December 2009 Archives

December 31, 2009

California Stockbroker Discipline Report for December 2009

The following information regarding broker misconduct and disciplinary activities taken against California stockbrokers was released by the Financial Industry Regulatory Authority (FINRA) in December 2009:

Dean Jay Addinanti formerly of Wells Fargo Advisors, LLC and A.G. Edwards & Sons, Inc. in Torrance, California, was fined and suspended from association with any FINRA member in any capacity for 60 days for allegedly conducting unauthorized transactions in customer accounts.

Stephen Crai Keifner formerly of First Allied Securities, Inc. and A.G. Edwards & Sons, Inc. in Ventura and Oxnard, California, was barred from association with any FINRA member in any capacity for allegedly engaging in unauthorized trades in customer accounts, making unsuitable recommendations and altering customer account documentation.

December 22, 2009

California Based Pacific Cornerstone Capital Fined $750,000 Over Private Placements

Pacific Cornerstone Capital, Inc. of Irvine, California, and it's CEO were fined a total of $750,000 by the Financial Industry Regulatory Authority (FINRA) for making false and misleading statements to purchasers of Cornerstone Industrial Properties LLC and CIP Leveraged Fund Advisors LLC. The two private placements raised approximately $50 million from 950 investors who purchased them either directly from Cornerstone or through a nationwide network of stockbrokers and investment advisers. Without admitting or denying FINRA's charges, the firm and its CEO consented to the following findings:

  • The firm had no reasonable basis for including representations in its offering documents that the targeted yield for a $100,000 investment was in excess of 18 percent over two to four years
  • Periodic update letters from the firm's CEO gave investors unrealistic performance estimates that misrepresented the true financial condition of each company.
  • The firm and its CEO failed to adequately supervise and monitor the sale of the private placement offerings.
FINRA and the SEC have recently stepped up enforcement and oversight activities involving the fraudulent sale of private placement offerings, also known as Regulation D offerings.
December 8, 2009

SEC Files Securities Fraud Lawsuit Against Brookstreet Securities of Irvine, California

Today, the SEC charged California-based Brookstreet Securities with securities fraud over the sale of riskly and unsuitable mortgage-backed securities, known as Collateralized Mortgage Obligations (CMOs), to conservative investors, many of them seniors and retirees who were financially destroyed. According to the SEC, Brookstreet sold approximately $300 million worth of CMOs to its customers between 2004-2007 even though the firm knew, or should have known, that the CMOs were unsuitable.

The SEC is seeking injunctive relief and disgorgement of all ill-gotten gains plus prejudgment interest from the firm plus financial penalties against the firm's President Stanley Brooks. Brookstone customers who were victims of the firm's CMO program also have the option of pursuing a securities arbitration claim against Brookstone to recover their finanicial losses.

December 7, 2009

SEC Strikes at Striker Petroleum for Securities Fraud

Striker debentures can now be added to the growing list of private-placement offerings that were marketed through a network of stockbrokers that have recently become embroiled in securities fraud lawsuits. This week, the SEC alleged that Striker Petroleum, LLC deceived approximately 540 investors into purchasing $57 million worth of fraudulent debentures. The SEC is alleging that Striker was selling the debentures to pay off prior debenture holders and to pay fixed returns to investors who had invested in Legacy oil and gas properties.

According to one industry news source, the Striker debentures were sold through a nationwide network of stockbrokers, including CapWest Securities. As a result, many investors who purchased Striker debentures may also have been sold interests in Provident Asset Management and Medical Capital--two private placements that are already the focus of SEC and investor lawsuits. As we noted in a recent blog posting on this very subject: Brokers who recommended these investments have a lot of explaining to do.

Click here for related blog postings.

