Napoli Bern Ripka, LLP Notice To Bear Stearns High Grade Investors
Recently, a Financial Industry Regulatory Authority (FINRA) arbitration panel awarded over $3 million damages following the collapse of the Bear Stearns High Grade Structured Credit Fund and Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund (“Bear Funds”). The Bear Funds were highly leveraged hedge funds that purchased collateralized debt obligations (“CDOs”) backed primarily by risky subprime mortgages. Starting in its inception in 2003, the Bear Funds continuously reported positive monthly gains and was valued at approximately $16 billion at its height. By the beginning of 2007, however, the subprime mortgage backed securities market began to unravel and the Bear Funds began to yield negative returns. In fact, the market crashed so quickly that by July 2007 the Bear Funds had completely collapsed, and investors were informed that they suffered over $1.5 billion in losses.
Napoli Bern Ripka, LLP is currently investigating whether Bear Stearns Asset Management (“BSAM”) fraudulently and negligently supervised the Bear Funds. Specifically, Napoli Bern Ripka, LLP is determining whether investors were mislead due to various misstatements and omissions of material fact made by BSAM while in communication with its investors. The recent award of damages by a FINRA arbitration panel further supports the notion that BSAM made unsuitable recommendations to investors and violated the federal securities law.
If you invested in either the Bear Stearns High Grade Structured Credit Fund or the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund, Napoli Bern Ripka is interested in hearing from you. Please contact the stock fraud department at 212-267-3700.
Medical Capital Holdings (MedCap) and Securities America
Napoli Bern Ripka, LLP is currently seeking clients who have incurred losses investing in Medical Capital Holdings. In July 2009, the Securities and Exchange Commission (SEC) sued Medical Capital for fraud, claiming that Medical Capital misappropriated $18.5 million of investors’ money and misrepresented its own business records by keeping several defaults under wraps. A court-appointed receiver subsequently revealed that most of the account receivables on MedCap’s books did not exist.
Securities America is one of the broker/dealers facing legal action in connection with Medical Capital Holdings. Massachusetts regulators sued the Omaha-based company on January 26, 2010, claiming it misled investors about the risks involved in the Medical Capital Notes and the financial health of the issuer, Medical Capital Holdings. According to the complaint, 400 Securities America advisers allegedly sold $700 million of the private placements, half of which are now in default. The $700 million sold by Securities America represents 37% percent of the $1.7 billion in notes that MedCap issued. Securities America was accused of committing securities fraud on a “massive scale” by committing “acts of material omissions and misleading statements.” The company continued to sell the notes to investors even after a senior-level company officer expressed concerns about Medical Capital and its fiscal health.
In addition to Securities America, other broker/dealers such as QA3 Financial Corp., National Securities Corp., CapWest Securities, Independent Financial Group LLC, Investors Capital Corp., and Centaurus Financial are also being investigated for investors’ losses in Medical Capital Holdings.
If you lost money related to an investment in Medical Capital Holdings, please do not hesiate to contact us to discuss your potential claim.
Brokers’ Misrepresentation of Risks Associated with “100 percent principal protected absolute return barrier notes.”
Throughout 2008 many brokers pushed their clients to purchase principal -protected notes issued by Lehman Brothers –notes that were marketed to investors as “safe” but that are now essentially worthless since the market seized and Lehman went under. Investors are seeking to enforce their right to be compensated for losses stemming from their advisors misrepresentation of these principal-protected notes as solid and secure, when they in fact posed an unsuitably high risk for most conservative investors. Investors allege that brokers not only failed to fully disclose the inherent risks to them, but also pedaled the investments as safe and secure, leaving investors with devastating losses they had no idea they were exposed to in the first place.
Unlike the name implies, these “100 percent principally protected absolute return barrier notes” are essentially zero-coupon notes whose returns are tied in part to the performance of an equity index (such as the Standard & Poor’s 500). The securities promise to return a gain from the index’s performance in addition to an investor’s principal if that index performs within a specified range.
