Securities Fraud Attorney Blog

Morgan Keegan Loses Two Significant Bond Fund Arbitrations

February 25, 2010 | By Ross B. Intelisano

Morgan Keegan lost two large FINRA arbitrations this week related to the Regions Morgan Keegan bond funds which were decimated in 2008. These awards are the second and third reported awards of over $1 million.

A securities arbitration panel ordered brokerage firm Morgan Keegan & Co. to pay Andrew Stein, a 38-year-old investor in Jupiter, Fla., and his two companies, $2.5 million for losses. Morgan Keegan was found liable for negligence, failure to supervise and selling unsuitable investments.

Another FINRA arbitration panel in Birmingham, Alabama ordered Morgan Keegan to pay over $1.1 million which according to counsel on the case represented 80% of the $1.4 million net losses in the RMK funds.

Bear Stearns High Grade Investors Should Decide Quickly Whether to File Arbitrations

February 12, 2010 | By Ross B. Intelisano

Below is an article from Reuters this week regarding our client’s $3.4 million arbitration victory against Bear Stearns related to the Bear Stearns High Grade Fund. There are many investors who, for one reason or another, had decided not to file arbitrations against Bear Stearns. Investors should be aware that FINRA has a six year eligibility rule. In some jurisdictions, an investor who files a FINRA arbitration more than six years after the purchase of the High Grade Fund may be the subject to a motion to dismiss in the FINRA arbitration. Since the original High Grade Fund launched in about September 2003, early investors who are contemplating taking action should make a final decision sooner rather than later so as to avoid any potential motion. Investors who rolled over from the High Grade Fund to the Enhanced Leverage Fund should have no FINRA eligibility rule issues.

Investor in defunct Bear fund wins $3.4 mln award 3:15pm EST * Award follows acquittal of fund managers * JPMorgan Chase is responsible for paying the investor By Matthew Goldstein NEW YORK, Feb 9 (Reuters) – A Georgia-based chain of service stations that lost money with a Bear Stearns hedge fund that collapsed in July 2007 has won a $3.4 million arbitration award.

The award by the securities industry arbitration panel is the first ruling in favor of an investor in one of two now defunct Bear hedge funds since a jury acquitted the funds’ former managers of criminal charges in November.

Rich & Intelisano Wins $3.4 Million Award Against Bear Stearns in World’s First High Grade Fund Case Tried to Verdict

February 9, 2010 | By Ross B. Intelisano

Below is a Reuter’s article about the first Bear Stearns High Grade Fund arbitration case won by an investor. John Rich and Ross Intelisano of Rich & Intelisano, LLP were lead trial counsel and Jake Zamansky and Ted Glenn of Zamansky & Associates were co-counsel.

“Investor in Defunct Bear Fund Wins $3.4 Mln Award”

* Award follows acquittal of fund managers

Sean Coffey for New York Attorney General

January 12, 2010 | By Ross B. Intelisano

Sean Coffey has recently embarked on a campaign to become the next Attorney General of New York State. I have never been substantially involved in a political campaign before, but Sean is different. I’ve worked with and known Sean and his prior law firm for many years and I have never been more impressed with a potential candidate for elected office as I am with Sean. He is smart, loyal, strong and possesses all of the qualities needed to be a fantastic Attorney General. Therefore, I’m going to be actively involved in helping Sean become the next Attorney General. And I think he’s going to win. The press is certainly catching on very quickly. Kate Kelley, a very well respected writer for the Wall Street Journal, wrote a great piece about the AG race. Here is the link. http://online.wsj.com/article/SB10001424052748704561004575013503448906246.html

And a snippet from the piece:

“So far, Wall Street isn’t taking much heat from current or potential candidates to succeed Mr. Cuomo.

Goldman Sachs’ Public Image

November 19, 2009 | By Ross B. Intelisano

There’s a very good piece in the Financial Times today about Goldman Sachs by Francesco Guerrera and Tom Braithwaite. It’s available online at http://www.ft.com/cms/s/0/1eb0ea18-d497-11de-a935-00144feabdc0.html?nclick_check=1

The authors explain how competitive Goldman is and how profits and risk management drive the firm. They go on to explain how difficult it will be for Goldman to handle the backlash of paying out huge bonuses in an environment of double digit unemployment rates.

For a long time, Goldman was by far the gold standard of investment firms. Much of the financial crisis stems from every other firm trying to be like Goldman and making huge, leveraged bets with proprietary capital. The difference has been that Goldman has always one stop ahead of the rest of the Street. Partly due to the “market color” it receives as an investment bank, prime broker, clearing firm, counter party, and trader, Goldman somehow is nimble enough to know when to stop on a dime and bet the other way. Merrill, Citi, Morgan and the rest could never do that. Merrill, especially, was three steps behind and was late to the CDO game just like it was late to the prop trading game and the internet craze.

FINRA Will Permanently Disclose Disciplinary Actions Against Former Brokers on BrokerCheck

November 18, 2009 | By Ross B. Intelisano

FINRA announced yesterday that it won approval from the SEC to expand its BrokerCheck service to make records of final regulatory actions against brokers permanently available to the public, regardless of whether the broker continues to be employed in the securities industry.

The FINRA press release states disclosure records for former brokers will be available on BrokerCheck beginning November 30. It goes on to state, “This is an important step for investors and for investor protection,” said FINRA Chairman and CEO Richard Ketchum. “Individuals previously barred by FINRA and other regulators have surfaced in a number of recent frauds in other parts of the financial industry that cost unsuspecting investors millions of dollars. It has never been more critical for investors to research the backgrounds of the financial professionals they deal with than it is today.”

