Last year, many muni-bond funds took a hit as a "perfect storm" struck the markets, flattening the yield curve between long term munis and short term munis. Many bond funds took a hit. Now, investors are hitting back.
Investors are beginning to file suit over the poor recommendations by their brokers to invest in certain High Yield Muni Bond Funds. Muni bond funds invest in debt issued by cities and other municipalities. They usually offer lower, steady returns, but are tax-free, which is attractive to rich people.
However, muni bond prices began to fall last summer and early fall, pushing yields higher, as investors moved money into the safest securities, such as short-term Treasury bonds. That, in turn, has hit some of the large muni bond funds. Some customers have begun to sue because they were not told that the high-yield funds in which they invested had significant risk to principal.
The result is that investors who thought they were investing in relatively safe, low volatility bond funds actually invested in bond funds that were subject wild price fluctuations. For example, the Oppenheimer Rochester Municipal Bond Fund was cited as a fund that was subject to significant price volatility in a Morningstar analyst report last January, 2007. "Some investors bought the fund after being told it was appropriate as an income producing vehicle, without disclosing that there was a material risk to the principal value, as this fund took some risks in more concentrated areas more than normal.," said Jeff Erez, Esq. a partner at Sonn & Erez in Fort Lauderdale. "We have recently filed suit against a brokerage firm, because of this lack of disclosure, and a significant amount of our client's portfolio was put in the fund, when only a small portion of the portfolio should have been invested, consistent with public recommendations from well-respected analysts, including Morningstar," said Erez.
Other lawsuits focus on the Morgan Keegan family of Bond Funds, which suffered losses as high as 80%, due to overexposure to the subprime credit market. Many of the arbitration cases filed alleged that Morgan Keegan, owned by Regions Bank, failed to disclose that is fund manager, Jim Kelsoe, had snapped up large amounts of collateralized mortgage obligations and other asset backed securities, many of which became illiquid in the fall of 2008. Other funds that suffered significant losses in 2007 included Eaton Vance National Muni fund The Goldman Sachs High Yield Muni fund and the Nuveen High Yield Municipal fund.
"The theme of these suits are consistent--investors are sold on the idea that they can earn an income in a relatively low risk investment, but are not told of the substantial risks to their principal investment," said Jeff Sonn, Esq., a partner at Sonn & Erez.
Monday, August 18, 2008
Monday, August 11, 2008
SEC CHARGES WEXTRUST, STEVEN BYERS, JOSPEH SHERESHEVSKY, AND OTHERS IN $255 MILLION PONZI SCHEME
Aug. 11, 2008 — The United States Securities and Exchange Commission filed charges against Wextrust Capital, LLC (Wextrust), its principals, and four affiliated Wextrust entities, alleging that defendants conducted a massive Ponzi-type scheme from 2005 or earlier that raised approximately $255 million from approximately 1,200 investors. The targets of the fraudulent offerings are primarily members of the Orthodox Jewish community.
The complaint alleges an affinity fraud of very large scale. In this case, one of the defendants used his extensive connections in the orthodox Jewish community to solicit more than $250 million from unsuspecting investors. Affinity frauds are especially horrible because the victims tend to let their guards down in circumstances where they might otherwise proceed with much more caution, according to a comment from the SEC.
Jeff Sonn, Esq., a securities attorney with Sonn & Erez, PLC, said that "using one's faith to steal money is one of the most heinous types of investment scams because the swindlers are defrauding people under the guise that they are pios and moral. Whatever happened to the commandment "Thou shalt not steal.?" As a Jew, I am outraged whenever I see a so-called Orthodox Jew swindle others in his community. Likewise, I have seen other cases where so-called Pastors or Priests have done the same to their own Christian community by using their beliefs to steal money. Its reprehensible."
The SEC charged in its Complaint that Wextrust, its principals Steven Byers and Joseph Shereshevsky, and its affiliated entities Wextrust Equity Partners, LLC (WEP), Wextrust Development Group, LLC (WDG), Wextrust Securities, LLC (Wextrust Securities) and Axela Hospitality, LLC (Axela) conducted at least 60 securities offerings through private placements and created approximately 150 entities in the form of limited liability companies or similar vehicles to act as issuers or facilitators of the offerings, purportedly to fund the acquisition of specified assets, the majority of which were commercial real estate ventures. Contrary to representations in the offering memoranda that proceeds would be used for specific projects, the defendants allegedly diverted funds to pay returns to investors in prior offerings, or to fund expenses of the defendants.
In one offering, conducted in 2005, the SEC complaint alleges that defendants falsely represented to investors that the more than $9 million raised would be used to purchase seven specifically identified real estate properties that were leased by federal government agencies, such as the General Services Administration. In fact, according to the complaint, the defendants never purchased the seven properties. Moreover, at the time the offering occurred, they knew or were reckless in not knowing that the seven properties would not be acquired. Significantly, while the offering was ongoing, the Wextrust entities "borrowed" more than $6 million from the funds raised in the GSA offering and used these funds for purposes unrelated to the GSA offering.
Overall, the complaint alleges, defendants diverted at least $100 million dollars to unauthorized purposes. The complaint alleges that the defendants are conducting at least four ongoing offering frauds intended to raise money to pay back investors from prior offerings.
The complaint named the following defendants.
Byers, age 46, is a resident of Oakbrook, Ill., and owns sixty percent of Wextrust. He is the Chairman of Wextrust and President and Chief Operating Officer of WEP, the arm of Wextrust focusing on income-producing properties, and is also an owner or controlling person of Wextrust Securities. Together with Shereshevsky and others not named in the complaint, Byers controls the Wextrust affiliated entities.