For an investor in one of these notes to earn the return of the index as well as get the principal back, the index cannot fall below or rise above a certain percent from the level it was at the day it was issued to investors. If the index exceeds those specific levels during the holding period, the investors only receive their principal back.
Clearly these are complex instruments that were, unfortunately, pushed on mostly conservative investors who had no way of fully understanding the true risks associated with these investments in general, but especially since the claims involving these notes popping up in arbitration hearings are mostly from investors who were advised to purchase these volatile notes in early to late 2008, at the height of market turmoil. The result? The notes became worthless and investors lost everything when Lehman went under.
Many of these investors, to their great misfortune, were not informed of the risks associated with these types of securities. Brokers marketed them to clients as “safe and stable” even in 2008 when any sophisticated investor would have deemed them unworthy of investment due to the wide-spread speculation that Lehman would be next in line to fail. Brokers-who received high commissions for these securities- misrepresented the risks associated with them to investors. This fact is further punctuated by the fact that most of the investors were not even aware that the then-floundering Lehman Brothers issued the notes.
The Securities Litigation Department of Napoli Bern Ripka LLP represents investors in various securities actions against financial advisors for violation of both state and federal securities law. If you were invested in principal-protected notes issued by Lehman Brothers, you may have the right to be compensated for your loss. To learn more, please contact Napoli Bern Ripka LLP at 212-267-3700 or agana@nbrlawfirm.com for a free and confidential consultation.
Medical Capital Investor Receives $400,000 Arbitration Award For Reg D Private Placement Investment
June 1 - In the first successful claim against a broker for selling Medical Capital notes, FINRA has ordered broker-dealer Peak Securities Corp. to pay customer Marilyn Hazell $400,000 that she lost in a Medical Capital Holdings fund.
Hazell filed arbitration claims against Peak Securities, the broker-dealer that sold Hazell Medical Capital notes. Hazell alleged breach of contract, breach of fiduciary duty, negligence and fraud stemming from the purchase of Medical Provider Fund VI notes offered by Medical Provider Funding Corp.
Private placements in Medical Capital are at the center of a July 2009 fraud complaint by the SEC. In its complaint, the SEC charged Medical Capital Holdings with fraud in the sale of $77 million in notes. According to the SEC, Medical Capital told investors that any funds raised from its private placement deals would be invested in medical receivables. The SEC alleges that the Medical Capital took $25 million in administrative fees for one fund, Medical Provider VI.
This will likely be the first of many arbitration awards against the brokerage firms who sold the Medical Capital notes. Brokerage firms selling such offerings have due diligence duties prior to approval of their sale, and representatives are required to make suitable recommendations to their customers. Additionally, brokers may not misrepresent the risk of securities they recommend and they must disclose material facts related to risk.
The attorneys at Napoli Bern Ripka have experience litigating numerous cases on behalf of customers who were sold fraudulent private placement investments similar to Medical Capital Holdings private placement investments. If you are an investor who purchased these offerings, please contact us today to discuss your potential claim against Medical Capital and the individual broker-dealers who sold Medical Capital notes.
Napoli Bern Ripka, LLP Investigates Recent New York Affinity Fraud Scheme
NEW YORK May 26, 2010
Affinity fraud refers to investment scams that target members of identifiable groups, such as the elderly, religious, or ethnic groups. Perpetrators portray themselves as members of the group in order to gain trust and eventually solicit investments in fraudulent scheme. Ponzi schemes are often combined with affinity fraud.
Recently, the SEC filed charges against New York investment firm GTF Enterprises Inc., the firm’s manager Gedrey Thompson, and associates Sezzie Goodluck and Dean Lewis for defrauding investors.
This affinity fraud targeted Caribbean and African-Americans with little investment experience, by inducing them to invest funds with promises of guaranteed returns. From 2004 through 2009, GTF and Thompson conducted an affinity fraud and ponzi scheme, targeting unsophisticated investors from African-American and Caribbean communities in Brooklyn, New York.
