February 25th, 2010
I will be writing a series of posts this week dedicated to the advantages of using mediation (as well as providing background information on arbitration). In today’s market, when fraudulent behavior in business matters is quite prevalent, it is necessary to know what options are available. This week, there will be detailed posts on each of these topics:
1) The Differences Between Mediation and Arbitration
2) Mediation as the Most Viable Option
3) Breaking Misconceptions about Mediation
Of course, I will continue to post my views on the top news stories as well.
Posted in Alternative Dispute Resolution | No Comments »
February 25th, 2010
Many of Madoff’s victims sent impassioned letters asking the judge to give Madoff as much time in prison as possible. Some of them have even asked for a chance to speak at the June 29 sentencing hearing.
The letters are wrenching because many of Madoff’s victims are elderly and retired who have lost everything to Madoff’s greed.
For more, including a link to these moving letters, click here.
Tags: madoff, protect investments, securities fraud, stock loss
Posted in Scams and Schemes, Securities Related Issues | No Comments »
February 25th, 2010
Earlier this week, Wells Fargo (along with the Bank of America, regarding Auction Rate Securities) reached agreements to settle securities fraud charges with state and federal regulators. Wells Fargo’s settlement involves its Boston-based mutual fund Evergreen Investment Management. Wells Fargo will pay $40 million dollars in the agreement with the Securities and Exchange Commission and the Massachusetts Securities Division. According to the regulators, Evergreen lied to investors about the value of securities it sold and disclosed this information to a select group of people. Although the behavior occurred while Evergreen was owned by the Wachovia Group, Wells Fargo has to bear the cost.
The value of the Evergreen Ultra Short Opportunities Fund, a group of mortgage-related securities that Evergreen controlled, was inflated 17% between February 2007 and June 2008, the SEC reports. The SEC states that its valuation committee learned of this when portfolio managers knew about problems regarding mortgage-backed securities but knowingly failed to disclose the mortgage-backed issues. Mutual funds must treat its clients equally, and hence, when Evergreen repriced the holdings in the fund, they informed only a few investors who were able to significantly reduced their losses.
This is a classic example of preferential treatment that is ever present in our market today. As the financial crisis looms, it is hard to see when such offenses will become less frequent, to say the least.
For more information, click here.
Posted in Securities Related Issues | No Comments »
February 25th, 2010
Data from RealtyTrac indicated that May foreclosures were way down compared to April. Hold the party hats and noise-makers because even this bit of good news, May was the third straight month with foreclosures exceeding 300,000 with Nevada and Arizona leading the pack.
A “normal” market typically sees less than 100,000 foreclosures per month. RealtyTrac estimates the number of filings to increase over the next few months as we see the impact of the end of the various foreclosure moratoriums implemented by various lenders and states.
As foreclosure filings remain high, there remains the ever-growing chance of foul play by law firms that handle foreclosures. For these law firms, business can be very profitable in dire economic times. It would be very tempting for some law firms to take up a large load of foreclosure filings and unlawfully handle them, for example, consider the investigation the Connecticut AG is conducting right now – which we blogged on earlier this month.
For more on the statistics, click here.
Posted in Consumer Protection, Foreclosures | No Comments »
February 25th, 2010
Now more ‘feeder fund’ investors are suing Madoff along with others. These two feeder funds are looking to recoup approximately $3.5 billion in alleged losses. Kingate Global Fund Ltd. and Kingate Euro Fund Ltd. filed their lawsuit in US District Court in Manhattan this week.
The lawsuit alleges that “[r]eportedly, over $3 billion was invested in Kingate Global and Kingate Euro, and virtually all of those moneys were funneled to Madoff.” A few months ago these two Kingate funds were sued by the trustee of Madoff’s investment company. The trusteee, Irving Picard sued to recover $255 million withdrawn from Madoff’s firm between October and November 2008. Picard’s lawsuit named fund manager Kingate Management Ltd.; Grosso’s FIM Advisers LLP, which acted as a consultant to the funds; and others as defendants.
The feeder fund lawsuit is an attempt to deflect the allegations made by the Madoff investment firm trustee Irving Picard that these two funds illegally profited from their association with Madoff.
The feeder funds will try to defend by saying they were victims too.
Time will tell, but if these money managers are half as astute as they (used to) like the public to believe I am not sure they will make a strong case.
Tags: madoff, ponzi scheme, protect investments, securities fraud, stock fraud, stock loss, sue broker
Posted in Business Disputes, Scams and Schemes, Securities Related Issues | No Comments »
February 25th, 2010
The Securities and Exchange Commission charged an investment adviser in Armonk, N.Y for stealing more than $6 million in investor funds for himself. He exploited clients that were mentally ill and handicapped, the SEC reports.
Matthew D. Weitzman used clients money for his own personal use by selling securities through clients’ accounts and transferring their money to a personal bank account. Clients received false account statements, often showing false account balances and inflated securities. Weitzman also engaged in broker-dealer foul play as letters would be fabricated by Weitzman on behalf of his clients to complete money transfers.
