Articles Tagged with financial fraud

man-and-woman-holding-money-300x300Broker Deborah D. Kelley is allegedly one of the key figures in the $184 billion New York pension fund “pay-for-play” bribery scandal. She was reportedly arrested in December 2016 in San Francisco on charges of securities fraud, conspiracy to commit securities fraud, and conspiracy to obstruct justice in an SEC investigation. This week she was barred by the Financial Industry Regulatory Authority (FINRA).

The salacious allegations in this scandal involves the NY retirement pension fund and Navnoor Kang, its former director of fixed income and portfolio strategy, not only made newspaper headlines but was reported in prominent magazines such as Vanity Fair. Allegedly, Mr. Kang received more than $100,000 in bribes, including prostitutes, bottle service, drugs, vacations and weekend trips, expensive watches, VIP tickets to concerts from Ms. Kelly and another broker Gregg Schonhorn, in exchange for promoting the interest of Deborah Kelley’s broker-dealer. It is reported that Navnoor Kang deposited $2 billion with Ms. Kelly’s broker-dealers. Wall Street Journal reportedly quoted U.S. attorney Preet Bharara calling this a “classic case of quid pro quo corruption.”

As per FINRA records, she was registered with Sterne, Agee & Leach Inc.in 2014 and subsequently with Stifel, Nicolaus & Co. Inc. after Stifel bought the former broker-dealer. She was reported fired by Stifel for bribing the pension fund manager with entertainment and gifts to further business opportunities and misrepresentation of these expenses, as noted in the FINRA proceedings that led to her disbarment.

Alliance for Investor Education and the PIABA Foundation is Hosting an Educational Conference about Securing Investors’ Financial Futures


National Town Hall
The National Investor Town Hall Meeting is a day-long series of presentations, free to the public, aimed at educating investors about the risks and rewards of financial investing. It will be held on October 29, 2016 at the Rancho Bernado Inn in San Diego, California. Many respected industry professionals, including Ms. Malecki and federal and state regulators will participate in four sessions to help attendees understand risk tolerance, choose financial advisors and avoid becoming victims of financial fraud.

“Financial fraud costs Americans approximately $50 billion each year. It has been my mission for over a decade to educate and empower investors, lending them a voice and holding big entities accountable for violating their fiduciary and ethical duties,” said Jenice Malecki, the founder of Malecki Law. She further adds, “I am excited to be part of this much needed grass-root investor education drive.”

magnifying-glass-1412773-300x300The investment and securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints regarding former UBS financial adviser Jeffrey Howell.

Per reports, Mr. Howell has been barred by the Financial Industry Regulatory Authority (“FINRA”)for providing a customer with false weekly account statements for over six years.  According to a settlement notice in connection with an investigation by FINRA , Mr. Howell sent these weekly statements with inflated values, at times overvaluing the account by close to $3 million.

Mr. Howell also allegedly used his own personal email account to distribute these reports, which compromised the accuracy of the firm’s books and records. Per BrokerCheck, Mr. Howell has not been licensed in the securities industry since 2014.

The Dow Jones dropped more than 600 points today in response to the Brexit vote.  This was reportedly the its eighth-largest point loss ever.  Meanwhile, the S&P 500 dropped more than 70 points today.  Certain financial company stocks dropped significantly as well.  Among them were Barclays, which dropped more than 20% and RBS who saw a 27% decline.  The financial sector as a whole reportedly had its worst day since 2011 dropping 5.4%.

While all of this may make the evening news more interesting to watch, the concerns on many people’s minds are undoubtedly, “How will this affect me and my portfolio?”  Especially with baby-boomers retiring each and every day, retirement portfolio losses so close to one’s retirement could be unrecoverable.

One of the first things to look at to see if your portfolio was significantly affected would be to examine at your exposure to the UK and your exposure to the financial sector.

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A recent study by Stanford University psychologists with participation of FINRA and AARP, concluded that financial fraudsters trigger and evoke strong emotions in elderly people to try and get them to hand over money. According to the study, inducing strong emotions in older adults (ages 65-86), whether positive or negative, increased their susceptibility to falsely advertised messages and fraud. The findings suggest that older adults are likely to spend or give away their money based on the emotional state they were experiencing rather than perceived credibility of the messages they are receiving. According to FINRA, this study is a major advance on understanding how elder fraud works and since money and investing is an emotional decision, it is critical to manage emotional states to avoid becoming a victim of fraud.

Malecki Law continues to champion the rights of vulnerable elderly people who have been victimized by financial fraudsters. Last week, Jenice Malecki spoke about elder financial fraud with David Lesch on BronxNet TV’s segment Today’s Verdict. Watch Ms. Malecki speaking about instances of how elder fraud works and can be avoided here: http://www.bronxnet.org/index.php?option=com_hwdvideoshare&task=viewvideo&Itemid=59&video_id=7353

Recently Ms. Malecki was also seen speaking about Elder Financial Exploitation on Wealth Management’s segment Case In Point with Bill Singer http://wealthmanagement.com/estate-planning/elder-financial-exploitation 

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In February 2016, academics Mark Egan, Gregor Matvos and Amit Seru at the University of Minnesota and University of Chicago business schools released a report titled “The Market for Financial Adviser Misconduct” on financial advisers in the United States. The report reveals how rampant securities fraud and broker misconduct is throughout the country. For the purpose of the study, these academics have analyzed the full set of disclosures of approximately 10% of employees in the finance and insurance sectors between 2005 and 2015, and taken in to account customer complaints, arbitrations, regulatory actions, terminations, bankruptcy filings and criminal proceedings. Based on this study, 7% of advisers were reported to have engaged in misconduct. The actual unreported cases may add to this number.

