Securities Law Blog
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Attorneys for Samuel Wyly and the estate of Charles Wyly, who were found liable for using a network of offshore trusts to conceal stock holdings in illegal trading, claim that they cannot pay the $728 million demanded by the SEC, stating that it would bankrupt them. Last week featured closing arguments from both sides in a non-jury trial regarding the amount the brothers should pay following their May 2014 jury verdict. Their attorneys claim that they have a combined net worth of about $119 million.

The Wylys asserted that the SEC did not show a nexus between the amount they demanded and the transactions for which the jury found them liable, arguing that $1.38 million should be the maximum amount they should pay. They claim that the SEC failed to present any evidence that any of their investors were harmed by the securities law violations. The jury found, however, that the Michaels Stores Inc. co-founders operated a fraud that earned them over $550 million in illicit gains over thirteen years.

The SEC reduced its demand from $1.41 billion after the judge rejected one of the theories underlying its calculations. The judge also threw out the SEC’s insider-trading claim against the brothers. The SEC, however, believes the numbers are “fair and equitable,” according to Bridget Fitzpatrick, an attorney for the SEC.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

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Administrative Law Judge Cameron Elliot found that Timbervest LLC and its four principals committed fraud and ordered the group to disgorge nearly $2 million in illegal gains. Timbervest is an Atlanta company that manages over $1.2 billion in investments pertaining to timber. The SEC alleged that in 2006 and 2007, Timbervest’s CEO, CIO, COO, and President received over $1 million in unauthorized, undisclosed real estate commissions paid out of the pension plan assets of Timbervest’s biggest client.

The SEC alleges that the payments were arranged to hide that the group benefited financially from the unauthorized transactions. Finally, the SEC alleges that Timbervest and its principals operated the undisclosed and unauthorized sale of a timberland property from a fund holding that same client’s pension assets to another investment fund that the firm managed. The company’s representatives stated that Timbervest’s client’s representative ordered it to destroy almost half of its portfolio, and the sale was a direct consequence of that order. The client knew of the sale, and it was authorized.

Timbervest has denied the SEC’s allegations and claims that there were no unauthorized transactions.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

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Throughout the year, the Frankowski Firm has investigated a number of Ponzi schemes. Thousands of investors have lost millions of dollars by unwittingly putting their money into Ponzi schemes all across the country. This second installment of our Year In Review summarizes many of the Ponzi schemes that have been uncovered over the past year.

Philippe Bourciquot was charged this year for his role in an alleged $3.1 million Ponzi scheme aimed at Haitian-Americans. Bourciquot made radio appearances to solicit investments by promising guaranteed monthly returns of eight percent, defrauding three hundred investors in the process.

Stephen Caputi had his sentence reduced. He had originally pleaded guilty for his part in the Scott Rothstein Ponzi scheme, admitting to posing as a TD Bank official on three different occasions to defraud investors. His five year sentence was reduced to 40 months and three years probation; his restitution was reduced from $29.1 million to $6.77 million.

Robert Cassandro received fifteen months to four years for his connection to a $11 million Ponzi scheme defrauding his own friends and relatives. He promised returns in investments in 30 single family homes he was building and pledged the houses as security for the loans.

Linda Deavers was convicted on charges pertaining to a $3.5 million Ponzi scheme aimed at Floridian investors. Her scheme operated through Angel Annie Humanitarian Trust LLC, promising massive returns from special European trading programs.

Archie Larue Evans was sentenced to seven years in prison and ordered to pay $3.7 million to his victims for his role in a Ponzi scheme run through Gold & Silver LLC that defrauded investors out of $2.5 million. Evans had persuaded church members in the Tilly Swamp Baptist Church in which he was a pastor to investor in Gold & Silver LLC, promising quarterly interest payments of between 105% and 12%. Evans carried a gun into the courthouse for his sentencing, but it was confiscated, and Evans may now face charges as a felon in possession of a firearm and for having a firearm in a federal courthouse.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

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Heidi Ann Gamer was charged last week by the SEC with operating a $771,900 offering fraud involving two companies, one of which was based in Atlanta, Georgia. Gamer’s victims included people who participated in substance-abuse programs.

Gamer was CEO of Gamer Media Partners Corp. out of Atlanta and Gamer Economic Systems LCC out of Colorado. She allegedly represented to investors that she would raise funds so the companies could buy interactive technology licensing rights for products such as smart-phone applications that the companies planned to develop and market. Gamer also allegedly solicited investors by misrepresenting the existence of contracts and licensing deals. During the course of the fraud, much of her investors’ funds were used for non-business expenses, including casino gambling, vacations, and shopping, according to the SEC.

