost some $25 million.

Banks, a private-equity investor, was Duncan’s adviser for nearly two decades, since the beginning of his professional sports career. The NBA All-Star says that Banks persuaded him to get involved in investments that were bad for Duncan but good for the financial adviser. He also claims that Banks forged his signature and withheld his return on a loan. The San Antonio Spurs star says that over the years, he’s invested millions of dollars in products and businesses that Banks either owned or had a financial stake in.

Meantime, Banks claims that Duncan’s losses are because of the player’s own impatience or due to misunderstandings. He argued that Duncan is using the Texas securities case to exit certain limited partnership investments.
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SEC Charges Investment Advisory Firm’s Former President With Stealing Client Monies, Including $300,000 from Mike Tyson

Published on: June 15, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission is charging the former president of SFX Financial Advisory Management Enterprises with stealing client funds. The regulator’s Enforcement Division contends that Brian J. Ourand abused his discretionary authority over several clients’ accounts. He allegedly stole about $670,000 over five years by writing himself checks and putting through wire transfers.

The investment advisory firm is owned by Live Nation Entertainment and provides financial management and advisory services to high net worth individuals. SFX has a specialized focus in working with former and current professional athletes. Ex-boxing champion Mike Tyson was an SFX client at one time.

He and his wife sued SFX, Live Nation, and Ourand in 2013 on the grounds of unjust enrichment, fraud, and breach of fiduciary duty. The Tysons accused them of misappropriating over $300,000 and costing him millions more in possible future earnings. They sought over $5 million.

In its order instituting administrative and cease-and-desist proceedings, the SEC said that Ourand served as relationship manager to a number of clients. He was in charge of bank accounts and paid their bills. He also purportedly had unauthorized access to their credit card accounts. Ourand provided investment advice and had discretionary authority to trade in client brokerage accounts.

SEC Warns About Fake Investment Advisers Who Inflate or Fake Their Credentials

Published on: June 4, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission has issued an alert cautioning investors to double check the credentials of financial professionals before working with them. This week, the regulator’s Enforcement Division announced two securities fraud cases against investment advisers accused of making false claims about their background and experience.

In one case, Michael G. Thomas purportedly told investors that Fortune Magazine had named him one of the “Top 25 Rising Business Stars.” The distinction does not exist. He also allegedly inflated his past investment performance, pumped up a fund’s projected performance, and made misrepresentations about who would be advising and co-managing a fund.

Thomas has consented to pay a $25,000 penalty. He agreed to not take part in the offer, issuance, or sale of certain securities for five years. Thomas is barred from associating with investment advisers, dealers, and brokers during that time.

SEC, Prosecutor Charge Miami Investment Adviser With Defrauding Retired Teachers and Law Enforcement Officers with Ponzi Scam

Published on: June 3, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The SEC is charging Miami investment adviser Phil Donnahue Williamson with running a Ponzi scam and bilking at least seventeen investors. The U.S. Attorney’s Office for the Southern District of Florida has filed a parallel criminal action against him.

According to the SEC, Williamson raised over $2 million over the course of seven years-from ’07 to ’14-while making misrepresentations about the way investors’ money would be used, as well as regarding the investments’ valuations and returns. He also allegedly misused or misappropriated at least $748,000 of client money to pay for personal expenses, other businesses, and unrelated investment activities. Among his investors were several retired local law enforcement officers and teachers who were looking to put their savings in safe investments.

Williamson allegedly used the money he solicited for the Sterling Investment Fund, which supposedly invested in properties and mortgages in Georgia and Florida, to run his Ponzi scheme. He advised investors to buy an LLC interest in the fund.

The Sterling Fund’s subscription agreement stated that the minimum agreement was $25,000 and that the funds would go toward buying mortgage loans or institutional third-party financing, which was to be used to also buy mortgage loans and otherwise support the business of the company.
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Boston Investment Adviser Must Pay Two Investors A $48M Arbitration Award

Published on: April 21, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Investment Advisory firm Family Endowment Partners and its managing partner Lee Weiss have been ordered to pay a $48 million securities arbitration award to clients for private investments they made in Biosyntec Polska, a company that owned a tobacco company in Poland and purportedly patents a cigarette filter that was supposed to dramatically transform the tobacco industry.

James and Jane Sutow accused the Boston investment advisor and Weiss of making investment recommendations that were not suitable and grossly negligent, selling unregistered securities using material and fraudulent misstatements, and failing to disclose conflicts of interest in the recommendations they made. More than $20 million in investments were recommended by Family Endowment Partners and Weiss to the claimants.

The Sutows invested $9 million in the Polish company over a three-year period. Iman Emami, the head of the group that purchased Biosyntec Polska, was someone Weiss had been acquainted with for a long time. Emami supposedly held the filter patents. The filter was supposed to use rosemary extract to get rid of most of the free radicals found in cigarette smoke. The Sutows also made investments in companies related to the Polish company, including $9.7 million in funds run and crated by the RIA and Weiss. However, none of the investments came with offering documents or information that gave the claimants complete and fair disclosure of material facts.

SEC Rejects Broker’s Efforts to Start RIA While Behind Bars

Published on: March 23, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Securities and Exchange Commission has barred David Scott Cacchione from the securities industry once again. Cacchione was banned in 2009 for helping to mastermind a $100 million financial scam. This time, his bar is for attempting to start a registered investment adviser firm while in jail for the previous crime.