Shereshevsky, age 51, is a resident of Norfolk, Va., and owns twenty percent of Wextrust through a partnership interest held in the name of his wife. Shereshevsky was, until recently, Wextrust's Chief Operating Officer, was instrumental in founding Wextrust Securities, and was responsible for Wextrust's expansion into purported diamond mining investments in Africa. Shershevsky pled guilty to one felony count of bank fraud in June 2003, U.S. v. Shereshevsky, 94 Cr. 248 (CSH).
WexTrust, an Illinois limited liability company, was formed by Byers in 2003. According to the company's website, Wextrust is a globally diversified private equity and specialty finance company, specializing in investment opportunities ranging from real estate to specialty finance and investment banking. Wextrust is headquartered in Chicago and maintains offices in New York, N,Y., Norfolk, V., Atlanta, Ga., Boca Raton, Fla., Nashville, Tenn., Tel Aviv, Israel; and Johannesburg, South Africa.
WEP is an Illinois limited liability company headquartered in Chicago, engaged in the business of buying real estate assets, generally though its partially-owned subsidiaries. According to WEP documents, WEP is the beneficial owner of approximately 120 entities formed for the purpose of owning equity interests in commercial and multi-family real estate assets.
WDG is an Illinois limited liability company headquartered in Chicago, in the business of developing real estate assets.
Wextrust Securities is a broker-dealer registered with the Commission and a Virginia limited liability company headquartered in Norfolk, Va. It employs thirty-six registered representatives and maintains branch offices in New York, N.Y., Norfolk, Chicago, Southfield, Mich., and Ramat Gan, Israel. It was formed in March 2005, registered with the Commission in March 2006, and has been a licensed broker dealer since that time.
Axela is an affiliate of WexTrust Capital. Axela, through its LLC subsidiaries, owns and operates Wextrust's hotel properties, including the Axela Baltimore Hotel and the Park View Hotel in Chicago, and provides asset management services to other Wextrust affiliated LLCs, such as Crowne-Phoenix Investors LLC.
The complaint alleges that defendants violated and are violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Wextrust Securities violated Sections 15(b)(1), 15(b)(7) and 15(c)(1) of the Exchange Act and Rules 10b-3, 15b1-1, 15b3-1 and 15b7-1 promulgated thereunder. Shereshevsky violated Section 15(a) or alternatively, aided and abetted, Wextrust Securities' violations of Sections 15(b)(1), 15(b)(7) and 15(c)(1) of the Exchange Act and Rules 10b-3, 15b1-1, 15b3-1 and 15b7-1 promulgated thereunder. Byers aided and abetted Wextrust Securities' violations of Sections 15(b)(1), 15(b)(7) and 15(c)(1) of the Exchange Act and Rules 10b-3, 15b1-1, 15b3-1 and 15b7-1.
The complaint alleges an affinity fraud of very large scale. In this case, one of the defendants used his extensive connections in the orthodox Jewish community to solicit more than $250 million from unsuspecting investors. Affinity frauds are especially horrible because the victims tend to let their guards down in circumstances where they might otherwise proceed with much more caution, according to a comment from the SEC.
Jeff Sonn, Esq., a securities attorney with Sonn & Erez, PLC, said that "using one's faith to steal money is one of the most heinous types of investment scams because the swindlers are defrauding people under the guise that they are pios and moral. Whatever happened to the commandment "Thou shalt not steal.?" As a Jew, I am outraged whenever I see a so-called Orthodox Jew swindle others in his community. Likewise, I have seen other cases where so-called Pastors or Priests have done the same to their own Christian community by using their beliefs to steal money. Its reprehensible."
The SEC charged in its Complaint that Wextrust, its principals Steven Byers and Joseph Shereshevsky, and its affiliated entities Wextrust Equity Partners, LLC (WEP), Wextrust Development Group, LLC (WDG), Wextrust Securities, LLC (Wextrust Securities) and Axela Hospitality, LLC (Axela) conducted at least 60 securities offerings through private placements and created approximately 150 entities in the form of limited liability companies or similar vehicles to act as issuers or facilitators of the offerings, purportedly to fund the acquisition of specified assets, the majority of which were commercial real estate ventures. Contrary to representations in the offering memoranda that proceeds would be used for specific projects, the defendants allegedly diverted funds to pay returns to investors in prior offerings, or to fund expenses of the defendants.
In one offering, conducted in 2005, the SEC complaint alleges that defendants falsely represented to investors that the more than $9 million raised would be used to purchase seven specifically identified real estate properties that were leased by federal government agencies, such as the General Services Administration. In fact, according to the complaint, the defendants never purchased the seven properties. Moreover, at the time the offering occurred, they knew or were reckless in not knowing that the seven properties would not be acquired. Significantly, while the offering was ongoing, the Wextrust entities "borrowed" more than $6 million from the funds raised in the GSA offering and used these funds for purposes unrelated to the GSA offering.
Overall, the complaint alleges, defendants diverted at least $100 million dollars to unauthorized purposes. The complaint alleges that the defendants are conducting at least four ongoing offering frauds intended to raise money to pay back investors from prior offerings.
The complaint named the following defendants.
Byers, age 46, is a resident of Oakbrook, Ill., and owns sixty percent of Wextrust. He is the Chairman of Wextrust and President and Chief Operating Officer of WEP, the arm of Wextrust focusing on income-producing properties, and is also an owner or controlling person of Wextrust Securities. Together with Shereshevsky and others not named in the complaint, Byers controls the Wextrust affiliated entities.
Shereshevsky, age 51, is a resident of Norfolk, Va., and owns twenty percent of Wextrust through a partnership interest held in the name of his wife. Shereshevsky was, until recently, Wextrust's Chief Operating Officer, was instrumental in founding Wextrust Securities, and was responsible for Wextrust's expansion into purported diamond mining investments in Africa. Shershevsky pled guilty to one felony count of bank fraud in June 2003, U.S. v. Shereshevsky, 94 Cr. 248 (CSH).
