Posts Tagged ‘ Securities Fraud ’
10 Biggest SEC Securities Settlements So Far This Year
September 20th, 2012. By AbiK
If you’ve been wondering what the largest SEC securities settlements have been for the first half of the year, the National Economic Research Associates, Inc., (NERA) recently released it’s mid-year update. NERA has a proprietary database of SEC settlements and judgments going back to July 21, 2002, and they track SEC settlement trends each year.
According to the NERA report for the first half of 2012, there are some interesting trends to keep an eye on:
• The SEC is on pace to settle with more defendants in FY12 than it has in any year since FY05.
• This increase is being driven by heightened settlement activity with individuals, particularly for allegations related to insider trading and Ponzi schemes; the SEC is on pace for a record number of insider trading settlements in FY12.
• The median settlement value with individuals continued to follow the upward path observed since FY10, while the median value of settlements with companies declined after reaching a record value in FY11.
• The largest settlements in 1H12 are the highly publicized settlements with Citigroup Global Markets, Inc. ($285 million), still under appeal after being rejected by Judge Jed Rakoff, and Raj Rajaratnam ($92.8 million).
The 10 largest SEC securities settlements for the first six months of the year were:
| Settling Defendant | Announcement Date | Settlement Amount | Allegation | ||
| 1. Citigroup Global Markets Inc. | 10/19/11 | $285M | Financial Services Misrepresentation to Customers | ||
| 2. Raj Rajaratnam, Galleon Management, LP | 11/8/11 | $92.81M | Insider Trading | ||
| 3. Magyar Telekom | 12/29/11 | $90.80M | FCPA | ||
| 4. George David Gordon, Attorney | 2/16/12 | $50.51M | Market Manipulation | ||
| 5. Wachovia Bank N.A. | 12/8/11 | $46.08M | Trading Violations | ||
| 6. Pentagon Capital Management | 3/30/12 | $42.05M | Market Timing/Late Trading | ||
| 7. GE Funding Capital Market Services | 12/23/11 | $24.90M | Market Manipulation | ||
| 8. MAAA Trust1 | 12/22/11 | $24.75M | Insider Trading | ||
| 9. Aon Corporation | 12/20/11 | $14.55M | FCPA | ||
| 10. Joseph F. Skowron III, Portfolio Manager, FrontPoint Partners, LLC | 11/17/11 | $13.37M | Insider Trading | ||
| 1Settlements that included a jointly liable individual. | |||||
| Read the full NERA Report here. | |||||
InSecurities: Securities Fraud Roundup 7.5.11
July 5th, 2011. By LucyC
Top Securities Fraud Stories
By now you know the script. InSecurities takes a look at some of the latest securities fraud happenings—where folks who thought they’d made some secure investments have found those investments, well, a bit insecure due to fraudulent—or alleged fraudulent—activity. So be prepared for those omnipresent words and phrases—like “materially false and misleading statements”. They tend to pop up here with some regularity, as you’ll see…
New Securities Lawsuits Filed
Our first Madoff Meter contender is Deutsche Bank AG. And DB brings us another of those omnipresent securities fraud phrases: “mortgage-backed securities” (you’ve heard that one before, right?)…
Company: Deutsche Bank AG
Ticker: DB
Class Period: Jan-3-07 to Jan-16-09
Date Filed: Jun-21-11
Lead Plaintiff Deadline: Aug-20-11
Court: Southern District of New York
Madoff Meter: 
The Allegations:
Not to be left out of the fray, Deutsche Bank (DB) is facing a securities class action brought on behalf of an institutional investor. Details above, and we’re talking big bucks, allegedly lost on ordinary shares during the period between January 3, 2007 and January 16, 2009 (the “Class Period”).
The complaint alleges that during the Class Period, DB issued materially false and misleading Read the rest of this entry »
Insecurities: Securities Fraud Roundup 3.30.11
March 30th, 2011. By LucyC
Top Securities Fraud Stories…
This week’s catch phrase—”False and Misleading Statements”…In our last edition of Insecurities, the recurring theme was ‘failure to disclose’—which led us to the Madoff Meter. Well, seems the idea of Bernie kind of stuck. So he’s back…
Though he never did really leave did he? Case in point, his yacht (or the ability to sell it in order to drum up some quid to help those who’d invested with him) was in today’s news—as well as the fact that three former Madoff employees lost their bid to have criminal charges dropped against them. The grounds for their request? That the charges should be dropped because the government had frozen their assets—assets they need to pay their lawyers. It didn’t fly with U.S. District Judge Laura Taylor Swain, who rejected the bid.
