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Securities Fraud
Since 1978, I have represented
several major broker/dealers, including Shearson
Lehman Brothers Inc. and PaineWebber, Inc. I
have practiced securities litigation in federal
and state courts, the New York Stock Exchange
and the National Association of Securities
Dealers. I handle cases involving churning,
unauthorized trading, suitability, negligence,
and breach of fiduciary duty.
WHAT IS BROKER FRAUD? "Broker fraud"
includes many types of wrongdoing:
misrepresentations, churning, unsuitable
investments and other acts of greed,
incompetence and negligence by stockbrokers,
financial planners, and others in the securities
industry. These actions sometimes cause
investors to lose their inheritances, their
retirement or even their life savings!
Securities regulators "police" the securities
industry and issue fines and suspensions. To
recover their losses investors must file claims
for recovery. Statistics demonstrate that they
are far more likely to recover if they are
represented by experienced attorneys. Since
investors sign account documents at brokerage
firms which almost always contain binding
arbitration clauses, most claims against
brokerage firms must be resolved in securities
arbitration. Our primary goal is to represent
investors who have lost money because of
mishandling of their brokerage accounts.
Worldcom fraud:
To those who have lost money in Worldcom at
Salomon Smith Barney, you may have a claim to
get your money back from Salomon Smith Barney,
the investment banking arm of Citigroup, Inc.
This is what Sanford I. Weill, Chairman and CEO
of Citigroup, said about the Worldcom debacle:
"We can see that certain of our activities do
not reflect that way we beleve business should
be done. That should never be the case and I am
sorry for that."
Merrill
Lynch
Despite the
declining value of its clients' portfolios, Merrill Lynch
continues to make a great deal of money. In its mid-year report
to shareholders, the company brags that "reported second-quarter
net earnings were 17% higher than the 2001 second quarter." For
the first half of 2002, their Private Client business sector
"earned 32% more before taxes than in the same period in
2001…pre-tax profit margin for this period was 13.3%,
meaningfully better than the 8.9% reported for the first half of
last year." The company's retail stock brokerage sector,
"pre-tax earnings were 25% higher than in the first six months
of 2001." Some of the stocks that Merrill Lynch pushed its
clients to buy:
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Infospace |
Webvan |
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Looksmart |
Overture |
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GotoiVillage |
MyPoints |
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Aether
Systems |
Quokka
LifeMinders |
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Merrill Lynch
Settles Analyst Charges for $100 million excerpts from recent
News Articles on Merrill Lynch and Henry Blodget (May 9 through
May 22, 2002):
New York
state Attorney General Eliot Spitzer has dropped the idea of
asking Merrill Lynch to contribute to a restitution fund for
investors who lost money on what he says were excessively
bullish recommendations by the firm's analysts. Spitzer said
that investors had a better chance of recovering money through
private lawsuits. Spitzer released e-mails in which Merrill
Lynch analysts derided stocks that the firm publicly recom-mended.
Lawyers for shareholders have em-braced that evidence.
As part of a
settlement with the New York Attorney General's office, Merrill
Lynch will pay $48 million to the state of New York and $52
million to other states as part of the settle-ment related to
"inappropriate communi-cations" found in the first phase of a
potentially lengthy investigation of Wall Street analysts'
behavior. The company also agreed to implement several changes
in how it is organized internally, further separating its
investment banking and stock research wings. The allegations
arose from analyst behavior during and immediately after the
incredible rise of Internet and related technology stocks.
During the
investigation, New York Attorney General Eliot Spitzer revealed
e-mails that showed stock analysts privately referred to stocks
as "dogs" while publicly maintaining buy ratings. "It is my view
that restitution is best accom-plished through private actions
that individual investors will bring based on the particular
facts of his or her or their investments," he said, according to
the Associated Press. By not acknowledging wrong-doing, Merrill
has retained the right to defend itself against a host of
private lawsuits filed in connection with the same stock bubble.
Some of the pending suits -- more have been filed in recent days
-- single out former Merrill Internet analyst Henry Blodget.
The
settlement comes about a month after a judge cleared the way for
further investigation of Merrill Lynch. That ruling followed
Spitzer's presentation of 100,000 pages of documents, which he
said showed that Merrill analysts were encouraged to give
posi-tive stock recommendations to help the company win
investment banking and underwriting business. The allegations
focused mainly on dot-com clients, such as Pets.com, Buy.com,
eToys, GoTo.com (now known as Overture) and InfoSpace. Spitzer
called the agreement a possible template for reform on Wall
Street. But the company did not admit wrongdoing, and some
observers suggested that the structural reforms, though stronger
than those recently approved by the Securities and Exchange
Commi-ssion, may fail to eliminate analysts' conflicts of
interest.
The attorney
general had accused Merrill Lynch researchers, notably former
Internet analyst Henry Blodget, of misleading investors by
issuing enthusiastic reports on stocks they privately derided so
Merrill could win or keep lucrative investment-banking business
from those firms. Spitzer stunned the financial world by
releasing a handful of subpoenaed e-mails in which Blodget and
others at Merrill Lynch disparaged stocks the company was
publicly recommending, calling them "junk," "crap," "dog" and
"disaster." Spitzer pledged to press ahead with his
investigation into analyst behavior at other firms. The attorney
general has subpoenaed at least seven other major Wall Street
houses: Morgan Stanley Dean Witter & Co.; Credit Suisse First
Boston; the Salomon Smith Barney Inc. unit of Citigroup Inc.;
Lehman Brothers Inc.; Bear, Stearns & Co.; UBS Warburg; and J.P.
Morgan Chase & Co.
The SEC has
opened its own investi-gation into conflicts of interest on Wall
Street. The Justice Department has also expressed interest in
probing the issue. The SEC approved new analyst rules proposed
by the New York Stock Exchange and the National Association of
Securities Dealers. In its statement of contrition, Merrill
Lynch apologized for "the inappropriate communication brought to
light" by Spitzer. But it stopped short of an admission of
wrongdoing, an element Spitzer fought for but Merrill rejected,
saying that such an admission would leave the firm wide open to
the dozens of shareholder lawsuits filed against it.
National Organizations
Commodities Futures Trading Commission
(CFTC)
202.418.5508, Office of Proceedings
Web site:
http://www.cftc.gov
National
Association of Securities Dealers (NASD)
800.289.9999
Web site:
http://www.nasdr.com
Securities
and Exchange Commission
202.942.7040, Office of Investor
Education
& Assistance
Web site:
http://www.sec.gov
Some
Individual State Securities Regulators
Florida:
Securities
Division
Department
of Banking & Finance
101 East
Gaines St.
Tallahassee, Fla. 32301
904.488.9805
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