WexTrust, an Illinois limited liability company, was formed by Byers in 2003. According to the company's website, Wextrust is a globally diversified private equity and specialty finance company, specializing in investment opportunities ranging from real estate to specialty finance and investment banking. Wextrust is headquartered in Chicago and maintains offices in New York, N,Y., Norfolk, V., Atlanta, Ga., Boca Raton, Fla., Nashville, Tenn., Tel Aviv, Israel; and Johannesburg, South Africa.
WEP is an Illinois limited liability company headquartered in Chicago, engaged in the business of buying real estate assets, generally though its partially-owned subsidiaries. According to WEP documents, WEP is the beneficial owner of approximately 120 entities formed for the purpose of owning equity interests in commercial and multi-family real estate assets.
WDG is an Illinois limited liability company headquartered in Chicago, in the business of developing real estate assets.
Wextrust Securities is a broker-dealer registered with the Commission and a Virginia limited liability company headquartered in Norfolk, Va. It employs thirty-six registered representatives and maintains branch offices in New York, N.Y., Norfolk, Chicago, Southfield, Mich., and Ramat Gan, Israel. It was formed in March 2005, registered with the Commission in March 2006, and has been a licensed broker dealer since that time.
Axela is an affiliate of WexTrust Capital. Axela, through its LLC subsidiaries, owns and operates Wextrust's hotel properties, including the Axela Baltimore Hotel and the Park View Hotel in Chicago, and provides asset management services to other Wextrust affiliated LLCs, such as Crowne-Phoenix Investors LLC.
The complaint alleges that defendants violated and are violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Wextrust Securities violated Sections 15(b)(1), 15(b)(7) and 15(c)(1) of the Exchange Act and Rules 10b-3, 15b1-1, 15b3-1 and 15b7-1 promulgated thereunder. Shereshevsky violated Section 15(a) or alternatively, aided and abetted, Wextrust Securities' violations of Sections 15(b)(1), 15(b)(7) and 15(c)(1) of the Exchange Act and Rules 10b-3, 15b1-1, 15b3-1 and 15b7-1 promulgated thereunder. Byers aided and abetted Wextrust Securities' violations of Sections 15(b)(1), 15(b)(7) and 15(c)(1) of the Exchange Act and Rules 10b-3, 15b1-1, 15b3-1 and 15b7-1.
Saturday, July 19, 2008
Mat / ASTA (Citigroup) Hedge Fund Investors Still Have Time To Sue or Settle
Citigroup Alternative Investments announced on July 15, 2008 today that the Company has extended the expiration date of the tender and exchange offers for each Portfolio to August 8, 2008. The deadline was July 15, 2008.
"A substantial number of investors have not chosen to settle their claims against Citigroup," said Jeff Sonn, Esq., of Sonn & Erez, a securities attorney representing Mat Investors. "Citigroup is desparately trying to settle these claims for 23 cents on the dollar, and they have extended the deadline, we think, because they are afraid their customers will sue them for their losses," said Sonn. "We think that customers deserve their right to ask an arbitration panel for all of their money back, and not settle for 23cents on the dollar" said Sonn.
As of July 14, 2008, holders of existing shares had tendered only approximately (i) 55% (166,550,000) of the Existing Shares of the National Portfolio; (ii) 22% (43,000,000) of the Existing Shares of the National Portfolio II; (iii) 42% (61,550,000) of the Existing Shares of the California Portfolio; and (iv) 73% (111,125,000) of the Existing Shares of the New York Portfolio.
"Any shareholder can still rescind their tender of their shares, and then can sue Citigroup Alternative Investments if they wish to ask for all of their money back," said Sonn.
"A substantial number of investors have not chosen to settle their claims against Citigroup," said Jeff Sonn, Esq., of Sonn & Erez, a securities attorney representing Mat Investors. "Citigroup is desparately trying to settle these claims for 23 cents on the dollar, and they have extended the deadline, we think, because they are afraid their customers will sue them for their losses," said Sonn. "We think that customers deserve their right to ask an arbitration panel for all of their money back, and not settle for 23cents on the dollar" said Sonn.
As of July 14, 2008, holders of existing shares had tendered only approximately (i) 55% (166,550,000) of the Existing Shares of the National Portfolio; (ii) 22% (43,000,000) of the Existing Shares of the National Portfolio II; (iii) 42% (61,550,000) of the Existing Shares of the California Portfolio; and (iv) 73% (111,125,000) of the Existing Shares of the New York Portfolio.
"Any shareholder can still rescind their tender of their shares, and then can sue Citigroup Alternative Investments if they wish to ask for all of their money back," said Sonn.
WACHOVIA SECURITIES' OFFICES RAIDED BY SECURITIES REGULATORS AMID COMPLAINTS OF ABUSIVE SALES OF AUCTION RATE SECURITIES
Securities regulators from more than five states raided the St. Louis headquarters of Wachovia Securities LLC, seeking documents and records related to the company’s sale of auction rate securities.
The regulators, led by officials from the office of Missouri secretary of state Robin Carnahan, executed subpoenas seeking information concerning Wachovia Securities’ sales practices, internal evaluations of the auction rate securities market and marketing strategies, Ms. Carnahan said in a statement.
Wachovia clients have filed more than 70 formal complaints, representing more than $40 million of frozen assets, with the state in the past four months.
“Hundreds of Missouri investors have called my office because of inability to access their money,” Ms. Carnahan said in the statement.
In May, Wachovia Corp. of Charlotte, N.C., the parent company of Wachovia Securities LLC and other affiliates, confirmed that it received inquiries from the Securities and Exchange Commission and state regulators regarding auction rate securities, according to an SEC filing.
