Securities Fraud

Securities Investigation: Broker Gregg Templeton

March 31, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Gregg Templeton (Templeton). According to BrokerCheck records Templeton is subject to six customer complaints and one employment separation. The recent customer complaints against Templeton allege securities law violations that including misrepresentations, breach of fiduciary duty, and negligent supervision among other claims. The claims appear to largely relate to allegations regarding promissory notes and penny stocks.

The most recent complaint filed in January 2016 alleges that between December 2013 and May 2015 the customer claims to have been defrauded out of $6,750,000 through misrepresentations in what appear to be penny stocks while Templeton was associated with Oppenheimer & Co. Inc. (Oppenheimer) out of the firm’s New York, New York office location. The dispute is currently pending.

Our firm has represented many clients in who have suffered losses due to inappropriate penny stock trading and manipulation claims. Penny stocks and low priced securities are favorite targets for investment fraud because they are easily manipulated and allow schemers to profit from their victims investments.

Customers Bring Complaints Against Thomas Andrews Over Misappropriation of Funds

February 14, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Thomas Andrews (Andrews). In October 2015, LPL Financial LLC (LPL), Andrews’ then employing brokerage firm, discharged Andrews alleging that he was terminated after the firm received allegations that the broker misappropriated funds. Thereafter, Andrews was suspended from the industry by FINRA after Andrews failed to respond to requests for information regarding the termination. In November 2015, customers of Andrews filed a complaint alleging that from 2011 through 2015 Andrews formed fictitious trusts and provided application materials for annuity products. Thereafter, the customers believed they had made investments but in fact received forged statements and that their monies had not been sent to annuity companies.

In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though when these incidents occur the brokerage firm claims ignorance of their advisor’s activities the firm is obligated under the FINRA rules to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

In cases of selling away the investor is unaware that the advisor’s investments are improper. In many of these cases the investor will not learn that the broker’s activities were wrongful until after the investment scheme is publicized, the broker is fired or charged by law enforcement, or stops returning client calls altogether.

Broker Investigation: Customer Complaints Against Broker Daniel McPherson

February 9, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Daniel McPherson (McPherson). According to BrokerCheck records McPherson is subject to two customer complaints. The customer complaints against McPherson allege securities law violations that including unsuitable investments, misrepresentations, and breach of fiduciary duty among other claims. The claims appear to relate to allegations regard direct participation products and limited partnerships such as equipment leasing and non-traded real estate investment trusts (Non-Traded REITs). Other products complained of include oil and gas private placements and tenant-in–common (TIC) investments.

Our firm has written numerous times about investor losses in these types of programs and private placement securities. All of these investments come with costs that make profiting from the investment extremely unlikely. For example, investors are destined to lose money in equipment leasing programs like LEAF Equipment Leasing Income Funds I-IV and ICON Leasing Funds Eleven and Twelve. The high costs and fees associated with these investments make significant returns virtual impossibility. Yet for all of their costs investors are in no way compensated for the additional risks of these products.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

Investor Recovery Options for RAAM Global Energy Company Losses

February 8, 2016 | by Staff Attorney

The investment attorneys with Gana Weinstein LLP continue to report on investor related losses in oil and gas and commodities related investments. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area. RAAM Global Energy Company (RAAM), on October 26, 2015, and its subsidiaries filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. According to the disclosures made at that time, RAAM’s producing assets are located in the Gulf of Mexico and in Louisiana, Texas, Oklahoma, and California. RAAM’s drilling program is focused on the Breton Sound offshore from Louisiana. For the first half of 2015 RAAM’s estimated revenue was approximately $33.4 million. However, RAAM’s indebtedness was approximately $300 million.

Our firm continues to file complaints on behalf of investors who have been overconcentrated in oil and gas investments. Oil and gas and commodities related investments have been recommended by brokers under the assumption that commodities prices would continue to go up. Some experts are saying that if production volume continues to be as high as it currently is and demand growth weak that the return to $100 a barrel is years away.

Before recommending investments in oil and gas and commodities related investments, brokers and advisors must ensure that the investment is appropriate for the investor and conduct due diligence on the company in order to understand the risks and prospects of the company. Oil and gas and commodities related investments have been recommended by brokers under the assumption that commodities prices would continue to go up. However, brokers who sell oil and gas and commodities products are obligated to understand the risks of these investments and convey them to clients.

