ABOUT BROKER FRAUD BLOG

Morgan Keegan Ordered to Pay Arbitration Award to Non-Profit Religious Organization

In a rare ruling an Alabama state court judge affirmed an amended version of an Award against Morgan Keegan & Company. Over a year ago a Financial Industry Regulatory Authority (FINRA) arbitration panel awarded Hayes Law Firm client and non-profit organization, United Prison Ministries, $220,000 plus interest for the losses suffered in Morgan Keegan bond funds.

United Prison Ministries was founded in 1980 and its charity work primarily includes reaching out to individuals who have been incarcerated. To date they have provided over 70 million Bible lessons, life changing books, and Bibles to male and female prisoners throughout the world.

Morgan Keegan sought to vacate the Award; however, Judge Nicole Gordon Still disagreed with the financial institution on two of their three reasons to vacate. In the end the award was amended by Judge Still to remove a double recovery of expert fees leaving a remaining award of $200,000 plus interest.

“Despite Morgan Keegan’s every attempt to delay payment to this worthwhile charity, justice did prevail and my client can now get back to the business of distributing bibles to inmates,” said our very own Debra Brewer Hayes of The Hayes Law Firm, P.C. in Houston,TX, who represented United Prison Ministries.

Morgan Keegan has been accused of engaging in a massive scheme to defraud investors.The Morgan Keegan bond funds that are reportedly the subject of hundreds of investor arbitrations include the following:

• Regions Morgan Keegan Select High Income-A, (Sym: MKHIX)
• Regions Morgan Keegan Select High Income-C, (Sym: RHICX)
• Regions Morgan Keegan Select High Income-I, (Sym: RHIIX)
• RMK High Income Fund, (Sym: RMH)
• RMK Strategic Income Fund, (Sym: RSF)
• Regions Morgan Keegan Select Intermediate Bond Fund-A, (Sym: MKIBX)
• Regions Morgan Keegan Select Intermediate Bond Fund-C, (Sym: RIBCX)
• Regions Morgan Keegan Select Intermediate Bond Fund-I, (Sym: RIBIX)
• RMK Multi-Sector High Income, (Sym: RHY)
• RMK Advantage Income, (Sym: RMA)

If you have been defrauded by Morgan Keegan and have lost your investment due to mismanagement, we can help.

Our team of experienced investment fraud attorneys is dedicated to helping those who have lost money in the stock market. Contact us today for free consultation with an investment fraud lawyer.

"Star Broker" Kenneth Star had a History of Fraud

Kenneth Starr, former broker to the stars, was found hiding in closet when police arrested him two weeks ago. Starr is accused of orchestrating and running a $30 million Ponzi Scheme in which he used investor money to furnish his lavish lifestyle.

According to a New York Times story this is not the first time that Starr has been accused of fraud. In 2002 Starr was named in a lawsuit filed by Sylvester Stallone which accused Starr of mismanaging a investment for now nearly defunct Planet Hollywood.

Starr was also accused of fraud by former actress Joan A. Stanton, and was fired by Lauren Bacall, Diane Sawyer, and the widow of legendary actor Humphrey Bogart.

Starr had made a fine life taking advantage of celebrities and using their money to fund his lavish lifestyle, but Starr will now most likely be trading the $7.5 million Upper East Side condo, for an extended stint in 6 x 8 jail cell.

New Probe Targets Morgan Stanley

The Wall Street Journal is reporting that federal investigators have launched a probe into whether Morgan Stanley misled investors about mortgage derivative deals it help design.

According to the WSJ, Morgan Stanley helped design the deals and then bet against them. Two of the deals that have come under scrutiny are so-called “Dead presidents’ deals” named after ex-presidents Buchanan and Jackson.

Apparently the report came as a surprise to Morgan CEO James Gorman, who told the press that he had no knowledge of the investigation and claimed that the firm had not been contacted by the Justice Department.

The new probe spawned from an SEC investigation launched in 2009 to examine the mortgage-bond business according to an unnamed source familiar with the matter.

It unclear what exactly the probe will find, but now that probes have been launched into mortgage-backed  securities dealings at Morgan Stanley and Goldman-Sachs, one has to wonder if all of Wall Street will soon see similar probes as it did in the auction rate securities debacle.

If you were mislead by Morgan Stanley we would like to hear about it. Our investment fraud attorneys are here to fight to recover our clients' funds that were lost due to investment fraud. Contact us today for free consultation with one our experienced investment fraud lawyers.

Previously Indicted Broker Faces New Charges

The Harris County District Attorney’s Office has announced that a mortgage broker who is already under indictment on theft and money laundering allegations will be facing additional charges for his alleged role in another half a million dollar financial scam.

According to the Houston Chronicle story, the accused, Kevin Kent, told his customers that he could secure them financing to buy multi-million dollar businesses. Kent requested that his clients provide “good faith” payments to him that he claimed would go into an escrow account. In all Kent collect about $1.4 million from his clients, but rather than placing the money in the escrow account he chose to spend the money resulting in his original indictment.