Thompson and his associates scammed investors into investing over $800,000 in GTF brokerage accounts by promising lofty, but false, investment returns with guaranteed safety of principal. Instead of using investors’ money as promised, Thompson invested only $100,000 of customers’ funds in the GTF brokerage account. Thompson misappropriated hundreds of thousands of dollars for personal use. Many GTF investors lost their life savings.
Thompson lost all of the invested funds trading in options and failed to disclose these losses to current or prospective GTF investors. Even worse, Thompson misappropriated thousands of dollars for personal use. For example - trips for Thompson and his girlfriend, private school tuition for his son, and meals at restaurants.
In order to conceal and perpetuate the scheme, Thompson and GTF provided investors with fictitious quarterly account statements.
Thompson, Lewis, and GTF made multiple misrepresentations to customers, promising customers that their money would be invested in options, futures, commodities, or other securities. Thompson told investors that their investments were risk-free and guaranteed a pre-determined rate of return per quarter, between 4 and 20 %, regardless of how the GTF account performed in the market.
In communications with prospective investors, Thompson guaranteed the safety of an investment with GTF. Thompson told one customer even when the market was at its worst that her investment would be “150% guaranteed” and told another customer that Thompson could make that person a millionaire.
In a promotional brochure Thompson provided to prospective GTF investors, Thompson touted GTF as “miles ahead of other investment management companies” because it assumed all of the trading risk. Additionally, Thompson described GTF’s trading strategy as “risk-averse.” These representations were false.
The SEC complaint also charges GTF account manager Dean Lewis and assistant treasurer Sezzie Goodluck with making false or misleading representations to investors.
Napoli Bern & Ripka LLP represents victims that have suffered losses caused by affinity fraud targeting a variety of groups, including the fraudulent trading schemes of GTF, Thompson, and his associates.
Source: http://www.sec.gov/litigation/complaints/2010/comp-pr2010-87.pdf
Investors Never Advised of Substantial Risks of Unlisted REITs
Napoli Bern Ripka LLP warns investors of inappropriate industry sales practices in the sale of unlisted real estate investment trusts. Investors across the country are seeking to enforce their right to be compensated for losses stemming from their advisors unsuitable recommendation of unlisted, or non-traded, real estate investment trusts (REITs). Investors allege that brokers failed to fully disclose the risks inherent in this investment.
Unlike listed REITs whose value is set daily by the market, unlisted REITs are valued by the staff of the REIT that can often create a conflict of interest during challenging economic times. Selling an unlisted REIT is also very different because of individual sales procedures. Depending on the REIT, an investor may be limited to selling their position through a redemption program that may actually be suspended if too many investors seek to redeem at once. This can leave an investor unable to liquidate their position and left holding what may have been an unsuitable investment.
Investors are alleging that the almost 15% commission offered to advisors may have led them to omit the limitations and risks of investing in this unique product. Legal causes of action include the failure to recommend suitable investments, breach of contract, breach of fiduciary duty and negligence. If you were invested in REITS such as the Behringer Harvard REIT, you may have right to be compensated for your loss to rescind the entire transaction. To learn more about the suitability of this investment to your investment portfolio, please contact Adam J. Gana of Napoli Bern Ripka LLP for a free and confidential consultation.
Provident Asset Management LLC Expelled By FINRA Over Fraudulent Private Placement
One March 18, 2010, the enforcement division of FINRA expelled Provident Asset Management LLC. It is alleged that the firm marketed a series of fraudulent private placements through an affiliate, Provident Royalties LLC, in what was a massive ponzi scheme that led to investors l. Provident Royalties sold $480 million of its offerings through an estimated 50 retail broker-dealers who promoted the investment to thousands of investors. Investors were promised an income producing investment with 18% return per year through an investment in a the oil and gas business but instead invested what was a massive ponzi scheme. Provident Asset Management neither admitted nor denied the charges.
Investors across the country are outrage at how fraudulent private placements were promoted by brokerage houses and financial advisors to them and are seeking their right to be compensated for their losses through mandatory arbitration with the Financial Industry Regulatory Authority (FINRA). Despite numerous warnings from the regulatory authorities, brokers and brokerage firms promoted private placement securities without diligently researching the risks or failing to fully disclose the risks to their clients.