"Finally, securities regulators are investigating a $330 billion dollar problem, because many investors have complained that they were mislead into buying auction rate securities with promises that these were safe, liquid investments that were cash-like or cash equivalents, and they are not," said Jeffrey Sonn, Esq. a securities attorney with Sonn & Erez, PLC, who represents investors with investment related claims. "Although the regulators cannot give investors back their money, hopefully the investigations will reveal what we have been saying all along, that in our opinion the auction rate securities market was marketed fraudulently to many investors," said Sonn.
The regulators, led by officials from the office of Missouri secretary of state Robin Carnahan, executed subpoenas seeking information concerning Wachovia Securities’ sales practices, internal evaluations of the auction rate securities market and marketing strategies, Ms. Carnahan said in a statement.
Wachovia clients have filed more than 70 formal complaints, representing more than $40 million of frozen assets, with the state in the past four months.
“Hundreds of Missouri investors have called my office because of inability to access their money,” Ms. Carnahan said in the statement.
In May, Wachovia Corp. of Charlotte, N.C., the parent company of Wachovia Securities LLC and other affiliates, confirmed that it received inquiries from the Securities and Exchange Commission and state regulators regarding auction rate securities, according to an SEC filing.
"Finally, securities regulators are investigating a $330 billion dollar problem, because many investors have complained that they were mislead into buying auction rate securities with promises that these were safe, liquid investments that were cash-like or cash equivalents, and they are not," said Jeffrey Sonn, Esq. a securities attorney with Sonn & Erez, PLC, who represents investors with investment related claims. "Although the regulators cannot give investors back their money, hopefully the investigations will reveal what we have been saying all along, that in our opinion the auction rate securities market was marketed fraudulently to many investors," said Sonn.
Monday, July 7, 2008
Condo-Hotel Buyers Sue Under Securities Laws
Condo-Hotel buyers are using the federal securities laws to try to get out of their purchase contracts. Current lawsuits around the country include the Resort at Singer Island, developed by WCI Communities, the Clearwater Cay Club, The Residences at MGM Grand and The Residences, a Condo Hotel by Turnberry. Some buyers' attorneys are now citing violations of the feder0al securitis laws, claiming that the condo-hotel units sold to their buyers should have triggered registration of the offering under the securities laws. In 1973, the Securities and Exchange Commission (SEC) issued a release addressing the sale of condominium units coupled with rental pool deals. In the SEC release, the SEC said that "condominiums, coupled with a rental arrangement, will be deemed to be securities if they are offered and sold through advertising, sales literature, promotional schemes or oral representations which emphasize economic benefits to the purchaser to be derived from the managerial efforts of the promoter, or a third party designated or arranged for by the promoter, in renting the units," according to the SEC release.
Securities attorneys are now investigating condo-hotel deals to see if they violate the securities laws. "In today's environment, condo-hotel buyers are anxious to see if they can get out of deals where they were wrongly convinced to buy a condo-hotel unit based on promises of income generated by the rental pools operated by the developer's hotel manager," said Jeff Sonn, Esq., a Fort Lauderdale securities attorney. "We have recently received inquiries on these cases and have also seen the filing of lawsuits against developers for promising profits on the rentals of condo-hotel units, in order to close sales, thus violating the federal securities laws. Buyers can rely upon the securities laws to get their money back in these situtations," added Sonn. According to Sonn, there needs to be a strict separation between the sale of the condominium-hotel unit and the rental pool process. If the salespersons emphasize the income on the unit as the main selling point, and couple the sale with a rental agreement, its likely to be the unregistered sale of a security, and the buyer can sue to get their money back.
Securities attorneys are now investigating condo-hotel deals to see if they violate the securities laws. "In today's environment, condo-hotel buyers are anxious to see if they can get out of deals where they were wrongly convinced to buy a condo-hotel unit based on promises of income generated by the rental pools operated by the developer's hotel manager," said Jeff Sonn, Esq., a Fort Lauderdale securities attorney. "We have recently received inquiries on these cases and have also seen the filing of lawsuits against developers for promising profits on the rentals of condo-hotel units, in order to close sales, thus violating the federal securities laws. Buyers can rely upon the securities laws to get their money back in these situtations," added Sonn. According to Sonn, there needs to be a strict separation between the sale of the condominium-hotel unit and the rental pool process. If the salespersons emphasize the income on the unit as the main selling point, and couple the sale with a rental agreement, its likely to be the unregistered sale of a security, and the buyer can sue to get their money back.
Tuesday, June 17, 2008
SONN & EREZ TO REPRESENT MATT V INVESTORS AS AN ALTERNATIVE TO THE CLASS ACTION CASES
On May 1, 2008, a class action was commenced on behalf of all persons or entities who purchased or otherwise acquired shares of MAT Five LLC (“MAT Five”), marketed by Citigroup.
The complaint charges MAT Five, Citigroup Global Markets Inc. (“Citigroup Global”) (the corporate and capital markets arm of Citigroup, Inc.’s (“Citigroup”) (NYSE:C) Corporate and Investment Banking group), Citigroup Alternative Investments LLC (“CAI”), Citigroup Fixed Income Alternatives (“CFIA”) and Reaz Islam with violations of the Securities Act of 1933 and Delaware law. MAT Five is a limited liability company that makes investments in limited liability company interests issued by Municipal Opportunity Fund Five National (“MOF Five”), a limited liability company that makes leveraged investments in fixed-rate, tax-exempt municipal bonds.
Specifically, the complaint alleges that during late 2006 and continuing into early 2007, Citigroup, through CFIA and CAI, targeted many of its clients who were believed to be interested in fixed-income investments which would provide higher yields. One type of investment Citigroup promoted to its investors was municipal bond opportunities involving the arbitrage of tax-exempt and taxable bonds. These were actually very risky investments which could drop precipitously if the markets changed, or if the investments were not properly managed. Defendants are alleged to have caused the PPM and presentation materials for MAT Five (the “Selling Documents”) to be disseminated beginning in 2006 in connection with the issuance of hundreds of millions of dollars of shares. The Selling Documents were false and misleading in that the strategy to be employed would not protect investors as suggested by the ratings of the underlying investments and defendants did not have risk management practices in place to prevent employees of CAI from engaging in highly risky investment practices. On March 20, 2008, CAI wrote a letter to investors which stated that the recent credit crunch had rapidly accelerated and spread into the municipal bond markets. As a result, the cash positions and net asset values of the MAT Five fund had been severely impacted, and they were going to indefinitely suspend the fund’s income distributions in an effort to preserve liquidity.