Broker Investigation: 13 Customer Complaints Against Aegis Capital Broker Keith Connolly

January 27, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Keith Connolly (Connolly). According to BrokerCheck records there are at least 13 customer complaints against Connolly. The customer complaints against Connolly allege a number of securities law violations including that the broker made unsuitable investments, misrepresentations, failure to supervise, unauthorized trading, and churning (excessive trading) among other claims. The most recent customer complaint filed in October 2014 alleged churning, negligence, unsuitability, overconcentration resulting in damages of $187,855 in damages. The claim is still pending. In August 2014, another client filed a complaint alleging administering the customer’s brokerage accounts claiming damages of 776,326. The claim was resolved settling for $450,000.

As a background, when brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades. Churning is considered a species of securities fraud. The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

The number of customer complaints against Connolly is high relative to his peers. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. Brokers must publicly disclose certain types of reportable events on their CRD including but not limited to customer complaints. In addition to disclosing client disputes brokers must divulge IRS tax liens, judgments, and criminal matters. However, FINRA’s records are not always complete according to a Wall Street Journal story that checked with 26 state regulators and found that at least 38,400 brokers had regulatory or financial red flags such as a personal bankruptcy that showed up in state records but not on BrokerCheck. More disturbing is the fact that 19,000 out of those 38,400 brokers had spotless BrokerCheck records.

Gana LLP Represents Victims of Edward Durante’s, Christopher Cervino’s, and Larry Werbel’s Alleged VGTel Scheme

January 17, 2016 | by Staff Attorney

The attorneys of Gana Weinstein LLP currently represent approximately 20 investors ensnared in Edward Durante’s (Durante), Christopher Cervino’s (Cervino), and Larry Werbel’s (Werbel) investment fraud scheme to manipulate the value of a number of penny stocks including VGTel, Inc. (VGTel), QLotus Holdings Inc., Haddad-Wylie Industries LLC (HWIC) and Cassidy Ventures, Inc. (CSVN). Recently, in simultaneous actions The Securities and Exchange Commission (SEC) and the United States Attorney for the Southern District of New York working with the Federal Bureau of Investigation (FBI) have filed charges against the foregoing individuals alleging that Durante and his co-conspirators defrauded more than 100 investors of at least $15,000,000.

The SEC’s and FBI’s charges mirror many of the allegations that been made by our clients. Durante is a repeat securities offender who was previously convicted in December 2001 of securities fraud, wire fraud, and money laundering barred by the SEC. Durante and his co-conspirators most recent fraud involved allegations of making false and misleading representations to investors to obtain funds to manipulate the public market in VGTL stock. Further, it was alleged that these individuals took advantage of their manipulation of the market to con investors into purchasing stock at inflated prices.

The defendants manipulated VGTL stock by allegedly controlling the majority of the public shares and then inducing investors to buy stock based on false representations and omissions, made unauthorized trades, and engaged in trades in which the defendants controlled both the accounts that purchased the stock and the accounts that sold the stock in order to artificially inflate the stock price and trading volume. Of the approximately $15 million invested in the fraudulent scheme, more than $9 million has been alleged to have been funneled to the defendants and other co-conspirators. For Werbel’s and Cervino’s efforts, the brokers received kickbacks and compensation from Durante.

Investor Recovery Options for Emerge Energy LP (EMES) Losses

December 29, 2015 | by Staff Attorney

The law offices of Gana Weinstein LLP continue to report on investor related losses and potential legal remedies due to unsuitable recommendations to investor in oil and gas and commodities related investments. Emerge Energy LP (Ticker Symbol: EMES) is a Master Limited Partnership (MLP). Emerge Energy has declined 93% in value from its 52-week high and is trading at only $4.71 a share. Emerge Energy business focuses in the Fracking Sand sector.

About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. There are about 130 MLPs trading on major exchanges that focus on energy related industries and natural resources. These companies have sprung up from the need for new energy infrastructure for the production and delivery of natural gas and crude oil from shale reserves.

However, brokers that have recommended MLPs to investors may have made unsuitable recommendations based upon the yields of these investments rather than the risk to principal. Over the past year MLPs have been hammered due to weaknesses in oil and gas and commodities markets.