December 4, 2009

Medical Capital Holdings & Provident Asset Management Securities Fraud Update

Since my last two blog postings about the Medical Capital securities class action lawsuits pending in California, I have heard from several investors that were defrauded into purchasing not only Medical Capital Holdings, but also Provident Asset Management. Brokers who recommended either one of these private placement investments have a lot of explaining to do. Before recommending any investment, brokers have a fiduciary duty to exercise due diligence in determining whether an investment is appropriate and suitable for their customer. Defrauded investors interested in recouping their investment losses should consider all of their legal options, including the filing of a securities arbitration claim against their stockbroker or investment advisor that recommended the investment.

Below is a brief overview of the Provident Asset Management and Medical Capital securities fraud matters.

Provident Asset Management

Thumbnail image for provident.jpgOn July 1, 2009, the SEC charged Provident Royalties LLC, Provident Asset management, and its founders with securities fraud for running what is alleged to be a $485 million Ponzi scheme involving at least 7,700 investors. The complaint also names as defendants numerous entities through which Provident raised funds: Provident Energy 1, LLP; Provident Energy 2, LLP; Provident Energy 3, LLP; Shale Royalties II, Inc.; Shale Royalties 3, LLC; Shale Royalties 4, LLC; Shale Royalties 5, LLC; Shale Royalties 6, LLC; Shale Royalties 7, LLC; Shale Royalties 8, LLC; Shale Royalties 9, LLC; Shale Royalties 10, LLC; Shale Royalties 11, LLC; Shale Royalties 12, LLC; Shale Royalties 13, LLC; Shale Royalties 14; LLC Shale Royalties 15, LLC; Shale Royalties 16, LLC; Shale Royalties 17, LLC; Shale Royalties 18, LLC; Shale Royalties 19, LLC; and Shale Royalties 20, LLC.

In addition, a consolidated securities class action is currently pending in the U.S. District Court for the Northern District of Texas against brokerage firms Next Financial Group, Inc.; QA3 Financial Corp. and Securities America, Inc. for their role in recommending these investments to their brokerage clients. Customers who were defrauded by these firms can participate in the class action or, in the alternative, pursue their own independent securities arbitration claim.

Medical Capital Holdings

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for medcap.jpgOn September 18, 2009, a class action lawsuit was filed in the Central District of California against the following brokerage firms Securities America, Inc., Ameriprise Financial, Inc., CapWest Securities, Inc, and Cullum & Burks Securities, Inc on behalf of investors that invested in Medical Capital Notes issued by Medical Provider Financial Corp. III, IV, V and/or VI.

On November 13, 2009, a separate class action lawsuit was filed in the Central District of California against National Securities Corporation for their involvement in recommending Medical Capital Notes to their customers.

There are also many other brokerage firms who aggressively sold Medical Capital Notes and Provident/Shale interests to their customers who were omitted from the various class action lawsuits, including some large brokerage firms and smaller regional firms. In addition to the class action defendants discussed above, I have heard from investors who invested in Medical Capital through brokers working with Okoboji Financial Services, Redwine Securities and others that are still being reviewed.

Related Blog Posts:

Medical Capital Class Action or Arbitration: Investors Should Consider Their Options

Is Mass-Arbitration in the Client's Best Interest?

Are Securities Arbitration Cases More Financially Rewarding for Investors than Class Actions?

December 1, 2009

Reminder to California Schwab Yield Plus Investors: Class Action Opt Out Deadline Looming

Investors who purchased the Schwab Yield Plus (SWYPX and SWYSX) money market funds, have until December 28, 2009, to decide whether to remain in the pending class action lawsuit or affirmatively "opt out" and pursue a securities arbitration claim. The following investors will be automatically included as class members if they do not take steps to opt out of the class action:

  1. Those that purchased the funds between November 15, 2006, and March 17, 2008;
  2. Those that purchased the funds between May 31, 2006, and March 17, 2008; and
  3. Any California resident who held the funds on September 1, 2006.

Investors should carefully consider whether or not opting out is the right choice for them based on their individual circumstances. Investors who elect to opt out of the class action can join hundreds of other investors who have filed their own independent securities arbitration claims with the Financial Industry Regulatory Authority (FINRA).

For more information, please see our previous blog posting: Securities Arbitration vs. Class Actions: Consider Your Options