Sonn & Erez, a securities arbitration and litigation firm in Florida, is representing investors who have lost money in MAT Five. "We feel that investors in MAT Five will get speedier justice in individual arbitration claims rather than in the class action," said Jeff Sonn, Esq. "Normally, arbitrations from beginning to end take about 12-17 months, with little chance for an appeal, whereas the class actions can take many years, due to the slow pace of federal court and the chance for appeals, which are common in these types of cases," said Sonn. Arbitration is an alternative to Court and the class action process. In an arbitration, three arbitrators serve as the jury, and decide how much an investor will receive. The arbitration process is quicker because it does not generally allow for any depositions, and the process to get to a final hearing is generally much quicker than the process to get to a trial in court.
The complaint charges MAT Five, Citigroup Global Markets Inc. (“Citigroup Global”) (the corporate and capital markets arm of Citigroup, Inc.’s (“Citigroup”) (NYSE:C) Corporate and Investment Banking group), Citigroup Alternative Investments LLC (“CAI”), Citigroup Fixed Income Alternatives (“CFIA”) and Reaz Islam with violations of the Securities Act of 1933 and Delaware law. MAT Five is a limited liability company that makes investments in limited liability company interests issued by Municipal Opportunity Fund Five National (“MOF Five”), a limited liability company that makes leveraged investments in fixed-rate, tax-exempt municipal bonds.
Specifically, the complaint alleges that during late 2006 and continuing into early 2007, Citigroup, through CFIA and CAI, targeted many of its clients who were believed to be interested in fixed-income investments which would provide higher yields. One type of investment Citigroup promoted to its investors was municipal bond opportunities involving the arbitrage of tax-exempt and taxable bonds. These were actually very risky investments which could drop precipitously if the markets changed, or if the investments were not properly managed. Defendants are alleged to have caused the PPM and presentation materials for MAT Five (the “Selling Documents”) to be disseminated beginning in 2006 in connection with the issuance of hundreds of millions of dollars of shares. The Selling Documents were false and misleading in that the strategy to be employed would not protect investors as suggested by the ratings of the underlying investments and defendants did not have risk management practices in place to prevent employees of CAI from engaging in highly risky investment practices. On March 20, 2008, CAI wrote a letter to investors which stated that the recent credit crunch had rapidly accelerated and spread into the municipal bond markets. As a result, the cash positions and net asset values of the MAT Five fund had been severely impacted, and they were going to indefinitely suspend the fund’s income distributions in an effort to preserve liquidity.
Sonn & Erez, a securities arbitration and litigation firm in Florida, is representing investors who have lost money in MAT Five. "We feel that investors in MAT Five will get speedier justice in individual arbitration claims rather than in the class action," said Jeff Sonn, Esq. "Normally, arbitrations from beginning to end take about 12-17 months, with little chance for an appeal, whereas the class actions can take many years, due to the slow pace of federal court and the chance for appeals, which are common in these types of cases," said Sonn. Arbitration is an alternative to Court and the class action process. In an arbitration, three arbitrators serve as the jury, and decide how much an investor will receive. The arbitration process is quicker because it does not generally allow for any depositions, and the process to get to a final hearing is generally much quicker than the process to get to a trial in court.
North American Clearing of Longwood, Florida Frozen by SEC
NORTH AMERICAN CLEARING CHARGED WITH FRAUD BY THE SEC (CASE nO. 6-08-CV-829-ORL-31-GJK(MD. FLA)
The Securities and Exchange Commission (SEC) today announced that it has obtained an asset freeze and other emergency relief to protect investors whose funds were at risk due to fraudulent misconduct at North American Clearing, Inc., a Longwood, Florida based general securities and clearing brokerage firm. North American Clearing services approximately 40 correspondent brokers and clears transactions for over 10,000 customer accounts.
The SEC requested the relief when it filed a complaint on May 27, 2008 against North American Clearing, its founder and director Richard L. Goble, its president Bruce B. Blatman, and its former financial and operations principal Timothy J. Ward, charging them with fraud and other securities laws violations. The SEC's complaint alleges that the defendants engaged in illegal activities, including the misuse of customer funds, in order to hide North American Clearing's financial problems and to pay for its daily business operations.
In addition to the asset freeze, the SEC obtained a temporary restraining order against the defendants and an order appointing a receiver over North American Clearing.
The SEC's complaint alleges that the defendants' fraud began earlier this year, when North American Clearing began experiencing severe financial problems. To ease its financial difficulties, North American Clearing secured a bank loan using customer securities as collateral. To comply with the federal securities laws and remain in operation, North American Clearing increased its reserves in an account it maintained for the benefit of customers, which limited funds available to North American Clearing to meet its daily operating expenses.
According to the SEC's complaint, on several occasions in March and April 2008, North American Clearing improperly sold customer money market funds as a means of temporarily freeing up funds that it then used to pay for daily operating expenses. The SEC's complaint also alleges that on May 13, 2008, the defendants manipulated North American Clearing's processing system to overstate net customer money market purchases. This enabled North American Clearing to illegally withdraw more than $3 million from the reserves it was required to maintain for the benefit of customers.