Cacchione, who was released from prison in June, had been sentenced to five years in jail and three years supervised release for pleading guilty to securities fraud. The charge involved pledging clients’ securities without their knowledge to obtain over $45 million in personal loans for a friend. Among those whose money he used was an elderly widow and a children’s charity.

According to the SFGate, in 2007 and 2008 Cacchione, while managing director of Merriman, Curhan, Ford & Co. in San Francisco, gave client brokerage statements to William Del Biaggio III, who doctored them to make it appears as if the securities belonged to him. He did this to secure or renew some $100 million in loans. He used the funds to pay off debt and purchase an ownership stake in the Nashville Predators hockey team.

Over $44M Lost in Alleged Investment Adviser Scam Involving Total Wealth Management

Published on: March 19, 2015 | by Shepherd Smith Edwards & Kantas, LLP

According to a court-appointed receiver, investors who were the victim of a financial scam allegedly run by Total Wealth Management founder Jacob Cooper lost more than $44 million of assets. The investors are suing Cooper and other principals of the investment adviser.

Cooper pursued investors using “Uncommon Wealth,” his weekly radio show in which he’d discuss retirement planning. According to InvestmentNews, He capitalized on his past history as an Eagle Scout, as well as he was a Mormon and his dad had been in the U.S. Marine Corps, to grow a more than $100 million business with over 600 clients.

Cooper and other firm principals allegedly pooled about 6% of the $100 million and placed them in the Altus Funds, which are proprietary investment funds. These funds then invested in unsuccessful ventures, as well as in Private Placement Capital Notes-the latter did pay interest until two years ago.

Consumer Groups Accuse SEC of Not Protecting Retail Investors and Poorly Regulating Investment Advisers

Published on: March 13, 2015 | by Shepherd Smith Edwards & Kantas, LLP

A letter to the SEC from consumer groups claims that the agency is not meeting its obligation to make sure that retail investors are getting the protections they need. The Consumer Federation of America, Americans for Financial Reform, Fund Democracy, Consumer Action, Public Citizen, and AFL-CIO gave an outline of how they want the regulator to enhance financial adviser regulation, which they believe could be more robust.

They are calling on the Commission to execute “concrete steps” to up the standards bar for brokers when it comes to giving investment advice. For right now, brokers only have to recommend investments that in general are a fit for the clients’ investment goals and risk tolerance level, even as investment advisers must abide by a fiduciary obligation.

The letter from the groups also talks about improving financial adviser disclosure in regards to compensation and conflicts, reforming the sharing of revenue, placing limits to mandatory arbitration for disputes between investors and their financial representatives, strengthening regulations for high-risk financial products, and enhancing required disclosures from financial advisers to investors about financial products.

SEC Claims Investment Adviser Paid for Fraud Settlement With Client Monies

Published on: February 10, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Securities and Exchange Commission is accusing investment adviser Jacob Cooper and his Total Wealth Management firm of using client funds to pay for a settlement in a fraud case. Now, in the wake of the allegations, the RIA is facing new securities charges.

According to the regulator, Total Wealth Management found clients via a weekly radio show, of which Cooper was the host, and also through free lunches.The SEC contends that Cooper and his firm misused investor money and bilked clients via “administrative” fees that went unexplained. The fees ranged from $3,500 to $7,500/per account. The regulator says that to resolve an SEC administrative action from last year, the investment adviser allegedly borrowed $150K in client funds.

The action accused Cooper of pooling about 75% of clients’ $100 million in assets, placing them in a private fund, and then investing that in unaffiliated funds, which gave clients an undisclosed revenue-sharing fee. In its most recent complaint, the SEC said that Cooper also used investor money to cover the legal fees on a class action that clients brought. These clients were unable to end their relationship with the RIA or take out their money. Following the class action securities case, Cooper sent out an email notifying clients that because of this litigation, all of them would now have to contend with fee increases.

Sun Antonio Spurs Star Tim Duncan Files Texas Investment Adviser Fraud Case

Published on: January 31, 2015 | by Shepherd Smith Edwards & Kantas, LLP

NBA All-Star Tim Duncan is suing his investment adviser for securities fraud. The San Antonio Spurs basketball player says that his financial representative, Charles Banks, made investment recommendations based on conflicts of interest. Duncan claims that because of this he sustained substantial financial losses. According to one source, the NBA star lost more than $20 million.

In his Texas securities case, Duncan says that Banks, who gave him investment advice for seventeen years, took advantage of their relationship for personal gain. Duncan claims that Banks suggested he invest several million dollars in beauty products, hotels, sporting goods, and wineries that the latter either had a financial stake in or owned. The NBA basketball player also says that Banks was able to garner a $6.5 million bank loan using Duncan’s forged signature.

Unfortunately, professional athletes are targeted by financial fraudsters. With their large incomes and, in some cases, inexperience with managing their money and investments, there are scammers who will take advantage of their investment adviser relationship with them to try to make money. Because pro athletes can only play at the NBA, NFL, MLB, and NHL levels for a certain amount of years, unexpected and substantial financial losses caused by securities fraud may prove devastating for athletes and their families.