Recovery Options for Investors in Samuel DelPresto Market Manipulation Fraud

December 26, 2015 | by Staff Attorney

The securities attorneys of Gana Weinstein LLP are investigating potential recovery options for investors of Samuel DelPresto (DelPresto) who suffered investment losses as a result of fraud. Recently, the Securities and Exchange Commission (SEC) filed an amended complaint. The SEC’s complaint, charged DelPresto, MLF Group, LLC (MLF), and Donald Toomer, Jr. (Toomer) with allegations of engaging in a series of fraudulent schemes designed to manipulate the market price of and demand for the stocks of BioNeutral Group, Inc. (BONU); NXT Nutritionals Holdings, Inc. (NXTH); Mesa Energy Holdings, Inc, (MSEH); and ClearLite Holdings, Inc. (CLRH). The fraudulent schemes allegedly generated profits of approximately $13 million for DelPresto.

The SEC alleged that each scheme followed a similar pattern whereby DelPresto and a business partner identified only as “Individual A” used a private company in need of financing to orchestrate a reverse merger of it and a shell company that DelPresto and Individual A controlled. Once the reverse merger was consummated, the SEC alleged that DelPresto and Individual A engaged in manipulative trading, paid for promotional campaigns, and otherwise engineered an attractive and rising stock price. The SEC alleged that once the stock price reached high levels then DelPresto and Individual A sold their stock at the expense of investors.

In order to carry out their scheme, the SEC alleged that DelPresto, Individual A, and others deposited shares in brokerage accounts with a registered broker referred to as the “Trader”. The SEC found that the Trader, DelPresto, Individual A, and others then engaged in a pattern of matched trading between and amongst brokerage accounts that they controlled.

Broker Investigation: VSR Financial Services Advisor Robert Hinz

December 16, 2015 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating customer complaints against broker Robert Hinz Jr. (Hinz). There are at least 7 customer complaints against Hinz. The customer complaints against Hinz allege a number of securities law violations including that the broker made unsuitable investments, misrepresentations, negligence, fraud, breach of fiduciary duty, and unauthorized trading among other claims. One of the claims involves the purchase of oil and gas private placement Reef Oil & Gas Income and Development Fund III.

The most recent complaint was filed in February 2013 and alleged fraud and negligence from activities that occurred from July 2007 until December 2009 and resulted in $240,000 in damages. Another complaint filed in January 2012 alleged dissatisfied performance with respect to investments and asked for $34,680. The case was closed with no action.

Hinz entered the securities industry in January 1982. Since August 1994, Hinz has been registered with VSR Financial Services, Inc. out of the firm’s Seattle, Washington office location.

SEC Sanctions Gary Arford Over Allegations of Securities Fraud and Misappropriation

December 9, 2015 | by Staff Attorney

The Securities and Exchange Commission (SEC) brought an enforcement action against broker Gary Arford (Arford) resulting in a monetary sanctions of $4,226,684. In addition, according to the BrokerCheck records kept by FINRA, Arford has been the subject of at least 10 customer complaints. The customer complaints against Arford allege unsuitable investments, misrepresentations, and fraud among other claims. Many of the complaints involve products such as oil and gas and penny stocks. Arford was also permitted to resign from Comprehensive Wealth Management, LLC (Comprehensive Wealth Management) after allegations were made that Arford attempted to directly settle a customer complaint. In March 2014, Arford was also terminated from Independent Financial Group, LLC (IFG) after allegations were made that Arford was the subject of customer complaints.

The most recent complaint against Arford alleged $560,000 in damages concerning allegations that Arford as an owner of Comprehensive Wealth Management breach his fiduciary duty by recommending unsuitable oil and gas products from 2011 through 2014 and misrepresented the investments. Another customer complaint filed in September 2014 alleges similar issues with oil and gas and penny stock investment made between 2012 and 2013 which resulted in $500,000 in alleged damages.

In the SEC action, the regulator alleged that between approximately December 2010 and October 2013, Arford acted as an investment adviser to a private fund (Fund) and provided advice for real estate-related investments. The SEC alleged that Arford defrauded the Fund and its investors in at least four ways by: 1) inducing the Fund to commit a total of $4 million to an investment in a company, referred to as Suburban Hotel, that was purportedly planning to build and operate a hotel on undeveloped land in Seattle by misrepresenting and concealing material facts about the company’s debt and the encumbrances; 2) after obtaining the Fund’s investment commitment Respondent took personal ownership of the company’s undeveloped property, and then pledged it as collateral for personal debts; 3) inducing the Fund to continue fulfilling its investment commitment by concealing his personal ownership and use of the company’s undeveloped property and by misrepresenting and hiding material facts about the use of Fund assets; and 4) by misappropriating Fund assets for unrelated purposes.