The SEC's complaint, filed in the United States District Court for the Middle District of Florida in Orlando, seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains against North American Clearing and Goble, and civil penalties against all defendants. The SEC's complaint alleges that the defendants violated the antifraud, customer protection and books and records provisions of the Securities Exchange Act of 1934 (Exchange Act). Specifically, the SEC alleges that North American Clearing violated Sections 10(b), 15(c), and 17(a) of the Exchange Act and Rules 10b-5, 15c3-3, and 17a-3 thereunder, and that Goble, Blatman, and Ward violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and aided and abetted North American Clearing's violations of Sections 15(c) and 17(a) of the Exchange Act and Rules 15c3-3, and 17a-3 thereunder.
On May 27, 2008, the Honorable Gregory A. Presnell granted the SEC's ex parte motion for emergency relief, entering a temporary restraining order against the defendants and freezing North American Clearing's assets. The order also provides for a sworn accounting from North American Clearing and preservation of its records. The Court further appointed Peter J. Anderson, an attorney in the law firm of Sutherland Asbill & Brennan LLP of Atlanta, Georgia, as a receiver over North American Clearing. Among other things, the receiver is responsible for marshaling and safeguarding assets held by North American Clearing. A show cause hearing has been set for June 6, 2008, to determine whether the emergency asset freeze and other relief should remain in effect.
The Securities and Exchange Commission (SEC) today announced that it has obtained an asset freeze and other emergency relief to protect investors whose funds were at risk due to fraudulent misconduct at North American Clearing, Inc., a Longwood, Florida based general securities and clearing brokerage firm. North American Clearing services approximately 40 correspondent brokers and clears transactions for over 10,000 customer accounts.
The SEC requested the relief when it filed a complaint on May 27, 2008 against North American Clearing, its founder and director Richard L. Goble, its president Bruce B. Blatman, and its former financial and operations principal Timothy J. Ward, charging them with fraud and other securities laws violations. The SEC's complaint alleges that the defendants engaged in illegal activities, including the misuse of customer funds, in order to hide North American Clearing's financial problems and to pay for its daily business operations.
In addition to the asset freeze, the SEC obtained a temporary restraining order against the defendants and an order appointing a receiver over North American Clearing.
The SEC's complaint alleges that the defendants' fraud began earlier this year, when North American Clearing began experiencing severe financial problems. To ease its financial difficulties, North American Clearing secured a bank loan using customer securities as collateral. To comply with the federal securities laws and remain in operation, North American Clearing increased its reserves in an account it maintained for the benefit of customers, which limited funds available to North American Clearing to meet its daily operating expenses.
According to the SEC's complaint, on several occasions in March and April 2008, North American Clearing improperly sold customer money market funds as a means of temporarily freeing up funds that it then used to pay for daily operating expenses. The SEC's complaint also alleges that on May 13, 2008, the defendants manipulated North American Clearing's processing system to overstate net customer money market purchases. This enabled North American Clearing to illegally withdraw more than $3 million from the reserves it was required to maintain for the benefit of customers.
The SEC's complaint, filed in the United States District Court for the Middle District of Florida in Orlando, seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains against North American Clearing and Goble, and civil penalties against all defendants. The SEC's complaint alleges that the defendants violated the antifraud, customer protection and books and records provisions of the Securities Exchange Act of 1934 (Exchange Act). Specifically, the SEC alleges that North American Clearing violated Sections 10(b), 15(c), and 17(a) of the Exchange Act and Rules 10b-5, 15c3-3, and 17a-3 thereunder, and that Goble, Blatman, and Ward violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and aided and abetted North American Clearing's violations of Sections 15(c) and 17(a) of the Exchange Act and Rules 15c3-3, and 17a-3 thereunder.
On May 27, 2008, the Honorable Gregory A. Presnell granted the SEC's ex parte motion for emergency relief, entering a temporary restraining order against the defendants and freezing North American Clearing's assets. The order also provides for a sworn accounting from North American Clearing and preservation of its records. The Court further appointed Peter J. Anderson, an attorney in the law firm of Sutherland Asbill & Brennan LLP of Atlanta, Georgia, as a receiver over North American Clearing. Among other things, the receiver is responsible for marshaling and safeguarding assets held by North American Clearing. A show cause hearing has been set for June 6, 2008, to determine whether the emergency asset freeze and other relief should remain in effect.
Thursday, May 8, 2008
Sonn & Erez Hired by Investors To Sue Charles Schwab Over Its YieldPlus Funds -- SCHW, SWYSX, SWYPX
May 8, 2008- Sonn & Erez has been retained by investors to sue Charles Schwab over the misrepresentations in marketing their YieldPlus Funds, which have lost as much as 80% in the past year due to reckless investments in mortgage backed securities. Many investors were seeking the safety of CDs or moneymarkets, and were steered into the YildPlus Funds without proper disclosure.
A class-action lawsuit filed by stockholders against investment giant Charles Schwab (Nasdaq:SCHW) concerning its YieldPlus Funds Investor Shares (Nasdaq:SWYSX) and YieldPlus Funds Select Shares (Nasdaq:SWYPX) is sparking dramatic reactions from investors, according to the law firm which filed the suit.
The range of investors who are complaining includes investment advisors and retirees. Money managers and registered investment advisors who followed Schwab's advice are also upset as their clients are inquiring whether they can join or have losses large enough to be the lead plaintiff.
The common complaint was Schwab's representation that the YieldPlus funds were a safe alternative to cash, CDs and money market funds, which appears to be false.
The lawsuit, filed March 18, 2008 in U.S. District Court in Northern California, alleges Schwab omitted important information from the funds' SEC Registration Statement, Prospectus and selling representation, including how heavily the funds were exposed to sub-prime mortgage risks. The lawsuit claims more than 50 percent of the funds' assets are invested in the risky mortgage industry -- a percentage that grew as the company abandoned the original objectives of the funds in pursuit of higher yields.
Charles Schwab advertised the YieldPlus funds as ultra-short bond funds that serve as a higher-yielding alternative to money-market funds and offered low risk to investors. Charles Schwab also claimed to offer "investments in a large, well-diversified portfolio," the class action complaint states.