The new charge claims that in June of 2009 Kent offered to arrange finance deals for business investors, including fabricated documents if they too would contribute funds that were to go into an escrow account. By the time of his arrest Kent had defrauded investors of some $500,000.

Investigators would like to speak to anyone who may have done business with Kent personally or through his firm OMC Capital. If you have business with Kent you should contact the Harris County District Attorney’s Office financial crimes division at 713-755-8333.

If you have defrauded by a dishonest broker the investment fraud attorneys at the Hayes Law Firm can help. Please contact us today for a free consultation with an experienced investment fraud lawyer.

Florida Man Hit with Fraud Charges in Alleged Ponzi Scheme

Just when you thought all was clear on the Ponzi home front, this story from the Wall Street Journal’s law blog rears its head.

According to the story, a complaint was filed Wednesday in New Jersey alleging that Florida entrepreneur Nevin Shapiro and his company Capitol Investments USA defrauded investors of at least $80 million through a Ponzi scheme.

A Bloomberg report says that the complaint claims Shapiro gathered money from investors from January of 2005 to November of 2009 which he claimed would be invested in “Capitol,” a Florida-based wholesale grocery distributor.

Apparently (“allegedly”)Shapiro had no legitimate business during this time and used the funds he collected from investors to fund principal and interest payments to existing investors and spent millions more on personal expenses.

Shapiro surrendered to authorities yesterday and is expected to appear in federal court today, where his attorneys will address the charges.

If you have lost your hard-earned dollars due to the devious acts of a broker or investment company the investment fraud attorneys at the Hayes Law Firm can help. Contact us today for a free consultation with an experienced investment fraud lawyer.

New Braunfels Investment Company Accused of Fraud

Big fraud news today out of a small Texas town. According to the Herald-Zeitung, the local New Braunfels newspaper, the Texas Commissioner of Insurance issued a cease and desist order Friday to the New Braunfels-based Retirement Values LLC.

The order comes just a week after the company was hit with a similar mandate by the Texas State Securities Board. Both bodies allege that the company defrauded some 800 investors by providing inaccurate and misleading expectations to investors. Authorities also allege that the company was not properly licensed to do business in the state of Texas

Retirement Values LLC specializes in the re-selling of life insurance policies, or life settlement insurance. Basically the way the industry works is; buyers purchase the expiring life insurance policies of others. The buyers then pay the premiums on the policy and have an opportunity to make a profit if the former policyholder dies before their estimated life expectancy. If the former policyholder outlives expectations the buyer is stuck paying additional premiums on the policy.

The Texas securities board estimates that buyers have invested over $100 million in Retirement Values through the purchase of these types of policies.

Richard “Dick” Gray, the president of Retirement Values says that the company had complied with the mandate handed down by the securities board last week, saying the latest order is like “kicking someone after they’re already down.”

While the securities board’s order targeted only Retirement Values and Gray, the latest order is also directed at Midwest Medical Review – the company that provides Retirement Values with their life expectancy estimates.

Gray called the actions “outrageous” and warned that the Texas insurance industry will be impacted by the action. He also accuses the department of insurance of “over-reaching” their authority. “They are claiming authority that doesn’t now exist,” said Gray.

It is still too early to determine whether criminal charges will be levied or what the impact of the cease and desist order will have on investors, but to say the least it does not appear promising for any of the parties involved.

The investment fraud attorneys at the Hayes Law Firm are interested in speaking with individuals who have invested in life settlement insurance through Retirement Values LLC. If you have lost money you invested through Retirement Values we may be able to help recover your losses.

Contact us today for a free consultation with one of our experienced investment fraud lawyers.

Morgan Keegan Hit with Fraud Charges

Federal officials have charged the well known mutual fund manager Morgan Keegan & Co. with fraud for allegedly inflating the value and downplaying the risk of securities backed by subprime mortgages.

According to the Wall Street Journal, SEC officials have accused fund manager James Kelsoe of manipulating the prices of low-quality investment to make the funds appear more attractive to potential investors. The complaint claims that Kelsoe convinced accounting to accept 262 “price adjustments” over the first 7 months of 2007 in order to hide the steep losses being suffered by funds backed by subprime mortgage investments. The SEC says this deceitful tactic cost investors $1 billion in losses.

The Federal Investment Regulatory Authority (FINRA) has filed a separate complaint alleging that the Morgan Keegan misled customers about the risks associated with investing in the bond funds, which cost ill-informed investors well over $1 billion.

At the end of 2005 one the funds in question had out preformed all other high-yield funds in the nation; however, when the bottom dropped out of the housing market the funds began to plummet due to the heavy investment in the subprime mortgage market. Rather than tell investors about the steep losses the funds were suffering Kelsoe chose to hide the losses through often arbitrary price adjustments. By the end of 2008, three of the funds had plunged an average of 59.5%, costing investors billions.

