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Three men are facings charges by the SEC and federal prosecutors over allegations of running a $364 million in one of the largest Ponzi Schemes found in the Washington D.C region. A federal grand jury indicted the three alleged perpetrators, Kevin Merrill of Maryland, Jay Ledford of Texas and Cameron Jezierski of Texas in a Maryland court. The charges leading to their arrest include wire fraud, identity theft, money laundering, and conspiracy, according to the U.S attorney’s office. They falsely represented themselves as financial professionals selling credit portfolios to unsuspecting investors. Meanwhile, most of the investor money was pocketed or used to pay existing investors. The alleged victims include individuals, family offices, and investment groups across the nation. Investment fraud attorneys see parallels between this case and the textbook example of a Ponzi Scheme.

Alleged Ponzi Schemers Kevin Merrill, Jay Ledford, and Cameron Jezierski allegedly ran a multi-million-dollar scheme to defraud investors using consumer debt portfolios, according to the indictment. Consumer debt portfolios consisted of outstanding debt owed to consumer lenders like banks and student loan lenders. It is alleged that starting in January 2013, the three men collected investor money through offering investments in consumer debt portfolios. The investing victims were allegedly promised profits from successful “flips” or collections from consumer payments.  The indictment further alleges that the men shielded their fraudulent activity from investors through the creation of falsified documents and companies. The investors allegedly received collection reports, consumer debt portfolio overviews and sales agreements, bank wire transfer records and bank statements containing falsified information.

According to the indictment, most of the money was not invested but used to maintain their elaborate Ponzi Scheme, unbeknownst to the victims. A Ponzi Scheme is an investment fraud that solicits people to invest in non-existent investments. New investor money ends up being used to produce “returns” to existing investors to maintain the Ponzi Scheme and fund their lavish lifestyle. The Ponzi Schemer will distribute falsified documents containing inaccurate information about their nonexistent investments. The schemes will spread as investors bring more people on board based on their positive returns in the beginning. As more investors join, Ponzi Schemers, such as the three men receive more money to fund their lavish lifestyle. Notably, according to the indictment in the Baltimore case, $73 million of investor funds went to personal expenses that included high-end cars, expensive homes, and jewelry. Additionally, the accused allegedly spent the money gambling at casinos and other luxuries to sustain their lavish lifestyles.

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According to published materials, two years ago the SEC started investigating, American Realty Capital Properties Inc (ARCP) and its executives, for allegedly overstating financial results and deliberate concealment of financial mistakes, which rattled the REIT brokerage empire built by Nicholas Schorsch. After investigations, the SEC reported that it recently brought charges against Brian S. Block and Lisa P. McAlister, the former chief financial and chief accounting officers of American Realty Capital Properties Inc.

The FBI announced Block’s arrest at his home in Pennsylvania on charges of securities fraud and conspiracy. In June, McAlister reportedly pled guilty to four securities fraud and false filing counts. According to the charges brought by the SEC, they are alleged to have intentionally inflated a key metric to make sure that the REIT met analysts’ estimates for the first two quarters of 2014. As per AdvisorHub, Block’s attorney was quoted saying “[t]here is little precedent for the notion that criminal charges are appropriate when accountants make decisions involving these sorts of accounting principles [non-GAAP principles applicable only to REITs].”

After ARCP, with apparent market capitalization of $11.5 billion, publicly disclosed its intentional errors and result inflation in 2014, Schorsch controlled REITs and holding companies lost billions of dollars and ten broker dealers filed for Chapter 11 bankruptcy.

chessThe Financial Industry Regulatory Authority (FINRA) announced on July 19, 2016 in a News Release that it had fined Prudential Annuities Distributors, Inc. $950,000 for “failing to detect and prevent a scheme that resulted in the theft of approximately $1.3 million from an 89-year-old customer’s variable annuity account.  Prudential Annuities Distributors acts as a principal underwriter and distributing broker-dealer for life and annuity products issued by its affiliates.