Enough about Bernie (or, more about him later)—starting off this edition of Insecurities is Elan Corporation…
Company: Elan Corporation
Ticker: ELN
Class Period: Jul-2-09 to Aug-5-09
Date Filed: Mar-1-11
Court: Southern District of New York
Madoff Meter: 
The Allegations:
What’s that crashing sound I hear? Elan got hit with a securities class action lawsuit earlier this month over allegations that it and certain of its officers and directors made false and misleading statements regarding the July 2, 2009 sale of the Company’s rights to its Alzheimer Immunotherapy Program (“AIP”) to Johnson & Johnson (“JNJ”).
The allegations stem from Elan’s failure to disclose that a provision in their definitive agreement with JNJ would violate the terms of an existing agreement between the Company and Biogen Idec Inc. (“Biogen”) related to their joint development and sale of multiple sclerosis drug Tysabri. Hey—maybe they just forgot about their deal with Biogen.
As a result of the violation, Elan was forced to renegotiate the terms of its sale of AIP, whereby JNJ paid $115 million less to Elan than previously agreed. Ouch.
Predictably, once Elan issued its press release disclosing the breach of their agreement with Biogen to the public, share prices of Elan common stock fell about 11%, according to the lawsuit, on abnormally high trading volume. That would make a difference to retirement funds, no doubt.
Next up: China Integrated Energy…
Company: China Integrated Energy, Inc.
Ticker: CBEH
Class Period: Mar-30-10 to Mar-16-11
Date Filed: Mar-26-11
Lead Plaintiff Deadline: May-25-11
Court: Central District of California
The Allegations:
Determining fact from fiction. This one involves China Integrated Energy—and allegations that it also issued materially false and misleading statements to investors, because it concealed related-party transactions.
The alleged facts—that the transactions between the Company and its officers and directors had the effect of funneling cash to these officers and directors. The alleged fiction—that the company’s Chinese SAIC filings misrepresented its financial performance, business prospects, and financial condition to investors.
So, the only people making the kind of money advertised were CBEH’s officers and directors. Not the investors. The alleged violations were uncovered in a report by Sinclair Upton, most of which CBEH denied. However, they did ‘fess up to having engaged in an undisclosed related party transaction with the CEO’s 22 year old son? Where’s Bernie? This could be a 3 or 4 on the Madoff meter…
On to Finisar Corporation…
Company: Finisar Corporation
Ticker: FNSR
Class Period: Dec-2-10 to Mar-8-11
Date Filed: Mar-15-11
Lead Plaintiff Deadline: May-14-11
Court: Northern District of California
Madoff Meter:
The Allegations:
Was Finisar doing a little too much networking maybe? It’s also accused of issuing false and misleading statements resulting in investor losses.
Finisar provides optical subsystems and components that connect short-distance local area networks, storage area networks, longer distance metropolitan area networks, fiber-to-the-home networks, cable television networks and wide area networks. A growth industry one would figure—especially in emerging markets.
The complaint alleges that the company failed to disclose that its recent revenue growth was due to an oversupply of inventory in the market and that the Company would be unable to sustain its strong growth due to increased pricing pressures and a slowdown in business from China. As a result of defendants’ false statements, Finisar’s stock traded at artificially inflated prices during the Class Period, reaching a high of $43.23 per share on February 14, 2011.