Attorneys at Sonn & Erez believes investors will fare better in arbitration claims than in the class action, said Jeff Sonn, Esq., managing partner at Sonn & Erez PLC. The only offers we have heard that have come from Schwab since the filing of the lawsuit was about 5% of the client’s losses, so it appears that lawsuit has not had the effect that class action lawyers were hoping for," said Sonn. "We think customers should sue Schwab in arbitration, which should be completed in about 16 months, rather than join the class action, which could take years."
Investors in a Schwab YieldPlus fund may be eligible to file arbitration claims to recover their losses. Investors should contact Jeff Sonn, Esq. at 1-866-372-8311 or jsonn@sonnerez.com for more information. Sonn & Erez, PLC is an AV-Rated law firm that represents investors nationwide in stockbroker misconduct and investment fraud cases. For 20 years, lawyers at Sonn & Erez has represented investors against the major Wall Street brokerage firms in claims involving stocks, options, auction rate securities, variable annuities, hedge funds, mutual funds, bonds, and collateralized mortgage obligations (CMOs).
A class-action lawsuit filed by stockholders against investment giant Charles Schwab (Nasdaq:SCHW) concerning its YieldPlus Funds Investor Shares (Nasdaq:SWYSX) and YieldPlus Funds Select Shares (Nasdaq:SWYPX) is sparking dramatic reactions from investors, according to the law firm which filed the suit.
The range of investors who are complaining includes investment advisors and retirees. Money managers and registered investment advisors who followed Schwab's advice are also upset as their clients are inquiring whether they can join or have losses large enough to be the lead plaintiff.
The common complaint was Schwab's representation that the YieldPlus funds were a safe alternative to cash, CDs and money market funds, which appears to be false.
The lawsuit, filed March 18, 2008 in U.S. District Court in Northern California, alleges Schwab omitted important information from the funds' SEC Registration Statement, Prospectus and selling representation, including how heavily the funds were exposed to sub-prime mortgage risks. The lawsuit claims more than 50 percent of the funds' assets are invested in the risky mortgage industry -- a percentage that grew as the company abandoned the original objectives of the funds in pursuit of higher yields.
Charles Schwab advertised the YieldPlus funds as ultra-short bond funds that serve as a higher-yielding alternative to money-market funds and offered low risk to investors. Charles Schwab also claimed to offer "investments in a large, well-diversified portfolio," the class action complaint states.
Attorneys at Sonn & Erez believes investors will fare better in arbitration claims than in the class action, said Jeff Sonn, Esq., managing partner at Sonn & Erez PLC. The only offers we have heard that have come from Schwab since the filing of the lawsuit was about 5% of the client’s losses, so it appears that lawsuit has not had the effect that class action lawyers were hoping for," said Sonn. "We think customers should sue Schwab in arbitration, which should be completed in about 16 months, rather than join the class action, which could take years."
Investors in a Schwab YieldPlus fund may be eligible to file arbitration claims to recover their losses. Investors should contact Jeff Sonn, Esq. at 1-866-372-8311 or jsonn@sonnerez.com for more information. Sonn & Erez, PLC is an AV-Rated law firm that represents investors nationwide in stockbroker misconduct and investment fraud cases. For 20 years, lawyers at Sonn & Erez has represented investors against the major Wall Street brokerage firms in claims involving stocks, options, auction rate securities, variable annuities, hedge funds, mutual funds, bonds, and collateralized mortgage obligations (CMOs).
Wednesday, May 7, 2008
Sonn & Erez Suing Morgan Keegan For Investors Who Suffered Losses in Morgan Keegan Bond Funds
Many investtors lost large sums of money in the Region Morgan Keegan Select High Income Fund; Regions Morgan Keegan Strategic Income Fund; Regions Morgan Keegan Select Intermediate Bond Fund; Regions Morgan Keegan Multi-Sector High Income Fund; or the Regions Morgan Keegan Advantage Income Fund.
The law firm of Sonn & Erez does not believe that these losses were caused solely by market forces, as Morgan Keegan may contend. On July 19, 2007. Bloomberg News described James Kelsoe, the funds' manager, as having an "intoxication" with structured financial products which "kept him from pulling out completely." These high risk products included "collateralized debt obligations" (CDOs), "collateralized mortgage obligations" (CMOs) and "collateralized loan obligations" (CLOs). Much of the losses are related to the surging defaults and delinquencies in the loans that underlied the securities that Kelso bought.
In one class action suit, directed at the RMK Advantage Income Fund and the RMK Strategic Income Fund, allegaions were made that investors were not told about the true risks of the fund, the extent to which the funds were invested in illiquid securities; that due to the illiquidity of some assets, the fund manager was forced to sell the lower risk assets first, thereby penalizing fund holders; that the funds were heavily invested in risky subprime loans and collateralized debt obligations; that the funds' board of directors had a conflict of interest; that the funds, which were said to be independent with different strategies, were nearly identical in strategy, resulting in increased risk and that the pre-2006 results were attributable to their concentration in illiquid, subprime and untested investment structures. The bottom line is that it appears that investors may have been hoodwinked by Morgan Keegan.
Investors have lost hundreds of millions of dollars, or more, in Morgan Keegan Bond Funs managed by James Kelsoe, and sold by Morgan Keegan brokers, some of whom feel that they were mislead by Kelsoe themselves. Investors are fighting back. Investors are hiring securities arbitration attorneys, such as Sonn & Erez, to sue to recover their losses. Call us at 1-866-372-8311 for a free evaluation. Cases are handled on a contingency fee basis. No recovery, No fee. In some cases, the firm will advance the costs of the suit for investors.