According to the News Release, a former registered Sales Assistant named Travis Wetzel, who worked at LPL Financial, stole money from the elderly customer’s account by submitting to Prudential Annuities Distributors 14 forged annuity withdrawal requests.  The News Release detailed that each month, from July 2010 to September 2012, Mr. Wetzel submitted 4 to 5 withdrawal requests totaling approximately $50,000.  The News Alert detailed that all withdrawn funds were deposited into an account in Mr. Wetzel’s wife’s maiden name that was controlled by Mr. Wetzel.

Prudential Annuities Distributors consented to the fine by submitting a Letter of Acceptance, Waiver and Consent No. 2012034423502 (AWC).  According to the AWC, each transaction submitted by Mr. Wetzel triggered an alert, or a “red flag,” putting Prudential Annuities Distributors on notice that his requests may be fraudulent.  Each alert required that a person manually review and confirm each transaction, and for each transaction, personnel determined the activity appeared legitimate, according to the AWC.  The AWC also noted that for 44 transfers, Prudential Annuities Distributors also determined that the withdrawn funds were paid to the customer, when they were not actually sent to the customer.

The securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Brandon Gioffre.  Mr. Gioffre was employed and registered from July 2014 to August 2015 with Constellation Wealth Advisors LLC, a New York broker-dealer, according to his publicly available BrokerCheck, as maintained by the Financial Industry Regulatory Authority (FINRA).  According to BrokerCheck records, Mr. Gioffre voluntarily resigned from Constellation amid allegations that he was involved in “soliciting a private placement” to three individuals.

Per his BrokerCheck report, prior to his employment and subsequent resignation from Constellation, Mr. Gioffre was employed by Morgan Stanley Smith Barney from June 2009 to June 2014 and was discharged from this firm amid allegations of “fee reversals in [his] personal Morgan Stanley account, continuing to maintain a pre-existing outside investment that never received written approval from the firm, and fund transfers between [his] personal Morgan Stanley account and the accounts of family members.”

Subsequent to his resignation, Mr. Gioffre was barred from association with any FINRA member broker-dealer on June 22, 2016 by FINRA, after submitting a Letter of Acceptance, Waiver and Consent No. 2015046448701 (AWC).  According to the AWC, Mr. Gioffre violated FINRA Rule 3040 by recommending to several people an investment in a private placement that was not offered through his firm.  The AWC further stated that Mr. Gioffre “created the false impression that [the firm] sanctioned the private placement” by using the firm’s offices for meetings and his business email account to communicate with the investors.

The securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Joseph A. Miles.  Mr. Miles is believed to be currently employed and registered with St. Bernard Financial Services, Inc. based in Russellville, Arkansas.  He was also previously registered with Clearing Services of America, Inc., American Capital Equities, Inc., Dominick & Dominick, Inc. and David Lerner Associates, Inc., according to industry records.

According to his BrokerCheck, as maintained by the Financial Industry Regulatory Authority (FINRA), Mr. Miles has been the subject of three recent customer complaints, including one complaint seeking $169,865.70 alleging that Mr. Miles sold bonds that declined in value, with damages granted of $100,000.  The second most recent customer complaint alleged securities fraud, breach of fiduciary duty, common law fraud, and breach of contract related to South African Bonds which was settled for $75,000, according to FINRA records.  The third complaint involved allegations of fraud, breach of contract and negligence and was settled after the death of the customer, per BrokerCheck records.

If you or a family member lost money that was invested with Joseph A. Miles, you are encouraged to contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

According to a Letter of Acceptance Waiver and Consent filed with the Financial Industry Regulatory Authority (“FINRA”), Thomas Buck has been barred by FINRA from working with any FINRA member firms. Mr. Buck was a former top broker at Bank of America Merrill Lynch and was at the time a broker at RBC Wealth Management.