Then, on March 8, 2011, after the market closed, Finisar issued a press release announcing its third quarter fiscal year 2011 results—reporting earnings of $18.8 million, or $0.22 diluted earnings per share, and revenue of $263.0 million. The Company further reported its fourth quarter 2011 revenues would be in the range of $235 to $250 million, lower than analysts’ estimates. On this news, Finisar’s stock fell $15.43 per share to close at $24.61 per share on March 9, 2011, a one-day decline of nearly 39%—it went straight through the floor and kept on going…
Top Securities Settlements…
Countrywide Financial
Madoff Meter:
A couple of settlements registering on our Madoff meter this month. I’d give this first one a 5. It Read the rest of this entry »
Insecurities: Securities Fraud Roundup 2.23.11
February 23rd, 2011. By LucyC
Top Securities Fraud Stories
Tired of losing money? WFC (NYSE)—also known as Wells Fargo—was known as Wachovia—is being sued. Hard to believe, I know—especially in these times. But it seems that a retired woman in Florida has had enough of losing money with her IRA investments, and figures the odds of actually recovering her money—never mind making any—are better with seeking a Wells Fargo class action lawsuit. So she’s filed a claim.
The back story: The plaintiff gave her Wachovia broker a ‘second chance” (why?) to “do a better job” (read ‘make money not lose it’) with her IRA investments—but apparently, that didn’t work out so well.
In fact, the securities fraud case claims that WFC “breached its duty to make suitable recommendations; mis-marked her investment objective and risk tolerance; and engaged in short term trading and speculating on Latin America and China mutual funds, and on ‘ultra bull’ leveraged exchange traded funds.” That doesn’t exactly read like the manifesto for conservative value investing.
The WFC broker also stands accused of “excessive trading”: the claim contends that the broker “generated an annual turnover rate of more than 17 times the average monthly equity in Claimant’s IRA.”
And “Wells Fargo “needed an accurate customer profile to make suitable recommendations in Claimants IRA—including her investment objectives and risk tolerance, time frame, withdrawals, annual income, net worth, investment experience and her employment. Instead, the broker’s key forms included both contradictory and untrue information about Claimant,” the claim alleges.
And then there’s a raft of securities fraud class actions stemming from unbridled optimism—also known as concealing the facts or ‘failure to disclose’…
Failure to Disclose Club
Where members vie for position on the Madoff meter.
Company: Bank of America Corporation (BofA)
Ticker: BAC
Class Period: Jan-20-10 to Oct-19-10
Court: Southern District of New York
Madoff Meter Rank: 
Let’s start with BofA (BAC:NYSE), the largest bank in the US. Just how many class actions have they faced in the past 12 months? This latest was filed by an institutional investor on behalf of purchasers of BofA common stock during the period between January 20, 2010 and October Read the rest of this entry »
6 Tips to Avoid a Ponzi Scheme
February 3rd, 2011. By Kristine B
They are two words that no investor wants to hear: Ponzi scheme. As in, your money was invested in a Ponzi scheme. People whose money winds up in a Ponzi scheme often have a lot of difficulty getting their money back, especially if they were among the last to invest. There are ways to watch for Ponzi schemes and avoid them. These tips won’t guarantee that you’ll never invest in a Ponzi scheme, but they’ll at least help to reduce the likelihood of it happening.
What is a Ponzi Scheme?
A Ponzi scheme is an investment scheme in which money from new investors is used to pay out previous (or existing) investors. So, when I invest in the scheme (unknowingly, of course), my money is used to pay the would be “ROI” (return on investment) to the people already invested in the scheme. So, in other words, very little real investing occurs. The Ponzi scheme collapses when one of three things happens: there are not enough new investors to pay out previous investors; when large numbers of previous investors demand to be paid out; or when someone becomes suspicious about where the money is coming from. In recent times, the Bernie Madoff Ponzi scheme made headlines—and Carr Miller is now facing allegations of a Ponzi scheme as well.
The Downside of Ponzi Schemes
Because the money isn’t really invested as it’s purported to be, the scheme requires new investors to keep it going. But those new investors, if no one else invests after them, won’t get their money back. Their money has either gone to previous investors or has gone to fund a lavish lifestyle on the part of the person in charge of the scheme. Nice, huh? All your hard-earned money just bought some guy a fancy car and a trip to a luxury resort, while you thought it was sitting in honest investments.
Even previous investors who were paid out might not be safe. Why? Because the money they were given was illegally gained. So they might have to give some or all of it back to a trustee who then determines how to split up whatever money remains—if any does.
How to Avoid Ponzi Schemes
1) Don’t invest with someone just because your friends/colleagues/associates do.
There’s no guarantee that they’ve done their homework about an investment. Furthermore, if Read the rest of this entry »
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