Additionally, Gamer represented to potential investors that her Atlanta company landed large contracts with a movie studio, a college, and the Atlanta Falcons. These deals, however, did not exist. Instead, she used investor funds for her personal use, including her condominium rent, pet grooming, and to help send an acquaintance to a private California weight-loss resort.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

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Throughout the year, the Frankowski Firm has investigated a number of Ponzi schemes. Thousands of investors have lost millions of dollars by unwittingly putting their money into Ponzi schemes all across the country. This Year In Review summarizes many of the Ponzi schemes that have been uncovered over the past year.

Monterey, California financial talk show how, Barbra Alexander, was sentenced this year to nine years in prison for her involvement in an $8 million scheme that conned 49 investors out of an estimated $6.3 million. Alexander and Michael Swanson ran APS Funding, which represented that it would provide 12% returns on short-term loans for real estate purchasers.

Jon Anderton was found guilty of contributing to a Ponzi scheme that conned three Hawaiian investors out of $1.2 million dollars.

Bar-K Inc. was accused a representing that it would loan investors’ funds to home buyers and developers and then pay dividends to investors from the loan proceeds while actually operating a Ponzi scheme that defrauded 1,500 Bay Area California residents out of $700 million.

Ron Battistella pleaded no contest to charges arising out of a $1.3 million Ponzi scheme that promised 10% annual returns. Battistella operated a car dealership and promised investors that their investments were backed by the cars in his showroom.

Ex-Lieutenant David Benjamin was found guilty for his participation in the Scott Rothstein Ponzi scheme and was sentenced to five years in prison. Benjamin received an estimated $180,000 for helping Rothstein by having a second lawyer’s ex-wife arrested falsely to gain an advantage in a child custody fight.

Charles B. Blackwelder and his daughter, Cara Lynne Grumme were arrested and charged with operating a $23 million Ponzi scheme, which enticed investors to purchase shares in residential and commercial rental properties and was run through CFS LLC. The scheme defrauded more than three hundred elderly citizens in Indiana.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

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Last Thursday, Bank of America and two of its subsidiaries agreed to settle its case with the U.S. Department of Justice for $16.65 billion. The settlement will put to end claims that the bank engaged in faulty lending during the housing boom years, making it the biggest settlement stemming from the 2008 financial crisis.

The anticipated settlement ends claims pertaining to subprime mortgage practices at Countrywide Financial Corp., a lender acquired by Bank of America during the crisis, and Merrill Lynch, which Bank of America obtained at the government’s urging at the height of the crisis.

In addition to the biggest civil settlement against any single entity in the history of the Justice Department, Bank of America also signed off on a 30-page statement of facts outlining the alleged disclosure and other violations at Countrywide, Merrill Lynch and Bank of America itself.

While the allegations against Bank of America, Countrywide Financial, and Merrill Lynch differ, each involved the entity “saying one thing to investors about the quality of the loans they packaged into RMBS, yet in reality knowing the facts indicated something quite different,” according to Associate Attorney General Tony West. Bank of America, which was not found liable for fraud in the case, had argued that losses to Fannie and Freddie were caused by the broader economic crisis, not by any fraud by Countrywide.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

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Cecil Franklin Speight, sole owner and CEO of International Stock Transfer of Palm Beach, Florida pleaded guilty last month to conspiracy to commit mail fraud and securities fraud for operating a scheme in which he conned investors out of $3 million. According to the SEC, Speight utilized “aggressive boiler room tactics” and faux investment firms that issued fake securities that were worthless.

“Rather than transferring capital to issuers, the defendant used the investors’ funds as his own, including financing his lifestyle in Florida. His victims, from the Eastern District of New York and around the world, were conned into buying bogus securities that were not worth the paper they were printed on. Now, he will be held to account for his crimes,” stated United States Attorney Lynch.

Speight allegedly stole more than $3.3 million from investors and used the money to pay for his personal expenses, such as purchases made at Mercedes-Benz, Nordstrom, and Groupon. He is looking at a sentence of up to five years in prison, more than $3.3 million in restitution, and a fine of at least equal and at most double what the investors lost.

Speight allegedly used cold callers and other means to persuade people into investing their money in high-yield securities. He then promised investors a high rate of return if they invested in securities that were supposedly associated with International Stock Transfer. As soon as the investors wired money to an escrow account, Speight took the money for this own personal use, withdrawing over $350,000 of investor fund in cash.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

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The Frankowski Firm is currently investigating a Ponzi scheme aimed at church-goers. Two people from North Carolina and one from Florida were sentenced earlier this month for what federal authorities have called a church-targeting Ponzi scheme. All three individuals had previously testified against Thomas Kimmel from Indiana who was the alleged mastermind of the operation.