Sonn & Erez is "AV" rated by Martindale Hubbel, the independent lawyer rating service. "AV" means Very High to Preeminent lawyer abilities and the highest ethical rating available. The lawyers at Sonn & Erez have substantial securities arbitration and litigation experience, and have recovered millions of dollars for their clients. Sonn & Erez believes that investors should bring individual arbitration actions, rather than a class action for their case.
In an arbitration, a three arbitrator "jury type" panel decides the case. Arbitration has been demonstrated to be cheaper, faster and more final than court. Whereas a class action in court can take years to resolve, arbitrations can generally get resolved in 12-18 months. Arbitration is far from a perfect alternative resolution than court, but in many cases can better serve those who cant wait years to get their money back. Call 1-868-372-8311 today for more information. Please note that Sonn & Erez will not be suing individual stockbrokers, but the Morgan Keegan brokerage firm company, and possibly senior officials, who should be responsible for these losses.
Many times, it is the stockbrokers themselves who step forward, and provide truthful testimony that their employer was not completely truthful about the products they sold, and sometime even mislead the brokers themselves. The stockbrokers themselves may even have claims against Morgan Keegan and James Kelsoe for misleading them as well. Dont suffer in silence. Fight back. Take action to recover your losses today. Call 1866-372-8311 today.
The law firm of Sonn & Erez does not believe that these losses were caused solely by market forces, as Morgan Keegan may contend. On July 19, 2007. Bloomberg News described James Kelsoe, the funds' manager, as having an "intoxication" with structured financial products which "kept him from pulling out completely." These high risk products included "collateralized debt obligations" (CDOs), "collateralized mortgage obligations" (CMOs) and "collateralized loan obligations" (CLOs). Much of the losses are related to the surging defaults and delinquencies in the loans that underlied the securities that Kelso bought.
In one class action suit, directed at the RMK Advantage Income Fund and the RMK Strategic Income Fund, allegaions were made that investors were not told about the true risks of the fund, the extent to which the funds were invested in illiquid securities; that due to the illiquidity of some assets, the fund manager was forced to sell the lower risk assets first, thereby penalizing fund holders; that the funds were heavily invested in risky subprime loans and collateralized debt obligations; that the funds' board of directors had a conflict of interest; that the funds, which were said to be independent with different strategies, were nearly identical in strategy, resulting in increased risk and that the pre-2006 results were attributable to their concentration in illiquid, subprime and untested investment structures. The bottom line is that it appears that investors may have been hoodwinked by Morgan Keegan.
Investors have lost hundreds of millions of dollars, or more, in Morgan Keegan Bond Funs managed by James Kelsoe, and sold by Morgan Keegan brokers, some of whom feel that they were mislead by Kelsoe themselves. Investors are fighting back. Investors are hiring securities arbitration attorneys, such as Sonn & Erez, to sue to recover their losses. Call us at 1-866-372-8311 for a free evaluation. Cases are handled on a contingency fee basis. No recovery, No fee. In some cases, the firm will advance the costs of the suit for investors.
Sonn & Erez is "AV" rated by Martindale Hubbel, the independent lawyer rating service. "AV" means Very High to Preeminent lawyer abilities and the highest ethical rating available. The lawyers at Sonn & Erez have substantial securities arbitration and litigation experience, and have recovered millions of dollars for their clients. Sonn & Erez believes that investors should bring individual arbitration actions, rather than a class action for their case.
In an arbitration, a three arbitrator "jury type" panel decides the case. Arbitration has been demonstrated to be cheaper, faster and more final than court. Whereas a class action in court can take years to resolve, arbitrations can generally get resolved in 12-18 months. Arbitration is far from a perfect alternative resolution than court, but in many cases can better serve those who cant wait years to get their money back. Call 1-868-372-8311 today for more information. Please note that Sonn & Erez will not be suing individual stockbrokers, but the Morgan Keegan brokerage firm company, and possibly senior officials, who should be responsible for these losses.
Many times, it is the stockbrokers themselves who step forward, and provide truthful testimony that their employer was not completely truthful about the products they sold, and sometime even mislead the brokers themselves. The stockbrokers themselves may even have claims against Morgan Keegan and James Kelsoe for misleading them as well. Dont suffer in silence. Fight back. Take action to recover your losses today. Call 1866-372-8311 today.
Lawyer Targets Morgan Keegan
(reprint from the South Florida Business Journal, 2/29/2008) A Fort Lauderdale lawyer is gathering investors and planning a lawsuit against mutual fund operator Morgan Keegan, an affiliate of Regions Financial Corp. (NYSE: RF).
The action would involve investors who lost money on funds that invested in some of the mortgage-related products that have gained headlines nationally, including collateralized mortgage obligations (CMOs).
Jeffrey R. Sonn, a partner at Fort Lauderdale-based law firm Sonn & Erez PLC, plans to raise questions about the suitability of the funds for conservative investors, such as a 94-year old client in Palm Beach who lost $2 million.
Two other firms are also seeking investor/claimants: Mark & Associates P.C., which has offices in Massachusetts and New York, and Houston-based Shepherd Smith & Edwards LLP.
A comparison of six Morgan Keegan and Regions funds on NASDAQ.com showed they had all dropped at least 70 percent over the past 12 months.
The company did not return a call for comment
The action would involve investors who lost money on funds that invested in some of the mortgage-related products that have gained headlines nationally, including collateralized mortgage obligations (CMOs).
Jeffrey R. Sonn, a partner at Fort Lauderdale-based law firm Sonn & Erez PLC, plans to raise questions about the suitability of the funds for conservative investors, such as a 94-year old client in Palm Beach who lost $2 million.
Two other firms are also seeking investor/claimants: Mark & Associates P.C., which has offices in Massachusetts and New York, and Houston-based Shepherd Smith & Edwards LLP.
A comparison of six Morgan Keegan and Regions funds on NASDAQ.com showed they had all dropped at least 70 percent over the past 12 months.
The company did not return a call for comment
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