One such victim is Rev. Richard Bland. Bland’s Alabama based United Prison Ministries International, a non-profit organization that distributes free bibles and religious books to prisoners and their families, lost over $200,000 after investing in the allegedly manipulated Morgan Keegan bond funds. UPMI is represented by investment fraud attorney Debra Brewer Hayes of the Hayes Law Firm in Houston.

Hundreds of investors, from large institutions to non-profits, like Rev. Bland’s UPMI are attempting to recover losses through arbitration panels created by FINRA.

 If you have lost money by investing in Morgan Keegan’s bond funds the investment fraud attorneys at the Hayes Law Firm can help. Our experienced investment fraud attorneys have helped recover millions for our clients and would like the chance to help you. Contact us today for free consultation with a Morgan Keegan bond fund lawyer.

SEC Charges Morgan Keegen, Two Employees with Fraud

A two year probe of Morgan Keegan has finally produced fraud charges against the broker-dealer and two employees accused of manipulating the prices of bond funds that were suffering steep losses. According to the SEC two Morgan Keegan employees worked together to fraudulently overstate the value of securities backed by subprime mortgages.

Robert Khuzami, director of the SEC's Division of Enforcement, said, "This scheme had two architects—a portfolio manager responsible for lies to investors about the true value of the assets in his funds, and a head of fund accounting who turned a blind eye to the fund's bogus valuation process."

The SEC claims that Morgan Keegan, owned by Regions Financial Corp., failed to employ reasonable internal pricing procedures in five funds, leading to inaccurate net asset values for the funds. Morgan Keegan allegedly published these inflated values and used the numbers to sell shares to investors.

In a separate complaint against Morgan Keegan, the Financial Industry Regulatory Authority (FINRA) alleges that the firm misled investors about the risk of investing in the funds, which cost investors well over $1 billion.

FINRA alleges that Morgan Keegan’s misleading and deficient internal guidance coupled with the failure to provide adequate training caused brokers to make misrepresentations about the funds to investors.

A Morgan Keegan spokesman said Wednesday that the firm believes the charges are meritless and based on erroneous hindsight analysis.

FINRA is seeking an unspecified fine, as well as the repayment of all ill-gotten profits and full restitution to investors who suffered losses.

If you have lost your nest egg as a result of Morgan Keegan’s deceitful tactics the investment fraud lawyers at the Hayes Law Firm can help. Contact us today for free consultation with a one of Morgan Keegan bond fund attorneys.

Judge Rules Charles Schwab Broke the Law in YieldPlus Case

Last week a U.S. District Court Judge William Alsup ruled that Charles Schwab Corp. did in fact violate the law when it loaded its YeildPlus Mutual Fund with high risk mortgage-related structured debt with first gaining approval by shareholders.

The ruling may provide a path for the members of one of three classes currently seeking compensation to recover some $140 million in losses that have been attributed to the risky investments fund managers loaded into the popular YeildPlus fund. Questions still remain for the two larger classes, but those may soon be answered as the case is set for trial coming up in May.

The lawsuit claimed that Schwab decreed in 2001 that YieldPlus would hold a maximum of 25 percent of private-label mortgage-backed securities, but in 2006 changed its Statement of Additional Information to allow the fund managers to abrogate that requirement without obtaining shareholder approval. While the 1940 act requires shareholder approval of changes in fundamental issues such as a fund's concentration policy, Schwab unilaterally loaded the $13 billion fund with this riskier class of mortgage securities well beyond the 25 percent limit.

When real estate market collapsed in 2007, so did the fund; costing investors and estimated $650 million.

The Plaintiff is the case claim that Schwab fund managers overloaded the fund with riskier investments in an effort to drive up yields and make the fund more attractive to potential investors. However, when the bottom fell out of the mortgage market this gamble ended up costing investors

Source: Hagens Berman LLP

The Stanford Fiasco Continues

Sir Allen Stanford has been locked up in a Texas jail for several months now on charges that he orchestrated a $7 billion Ponzi scheme. Over the last several months the Stanford debacle has been anything but quiet. At least two reports of physical altercations involving the former billionaire financial mogul, a virtual carousel of revolving attorneys, and all the while more accusations and additional lawsuits have continued to mount.

Last week Stanford requested yet another change in lawyers. This time he has requested to dump Ken Schaffer as lead counsel and replace him with Michael Essmyer of Houston’s Tritico & Rainey.

While Essmyer says that he has no intentions of delaying the trial scheduled to begin next January, he confirmed that Stanford will likely request a change of venue.

As the busy week continued American Express threw their hat into the ring. American Express filed suit against Stanford for his failure to pay for over $115,000 in charges mad on his Centurion Card.

With about 9 months to go before the trial is set to begin, who knows what is next, but I have a feeling we are far from done hearing about this one.