Mr. Buck was a registered broker at Merrill Lynch’s Carmel, Indiana office, which was part of the firm’s Indiana complex. While at Merrill Lynch, Mr. Buck, who reportedly oversaw $1.3 billion in assets, was accused of failing to discuss pricing alternatives with customers, among other allegations.  In addition, Mr. Buck was accused of unauthorized trading and using discretion in customer accounts improperly and in violation of FINRA Rules.

Buck was reportedly fired from Merrill Lynch in March.  Just four months after, he was reported as being barred from working at any FINRA-associated broker-dealer.  According to FINRA, Mr. Buck used commission-based accounts even though fee-based accounts would have been less expensive for clients. In some cases, clients were allegedly charged significantly more in commissions by virtue of the fact that they were not placed in fee-based accounts.

Jenice Malecki appeared on NBC’s Today Show tomorrow morning, March 14, 2013, to discuss the injunctive action filed by Spanx against Yummie Tummie. The video of Ms. Malecki is can be found here.

Yummie Tummie holds three design patents for its camisole products and at the end of 2012 informed Spanx that it was infringing upon those patent. Correspondence and negotiations ensued, resulting in Spanx filing an injunctive action in its home court in Georgia to preemptively stop Yummie Tummie from enforcing its patents. Yummie Tummie brought a prior infringement action against Maidenform in the United Stated Federal Court for the Southern District of New York, which case has been settled.

The issue will likely surround whether the patents are valid or invalid and whether the camisole passes the obviousness test. There are two fundamental tests: (1) the invention must be novel, not just a variation, and (2) it must be unobvious, something that someone with ordinary skills, would not have imagined. This will surely be a very fact intensive battle and this preemptive strike by Spanx is an aggressive move by a larger player exerting their financial muscles in order to attempt to control the course of the litigation against Yummie Tummie.

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Despite theater’s common expression that “the show must go on”, a large-scale musical planned to hit Broadway this month has been postponed following accusations of fraud and breach of contract levied against its stockbroker.  For further definitions of fraud and “BoC”, visit the Investors page of our firm’s website.   

 

Long Island-based broker Mark Hotton, 46, of West Islip, NY, is alleged to have deceived producers of Rebecca: The Musical via two counts of wire fraud – for which he faces up to 20 years in prison on each count – and the supposed fabrication of four fake investors in the show, who Hotton claimed were prepared to invest $4.5 million.  The show’s producers have since filed suit for a sum exceeding $100 million against Hotton and his wife and business partner, Sherri Hotton. 

Hotton’s story itself is said to be one of grandstanding theatrics in its own right.  When producers attempted to secure funds from allegedly falsified investor “Paul Abrams”, Hotton is said to have told them that the man had recently died on an African safari after contracting malaria.  Hotton also created false e-mail accounts and United Kingdom based mailing addresses for his invented investors, even corresponding with Rebecca‘s producers under these false identities.

Jenice Malecki will be speaking at the Practising Law Institute (PLI) Seminar tomorrow on Securities Arbitration 2012. If you cannot make it, there will be a webcast and course materials available.

Last year’s fervor over the fairness of arbitration has not so much subsided as it has been refined. In response to this shift, in 2012 FINRA will focus on streamlining and improving its dispute resolution forum, including fine-tuning the arbitrator disclosure process. FINRA’s goal is to ensure early disclosure of relevant arbitrator information, in order to save the parties the time and expense associated with replacing arbitrators whose disclosure is incomplete, while allowing for the parties’ continued input into the arbitrator selection process.

This year’s Securities Arbitration program will feature FINRA Dispute Resolution’s Director, staff, and arbitrators, as well as noted academics and experienced attorneys who represent both customers and industry players. Our faculty will explore FINRA’s efforts to improve the arbitrator disclosure process and provide you with practical tips on drafting claims and answers, striking and ranking proposed arbitrators, trying expungement hearings and resolving common ethical dilemmas that arise in securities arbitration practice.