This is an important addition to the publicly available regulatory records of former brokers. Often times, permanently barred brokers, traders and salesmen will attempt to work at unregistered entities such as hedge funds. It is difficult for potential investors to do due diligence on a hedge fund manager without the historical BrokerCheck information. In the past, if a registered representative was out of the business for more than two years, a public investor had no access to the broker’s disciplinary record.

Securities Fraud Content – What I’m Reading, Part One (Newspapers)

November 17, 2009 | By Ross B. Intelisano

I’m often asked what I read on a regular basis regarding securities and investment fraud. Back in the day (say, pre-Enron), there was limited print and online coverage of investment misconduct. In fact, when I told people what I did for a living, some would actually question whether our niche practice was even viable, “you mean there’s fraud going on on Wall Street?” Ah, how the world has changed. First Sam Israel, then the Bear Stearns High Grade Funds, and finally, the big whale of the Bernie Madoff affair.

Now, financial fraud news is general business news. Just look how Vanity Fair has scored huge every month with one strong financial story after another (Madoff, Fairfield Greenwich, Marc Dreier, Goldman Sachs and Morgan Stanley survival, etc.). Here is a little a look at what I’m presently reading, for better or worse. Today, I’ll focus on newspapers.

I start with the Financial Times. Worldly, smart, a cut above the rest for global coverage of finance. I particularly like Gillian Tett’s column and Greg Farrell’s Street coverage. I read the NY Times business section (mostly because it’s attached to the Sports section, but that’s a whole other issue). Gretchen Morgenson, Jenny Anderson, and newly appointed wonder kid Andrew Ross Sorkin, are all strong. No one covers investor protection better than Gretchen. And I love Ben Stein. However, it’s too bad the Times won’t throw more resources at its Street coverage. I also read the Wall Street Journal daily, especially on breaking finance news issues. Kate Kelley’s coverage of Bear Stearns collapse was award winning stuff. When the Journal sends its entire squadron on a topic, no one can top its finance coverage. I used to read the Post’s coverage but since Roddy Boyd left, it’s not as interesting.

Lehman Sues Barclays for $5 Billion

November 17, 2009 | By Ross B. Intelisano

Lehman Brothers Holdings Inc. filed a lawsuit against Barclays Capital in New York federal court alleging the British bank took control of excess assets in collusion with Lehman executives when it bought its U.S. brokerage business in 2008. The Lehman bankruptcy is the largest U.S. bankruptcy in history. The claim alleges that Barclays Capital received a $8.2 billion “windfall profit” due to an undisclosed $5 billion discount on the sale of certain securities. The complaint alleges, “The windfall to Barclays was not disclosed to the Court, the Lehman Boards or Lehman’s lawyers so as to allow the transfer to Barclays of billions of dollars in excess assets, without consideration, in a manner designed to avoid judicial, corporate and creditor oversight.”

Bankruptcy litigation is booming amidst the flood of major bankruptcies filed in the U.S. We have seen more and more battles between bankruptcy trustees and receivers against the major worldwide banks. Since many of these cases are filed by and defended by law firms which often represent bulge bracket investment banks and broker dealers, it will be interesting to see how many international law firms will be conflicted out of handling such cases.

In the Lehman v. Barclays case, Jones Day represents the Debtor, Lehman in the Barclays matter. Weil, Gotshal & Manges, is Lehman’s lead bankruptcy counsel, but is not handling the Barclays litigation. Boies, Schiller & Flexner is representing Barclays. David Boies’ firm’s website states, “We have been described by The Wall Street Journal as a “national litigation power–house” and by the National Law Journal as “unafraid to venture into controversial” and “high risk” matters.” This certainly qualifies.

SEC Will Pursue Case Against Cioffi and Tannin

November 17, 2009 | By Ross B. Intelisano

The SEC announced that it will continue to pursue its civil enforcement case against former Bear Stearns High Grade Fund portfolio managers Ralph Cioffi and Matthew Tannin, after the recent acquittal of criminal charges against Messrs. Cioffi and Tannin. According to recent news reports, Robert Khuzami, head of enforcement at the SEC, told Reuters TV, “We filed a case based on the evidence from our investigation.” Mr. Khuzami added, “we have a different standard of proof.”

The SEC’s complaint (available on its website) is indeed far more broad than the charges lodged by the U.S. Attorneys’ Office in Brooklyn. It also reaches all of the way back to the beginning of the High Grade Fund’s existence as opposed to just the late 2006, early 2007 time period the prosecutors focused on. The prosecutors’ standard of proof of “beyond a reasonable doubt” is much stiffer than the SEC’s and civil litigants’ standard of “by a preponderance of evidence.” In order for Messrs. Cioffi and Tannin to re-enter the securities industry, they will have to defend the SEC action as well.

Morgan Keegan Loses Another Bond Fund FINRA Arbitration

October 28, 2009 | By Ross B. Intelisano

A former president of a Memphis gas company won a $51,000 arbitration award against Morgan Keegan & Co. related to the Morgan Keegan bond funds. It was approximately 64% of the investor’s out of pocket losses. This is just another in a string of victories by public customers against Morgan Keegan related to the funds.

According to news reports, the statement of claim alleged that the funds were not managed conservatively and that Morgan Keegan misrepresented their volatility. Jim Kelsoe, the funds manager allegedly made numerous representations to the investor that the RMK funds were safe.

Morgan Keegan received a Wells notice in July from the SEC and the tide has seemingly changed in the arbitration forum. Our firm represent investors with RMK claims. According to a Morgan Keegan spokesman, despite the loss, Morgan Keegan will continue a vigorous defense of all claims. We shall see.