Investor Fraud

Two JP Morgan Traders charged with Overvaluing Investments

August 15, 2013 | by Staff Attorney

On August 14, 2013, the Securities & Exchange Commission issued a press release explaining that it had charged two JPMorgan traders with attempting to conceal investor losses by overvaluing the investments in a portfolio that they managed. The traders were Javier MarBecause of the overvalued investments, JPMorgan’s first quarter income before income tax expense was overstated by $660 million because of the alleged misconduct.

From the SEC:

The SEC alleges that Javier Martin-Artajo and Julien Grout were required to mark the portfolio’s investments at fair value in accordance with U.S. generally accepted accounting principles and JPMorgan’s internal accounting policy. But when the portfolio began experiencing mounting losses in early 2012, Martin-Artajo and Grout schemed to deliberately mismark hundreds of positions by maximizing their value instead of marking them at the mid-market prices that would reveal the losses. Their mismarking scheme caused JPMorgan’s reported first quarter income before income tax expense to be overstated by $660 million…

Wells Fargo Fined $2.8 Million by FINRA Arbitration Panel

August 20, 2012 | by Staff Attorney

In 2010, College Health and Investment Ltd (College Health), a family limited partnership, filed a case against Wells Fargo & Co. (Wells Fargo) in Financial Industry Regulatory Authority (FINRA) arbitration. College Health accused Wells Fargo of failing to detect the theft and unauthorized transactions in College Health’s account. College Health sought $4.4 million in damages against Wells Fargo.

From 2005 until 2008, Esther Spero (Spero), a former legal secretary at a firm that represented College Health, allegedly misused the family’s financial information and embezzled around $6 million. Spero’s scheme worked by opening accounts in Wachovia (now Wells Fargo) under College Health’s name or similar names in order to appear related to College Health. By doing so, she was easily able to transfer money from one of College Health’s actual accounts into the fake account and then finally into her own account.

College Health also filed a civil suit against Spero in the Southern District Court of Florida where she was eventually found guilty of the charges. However, Spero was unable to pay College Health for the amount she had taken from the company leading College Health to bring action against Wells Fargo in FINRA arbitration.

Customer Complaints Brought Against Andrew Rosenberg, Stuart Horowitz, NFP Securities, and Securities America Concerning Improper Investments

April 6, 2012 | by Staff Attorney

Andrew Rosenberg and Stuart Horowitz have been accused of selling unsuitable illiquid real estate investments through Andrew Stuart Asset Management, while be associated with NFP Securities, Inc. and Securities America Inc. These real estate investments include the Hennessy Financial Monthly Income Club also known as Capital Solutions Monthly Income Fund (Capital Solutions), Capital Solutions preferred Stock, True North Finance Preferred Stock (Capital Solutions), Warsowe Acquisitions Corp. Series 2 Debentures, Inland America Real Estate Trust, and G REIT, Inc.

The brokers allegedly told their customers that Capital Solutions was a “low risk investment” and it guaranteed a steady return through “short term secured loans.” The brokers also represented that Capital Solutions fund offered investors 12% returns. In one complaint, the brokers allegedly made representations that they were offering low risk investments to a 63-year-old father of five. The brokers went on to say that they too had their investments in Capital Solutions, in order to lure the client to invest. The client ultimately invested $300,000 into Capital Solutions.

Despite the broker’s statements, the investments were high risk and illiquid. In fact, the Capital Solutions (a/k/a Hennessey Fund) was a unregistered hedge fund that was involved in risky real estate loans. In September 2010, the Securities and Exchange Commission (SEC) sued the Hennessey Fund for being a Ponzi Scheme, whereby old investors in the Hennessey Fund were being paid by new investors. The case is, SEC v. True North Finance Corporation, f/k/a CS Financing Corporation, et al., Case No. 10-3995-DWF/JJK, (D. Minn).