Weitzman also took money from his clients’ Individual Retirement Accounts (IRAs) in order to maintain a minimum amount of cash to engage in the unauthorized transfers. Weitzman chose clients from AFW Asset Management, the company that he co-founded based in Purchase, N.Y, to exploit. He targeted clients that were less likely to check their account statements, like $430,000 total transfers from a client that was terminally ill. He took $85,000 from said client in two unauthorized transfers from the widow of the client.
Weitzman has been accused violating many industry rules click for more detail here.
Posted in Business Disputes, Scams and Schemes, Securities Related Issues | No Comments »
February 25th, 2010
Any intervention by the government in our world economy will inevitably end. As such the Fed’s (and other central banks) plan to exit their intervention in this financial mess has come to fruition, amidst the scrutiny of many high-ranking officials.
Angela Merkel, the German chancellor, attacked the Fed along with the European Central Bank and the Bank of England for their “loose” policies. The Fed has done the best it can to quell long-term interest rates, which has unfortunately failed. It has failed because although interest rates were lowered temporarily, in that time, the public bought up assets (regardless of risk) , which flows money out of the treasuries and makes bond yields increase. These bond yields are also an enemy to economic equilibrium, so the Fed creates money in order to balance out these yields. Now the increase of the quantity of currency in the market itself makes investors nervous about inflation. To which the Fed reacts by printing more money to reduce bonds. Keeping this cyclical nature of how the Fed operates, how viable is the Fed’s exit strategy. Because it began the action of reducing interest rates the way it did, it is hard to believe that the Fed will get out of this crisis without leaving some kind of inflationary effect.
For more on the article from the Economist.com, click on this link.
Posted in Business Disputes, Consumer Protection, International | No Comments »
February 25th, 2010
Although many auto industry experts predicted the inevitable collapse of GM several months to a year early, it still does not erase the fact that it was the biggest industrial collapse in history. The 101 year old company produced over 9 million cars in 34 different countries. It employed nearly a quarter million people worldwide, 91,000 jobs were in America. The problem behind a company this big was that against its 82.2 billion in assets, GM had liabilities of 172 million.
Fritz Henderson. the CFO of GM a year ago, realized that GM was losing money and attempted to organize several bonds or shares to put up for sale in order to raise 3 billion. Eventually the collapse of Lehman Brothers led Henderson to sell non-core assets as well. But this attempt was also in vain. This situation in combination with an economic situation where there were no lenders willing to support their assets at a level where they could do business.
GM’s bankruptcy is one in a long line of “quick-rinse” bankruptcies that the government believes is necessary for stakeholders to renounce their claims. This poses the question, although GM is essential for American financial growth, to what degree is temporary fix bankruptcy going to preemptively prevent the causes of GM’s downfall? Because if this quick-fix will inevitably lead to economic problems in the near future for GM, what is the excuse for filing Chapter 11?
For more information, an article by the Economist.com sheds light on the situation.
Posted in Consumer Protection | No Comments »
February 25th, 2010
Connecticut AG Richard Blumenthal has asked Fannie Mae and Freddie Mac (along with other organizations) why only a couple of law firms in Connecticut are handling foreclosures. In a June 4th letter to the companies that were suspect, Mr. Blumenthal had reason to believe that consumers were being charged excessive fees on foreclosure actions and that marshals were being charged extensively in connection to the foreclosures.
In a statement Blumenthal said:
“Dominance over foreclosure service by a few select law firms and marshals has spurred complaints about improper or illegal practices: wrongfully allocating work to non-marshals, forging papers, failing to serve papers, and making kickbacks..A scarce few are spinning foreclosures into fortunes, and perhaps deepening homeowner despair.”
This is a story we will be hearing about in other states as well. When one or two firms control huge portions of an industry that is called competition, wait, it is called oligopoly…not the best thing in these trying times.
For more on the story…click here.
Tags: ponzi scheme, protect investments, securities fraud, stock loss
Posted in Consumer Protection, Foreclosures | No Comments »
February 25th, 2010
New York Attorney General Andrew Cuomo closed down two debt collection companies in Western New York. The two Buffalo-based firms engaged in a variety of illegal activities to achieve their ends, through various forms of harassment. The Attorney General’s office have delivered subpoenas to over 15 collection agencies due to complaints received in the wake of this investigation.
Debt Collection agencies that engage in illegal means of collection often use coercion and harassment to collect money that sometimes a customer might not even owe. These two Buffalo firms, for example, allegedly forced individuals to pay debts that they didn’t even owe.
This issue has achieved nationwide importance, as the Federal Trade Commission has received three times the amount of complaints regarding debt collection agencies in 2008 in comparison to 2002. There is no doubt that this investigation will lead to the downfall of more debt collection agencies that engage in illegal means to collect.
Tough business this debt collection – significant rules about their activities, serious penalties if they get it wrong. I am sure that most are on the up and up and are aware of the costs of dropping the ball. As in any industry, a few bad apples can ruin the whole thing. The bad ones should be shut down but the good ones do provide a valuable service.
For more on this investigation…click here.
Tags: madoff, recession, securities fraud, stock fraud, stock loss
Posted in Consumer Protection, Scams and Schemes | No Comments »