Trust Assets, Beneficiaries, Investment Advisors & Your Rights
Napoli Bern Ripka LLP continues to represent trustees in claims against financial advisors to enforce their right to be compensated for the loss of trust assets as a result of their brokers’ failure to either recommend suitable investments in accordance with the trusts purpose or failure to properly disclose the risks inherent in their investment strategy.
A trustee has a duty to invest and manage property in accordance with a standard of prudence. This standard requires the exercise of reasonable care, skill and caution in making investment and management decisions. Trust assets must be invested in accordance with the trust’s purpose and income needs. If a trustee has limited investment knowledge or experience, he or she is entitled to rely upon the advice and recommendations of another professional. However, any professional that undertakes the management or assumes the role as trustee is held to a higher standard. A professional investment adviser that serves as trustee or agent or represents that he or she has a special skill must exercise such diligence in investing and managing assets as would customarily be exercised by prudent investor of discretion and intelligence having special investment skills.
Piror to making any recommendation, the trusts’ financial advisor must ensure the risks inherent in their recommendation is suitable for the trust and to evaluate each investment decision not in isolation, but in the context of its effect upon the entire trust portfolio. It is imperative to ensure that its risks and return of the proposed investment is suited to the investment objectives of the trust. Recent claims evidence in trend by financial advisors to create over-concentrated portfolios that expose investors to disproportionate level of risk for the returns being received. A well-diversified portfolio will shelter any investor from the effects of market instability and prevent substantial losses.
Napoli Bern Ripka LLP represents trustees and beneficiaries in actions against their financial advisors for negligence, breach of fiduciary duty and numerous violations of both state and federal securities law. If you are a trustee or beneficiary who has sustained losses in your trust portfolios, you may be entitled to be compensated. We invite you to contact our office for a free and confidential consultation.
Wachovia to Pay $160 Million in Money Laundering Settlement
Wachovia has agreed to pay $160 million to settle a federal investigation alleging that the US bank facilitated the laundering of illegal drug profits. The failure of the bank to maintain a system to monitor the transactions at issue for potential money laundering allowed millions of dollars from Mexican exchange houses to be laundered into the country. Prosecutors allege over $420 billion in transactions were executed without the required scrutiny for possible money-laundering activity. It was alleged that Wachovia’s inadequate system for detecting money launder may have been known by top executives because of the number of red flags. The settlement allows the bank and its executives to avoid criminal prosecution. It also provides that criminal charges for failing to have adequate money laundering monitoring system in place can be avoided if a suitable system is implemented with one year from the date of settlement.
Napoli Bern Ripka LLP represents whistle-blowers in actions against their employers for violation of their employment rights and to assist recovery of federal mandated recovery for whistle-blowers whose claim lead to recovery. To learn more about your rights under state and federal laws, we invite you to contact our office.
Broker Liability For Assisted Investor “Economic Suicide”
Investors are generally unaware of the plethora of rights that both state and federal securities laws provide to protect investors from the conduct and actions of their advisors. Industry professionals are highly regulated and several duties to investors. One less known duty is that of a broker’s responsibility to refuse to execute a transaction that is either inappropriate or unsuitable to an investor even when this transaction is unsolicited. It is well established that there is no excuse to broker liability for assisted economic suicide. Brokers have even been sanctioned in the past for failing to correct client’s “erroneous beliefs” about the safety of commodities trading and failing to stop their client from continued trading once aware of such misconceptions. The broker has an affirmative duty to cut a customer off, and stop what is known as “financial suicide.” This can include the inappropriate and unsuitable use of margin or option trading.
The Securities Litigation Department of Napoli Bern Ripka LLP represents investors in various securities actions against financial advisors for violation of both state and federal securities law. To learn more about your rights, we invite you to contact us for a free and confidential consultation. You may be entitled to recover your losses.