Here at Malecki Law, it is our mission to protect individuals who have been victimized by unscrupulous brokers. Here are some excerpts highlighting the important findings from this study:

  • According to the report, prior offenders are five times more likely to repeat their misconduct as compared to an average adviser. Approximately one-third of advisers with misconduct reports are repeat offenders. That is why we encourage all investors to investigate their broker on FINRA’s BrokerCheck

The Securities and Exchange Commission (SEC) announced on February 16, 2016 a settlement with Massachusetts-based PTC, Inc. involving alleged violations of the Foreign Corrupt Practices Act (FCPA).  In total, PTC was reported to agree to pay approximately $28 million, including nearly $12 million in disgorgement and more than $14 million in a non-prosecution agreement with the United States Department of Justice in a parallel action.

According to the SEC Order, PTC’s China-based subsidiaries made payments to China officials in an effort to win business, including:

  • Provided improper travel, gifts, and entertainment totaling nearly $1.5 million to Chinese government officials who were employed by state-owned entities that were PTC customers.

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FINRA reported that it barred 10 former Global Arena Representatives including the former President of Global Arena Capital Corp., Barbara Desiderio, and five former representatives (David Awad a.k.a. David Bennett, James Torres, Peter Snetzko, Alex Wildermuth, and Michael Tannen) in all capacities; barred two former principals, Kevin Hagan and Richard Bohack, for supervisory failures; sanctioned two other former brokers, Niaz Elmazi a.k.a. Nick Morrisey and Andrew Marze, for failing to cooperate with FINRA’s investigation. FINRA had cancelled Global Arena’s membership and barred the owner and three other brokers for fraud in July 2015 in a separate action.

FINRA announced that a 2014 on-site audit and investigation at Global Arena Capital Corp had allegedly revealed several instances of securities fraud including product misrepresentation, use of misleading claims, account churning, unsuitability, and other misconduct like use of high pressure sales tactics to make sales of junk bonds to customers. FINRA reports that their business model involved cold calling vulnerable groups of investors including seniors to make solicited recommendations of securities. These sanctions reiterate FINRA’S focus on tracking down groups of brokers who migrate from one risky and problem-ridden firm to another, with questionable practices. In this instance reported by FINRA, seven of the ten individuals had moved to Global Arena’s new office from HFP Capital Market, a firm that was expelled by FINRA in 2013. Apparently, FINRA’s risk-based approach identified certain brokers who had moved from HFP for heightened regulatory investigation, which confirmed FINRA’s suspicions. In settling the actions, the respondents neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

According to Susan Axelrod, FINRA’s Executive Vice President, Regulatory Operations, FINRA will continue will continue to monitor brokers who move from expelled or high-risk securities firms. They will use data leveraged from their study of broker migration to expedite investigations and sanction brokers who tend to prey on vulnerable investors.

The Securities and Exchange Commission (SEC) announced today that is has formally charged Malcolm Segal with running a Ponzi scheme and stealing investor money from his office in Pennsylvania.  According to his BrokerCheck Report, Mr. Segal was formerly a registered stockbroker with Aegis Capital Corp. and Cumberland Advisors.  Mr. Segal reportedly was a partner in J&M Financial and the president of National CD Sales.

According to the SEC, Mr. Segal allegedly sold what he called certificates of deposit (CDs) to his brokerage customers under the false pretense that he could get them a higher rate of interest than was then available through banks.  Mr. Segal allegedly represented to his victims that his CDs were FDIC insured and risk-free. Mr. Segal reportedly defrauded at least fifty investors out of roughly $15.5 million.

As his scheme was unravelling, Mr. Segal allegedly began to steal from his customers’ brokerage accounts by falsifying fraudulent paperwork such as letters of authorization. This fake paperwork reportedly allowed Mr. Segal to withdraw funds from his customers’ accounts without them knowing.  Ultimately, in July 2014, the scheme collapsed completely.  Mr. Segal has since been barred from the securities industry by the Financial Industry Regulatory Authority.

As the U.S. baby boomers look toward retirement, a larger percentage of the population will become senior-aged individuals who will have a substantial amount of savings that may be used to fund investments.  It is more important than ever to keep in mind that everyone needs to take as much care over their retirement nest egg now as they did when they were diligently saving.  The New Jersey Bureau of Securities has issued a new release to commemorate World Elder Abuse Awareness Day and remind senior-aged investors to be wary of financial fraud.

In the news release, the NJ Bureau noted that one in five Americans over the age of 65 are victims of financial fraud, making it one of the fastest growing forms of elder abuse.  However, the news release noted that anyone over than 55, whether working or retired, may be viewed as a potential target for financial fraud.

The NJ Bureau of Securities listed several types of financial fraud to be careful of, including: