Recently in Securities Fraud Category

February 3, 2014

"Wolf of Wall Street" High Pressure Sales Tactics

Many have complained, myself included, that the movie "Wolf of Wall Street" failed to show the devastation suffered by those who were victimized by Jordan Belfort and his company Stratton Oakmont. Clearly, this movie was produced purely for its entertainment value, not as a documentary or exposé about the evils of the brokerage industry. Nevertheless, the movie may have opened the eyes of some investors to the fact that stockbrokers don't always have their customer's best interest in mind.

As a public service for all of those who didn't see the movie (and those like the elderly couple in the row ahead of me who left the movie early because of all the debauchery being depicted), I am posting actual copies of scripts used by Stratton Oakmont brokers that I've culled from my legal files. My goal is to educate investors about high pressure tactics such as those used by Stratton Oakmont brokers. As illustrated in the scripts below, customers are typically pressured into making a decision immediately over the phone without the benefit of any research or financial data. A common ploy is to get the customer to invest a relatively small amount in a widely known company. Once a relationship is started, the broker will invariably urge the customer to make much larger investments in even riskier securities.

***We disclaim any responsibility for the information contained in the scripts quoted below***


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STRATTON BENEFITS

. . . . We're not a Merrill Lynch or Shearson Lehman, we choose not to be. If we wanted to do a TV commercial, we could. But here at Stratton, our reputation is by word of mouth. We don't require you to purchase 2,000 or 3,000 shares to do business like a major wirehouse would. We don't need to work large, we're willing to work small at the start of a relationship because we know we're right.

My philosophy is to work small, hit a base hit, come back with another idea, hit another base hit, and then another. After I've shown you winner after winner, after winner, and the bases are loaded, you're going to want to step up to the plate and swing for the grand slam.
Give me one shot, let me start the relationship with a base hit. Do this. Open an account for 100 shares, it's just a matter of some basic information.


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NESTLE

. . . . Now [ client's name ], my point to you is this, I can tell you all about Jaguar, Telephone De Mexico and Glaxo, how they traded from the London to the NYSE and dozens of other companies once they got listed, how investors made a fortune. But I'm not going to talk about the market value, the assets of Nestles, the profit margins and the P.E. ratios, because we'll be here all day.

The bottom line is this, what I have been doing for all of my clients A-Z. And hear me out. Is positioning them with large blocks of 5-10,000 shares of Nestles in an attempt to get them involved before Nestles gets its listing on the NYSE because once you read about this in the Wall Street Journal, IT'S TOO LATE! Do you follow me.

Now obviously [ name ], I haven't made you a dime yet, you don't know me from Adam and we don't even have the luxury of a track record together. So, I wouldn't ask you to take down a large block of Nestles like our other clients are doing.

What I propose is this, and please hear me out. Pick up a very small block of 500 shares. It's a cash investment of _____, going into the largest food company in the world. Your funds are not due today or tomorrow, their due in a week. You've probably done this before. First, you'll receive a standard confirmation from my bank clearing agent, Adler Coleman. You probably heard of them.

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KODAK

. . . . The key to making money in the stock market is to buy into weakness and to sell into strength.

Do you remember Union Carbide when their plant exploded in India; killing over 250,000? India sued Union Carbide for over 3 billion in damages. The stock dropped from $50 a share down to $18--sat there for over a year.

Our analyst--------is fat, bald, and dresses like @#$%&!, but he is one of the most astute minds on Wall Street.

He told us to buy Union Carbide between 18 and 21--the litigation will be settled and the fundamentals of the company dictate much higher prices.

6 months ago, I began buying the stock between 18 and 21 in anticipation of a settlement. 3 months ago they settled. The first day the stock was up 5 dollars--the next day up 6 dollars. We had a 60% return virtually overnight. I saw it happen with Texaco. I was a sheep and was scared to buy; when the stock ran to $50 I kicked myself in the @#$%.

The same thing with RJR. I only bought a touch and, when it traded from 25 to 106, I almost died.

But you know something, I got rich on Union Carbide and there is no way I'm letting you miss Kodak. Once litigation is settled were looking for at least 75 dollars a share.

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"SEND ME INFO."

. . . . Receiving and reading it in 3 days is not going to make you money. "Working with my timing will." There is no one that knows this stock better than me. I look for fundamentally sound companies that I can combine with a near term event, in this case litigation.

I'm hearing people all over Wall Street speaking about Kodak in terms that I haven't heard in years. It's the strongest story in months. The decision to buy Kodak has been made, not just by me, but by some of the top analysts at Shearson Lehman, Merrill Lynch, Kidder Peabody and Bear Stearns.

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"ASK MY WIFE"

. . . . I bet you make $10-20,000 dollar business decisions every day. I'm sure you didn't get to where you are today by consulting with your wife on everyday decisions.

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"LET ME CHECK IT OUT"

. . . . This is Eastman Kodak, we have access to the best and most current information. I can show you a view of the market you will not have seen before unless you were here. We're bringing you opportunity, not history and I'm concerned because you must realize you can't check out the kind of advice I'm giving you--performance speaks--I want to show you results.

September 27, 2012

ALF Investigating Claims Involving San Diego Investment Advisor Ray Lucia

$Bucket.jpgThe Alcala Law Firm is investigating claims about the sales practices of Ray Lucia, a San Diego, California, financial advisor and radio personality best known for his Buckets of Money (BOM) investing strategy. Raymond Lucia is the principal of RJL Wealth Management LLC (formerly Lucia Financial LLC). Recently, the Securities and Exchange Commission (SEC) filed a securities fraud lawsuit against Raymond Lucia and one of his former companies--Raymond J. Lucia Companies, Inc. According to the SEC's lawsuit, Lucia made false and misleading representations regarding the history and performance of his BOM strategy.

Raymond Lucia is the author of three books on investing for retirement: "Buckets of Money: How to Retire in Comfort and Safety," "Ready? Set? Retire!," and "The Buckets of Money Retirement Solution: The Ultimate Guide to Income for Life."

February 14, 2012

SEC Charges Southern California Stockbroker With Securities Fraud and Misappropriating Over $3 Million in Client Funds

sec crest.bin.jpgOn February 14, 2012, the Securities and Exchange Commission (SEC) filed a complaint against Brenda Esbach of Tustin, California charging her with numerous securities fraud violations. The activity in question began while Brenda Esbach was employed as an investment advisor with Ameriprise Financial Services and continued after she left Ameriprise and began working with Aventine Investment Services, Inc. and Purshe Kaplan Sterling Investments.

The SEC's complaint alleges that, instead of making investments as directed by her clients, Esbach misappropriated the funds using them to pay personal and business expenses, including private school tuition and trips to Las Vegas. Without admitting or denying the allegations, Esbach agreed to provide restitution to her victims in the amount of $2,561,873.

Esbach, who has also been the subject of several investor lawsuits and securities arbitration claims, is awaiting sentencing in a related Federal prosecution where she entered a guilty plea to one count of mail fraud and one count of money laundering back in September 2011.

April 7, 2011

SEC Files Securities Fraud Lawsuit Against Southern California Wealth Manager

Thumbnail image for Thumbnail image for sec crest.bin.jpgToday, the Securities and Exchange Commission (SEC) announced the filing of a civil securities fraud lawsuit against Southern California wealth advisory firm MAM Wealth Management, LLC (MAM), MAMW Real Estate General Partner, LLC (MAMW), Alex Martinez and Ralph Sanchez. The action alleges securities fraud in connection with client investments of $10.3 million in a risky real estate investment. According to the complaint, from 2007 through 2009, Martinez and Sanchez advised 50 of their clients to invest in MAM Wealth Management Real Estate Fund, LLC (MAM Fund) and misrepresented that the MAM Fund was a safe and liquid investment with 9% annual earnings. Martinez and Sanchez are alleged to have used their discretionary authority over their clients' accounts to invest in the MAM Fund despite its unsuitability for their conservative investment goals. Many of these client accounts were retirement accounts and the MAM fund was unsuitable for clients who were unable to accept the risk of losing their entire investment. According to the SEC, the defendants caused the MAM Fund to use client funds to make risky mortgage loans. In its action, the SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and monetary penalties.

December 22, 2010

Ponzi victims suing stockbrokers who recommended Draseena Funds Group investment

Securities Fraud Alert: Ponzi scheme victims who purchased unregistered securities from the Draseena Funds Group and related companies (see table below) from a stockbroker or investment advisor may be able to recoup their investment losses through securities arbitration. Although not all claims for investment losses are actionable, investors who received false, misleading or incomplete information about the risks associated with these securities may have a cause of action for securities fraud, breach of fiduciary duty, negligence and/or failure to conduct due diligence. Please note that claims arising under state or federal laws are time sensitive and, therefore, must be brought within a specified period of time after these events occurred or should have been discovered or else they will be barred. Click here for more information about securities arbitration.

Draseena Funds Group

Arrow Fund, LLC
Arrow Fund II
Nerium Currency Fund, LP
Conservium Fund, LLC
Senior Strength Q Fund, LLC
Three Oaks Senior Strength Fund, LLC
Three Oaks Fund, LP
Three Oaks Currency Fund, LP
Three Oaks Advanced Fund, LLC
Three Oaks Fund 25, LLC
US First Fund, LLC
SSecurity Fund, LLC

September 27, 2010

U.S. Justice Department Files Securities Fraud Lawsuit Against San Francisco Man for Perpetrating a Ponzi Scheme

The U.S. Attorney's office has charged a San Francisco man with securities fraud for perpetrating a Ponzi scheme that allegedly collected more than $25 million from 80 investors. Maher Talal Muhawieh was charged with obtaining loans from victims which he claimed would be used to renovate residential properties that would later be sold at a profit. Muhawieh told victims that the loans paid a high rate of return, had limited risk and were secured by deeds of trust. According to the indictment, Muhawieh operated a Ponzi scheme in which he misappropriated funds for his own personal and used borrowed funds to reimburse earlier investors.

In testimony before the U.S. Senate last week, an FBI official reported that securities fraud involving high yield investment products was on the rise. According to the FBI, this year 291 new high yield investment fraud cases have already been opened. See related blog posting: FBI Reports 105% Increase in High Yield Investment Fraud Investigations