James Willis Kirk and Carol April Graff, both of Washington, N.C., as well as Glen Smith Jr. of Lake Worth, Florida had previously pleaded guilty to conspiracy to commit mail fraud, sell unregistered securities and engage in unlawful monetary transactions. Kirk and Smith also pleaded guilty to selling unregistered securities. Kimmel was found guilty in July of conspiracy, mail fraud, and money laundering.

According to the prosecution, Kimmel solicited around $20 million for “Sure Line Acceptance Corporation” from investors, most of whom were church-attendees who were guaranteed that their principal was protected by collateral, including cars and car loans. The majority of the victims, however, never got their principal back.

Kimmel and his corporation were issued a cease and desist order in a number states, including New Jersey and Alabama. In New Jersey, Kimmel allegedly went to churches to talk to parishioners about how to live debt free by employing biblical principles. After presentations, he solicited parishioners to buy securities in Sure Line, which offered investments in the form of promissory notes.

Kimmel was convicted in Raleigh on June 26. At trial, prosecutors asserted that Kimmel gave financial conferences at churches, where he would spend at least a few minutes telling investors about a 12% collateralized note program. According to federal authorities, Kimmel was in reality operating a Ponzi scheme.

Kirk and Smith were sentenced to 60 months and 48 months, respectively. Graff was sentenced to 18 months. The award of restitution has been postponed for 60 days.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

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Morgan Stanley & Co. lost a FINRA arbitration dispute last week to Banco Nacional de Mexico SA. A FINRA panel ordered Morgan Stanley to pay the Mexican bank, commonly referred to as Banamex, $4.5 million, finding Morgan Stanley liable for negligence and negligent supervision.

The case was filed by the bank against Morgan Stanley in 2012. The statement of claim alleged fraud and negligence among other allegations and asked the FINRA panel to order Morgan Stanley to pay over $5.2 million. The dispute centered on whether Morgan Stanley allowed funds in a family’s trust account to be used to repay third-party loans without its authorization.

The trust was established in 2007 with proceeds from the sale of property that a group of adult siblings and their mother had inherited. Banamex was the trustee to the family’s trust account and hired a broker at Morgan Stanley to manage the accounts that same year.

The trust accounts were held at a banking unit of Morgan Stanley & Co and managed by the brokerage unit. They were set up in a way that did not allow the assets to be used as guarantees to pay off third-party loans taken by another family member’s account. Banamex alleged that Morgan Stanley caused the trust accounts to guarantee payment of third-party loans of a family member without Banamex’s authorization.

Morgan Stanley spokeswoman Christine Jockle wrote, “We are disappointed in the arbitration panel’s award. We believe that the evidence showed that the patriarch of the family pledged the trust accounts as collateral for loans that benefited the family, and those accounts were treated that way for the two year period at issue.”

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

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Lynn A. Simon, an investment advisor from Evansville, Indiana, pleaded guilty yesterday to charges arising from allegations last year that he conned over $1 million out of investors in the area. The charges included three counts of securities fraud, class B felonies, and one charge of unlawful sale of a security, which is a class C felony.

Simon reached an agreement with the Indiana Secretary of State’s Office that would send him to prison for two years and eight years of work release. Judge David Kiely will have to decide whether or not to uphold the agreement.

Simon was a registered investment advisor and the sole owner of Financial Security Planning, which operated as a satellite office of CFD Securities of Kokomo, Indiana. Simon also owned The Insurance Shoppe.

Local, state, and federal law enforcement agents started their investigation of Simon in April 2013 after he went missing and the Indiana Secretary of State’s Office starting getting complaints about him. The investigations found that Simon issued promissory notes that showed a rate of return at a specified maturity date but Simon also would tell investors that if they requested money it would be given in the order received and only if there was enough money coming into the fund.

None of the investments investigated sold under the Financial Security Planning name were registered with the state as required by law. Bank records did not show money going to investments of insurance companies as purported by Simon. Instead, the money was going into the account and then either went to other investors or was withdrawn by Simon, who was the only person authorized to use the account. More than $42,000 was withdrawn the day before his wife reported him missing.

Investigators followed Simon to Alabama and then to New Mexico before the Vanderburgh County Prosecutor’s Office obtained a warrant for his arrest. Simon surrendered at the Vanderburgh County Jail in September as Secret Service agents and local police were trying to locate him and serve the warrant.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.