Investor Fraud Summit: Miami, October 12, 2012

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A Southeastern Regional Investor Fraud Summit will be held at Miami Dade College on Friday, October 12, 2012. Recent investment fraud prosecutions, fraud trends, fraud prevention, and testimony from investment fraud victims will be featured topics.

The Miami Investor Fraud Summit, one of several scheduled across the country, is sponsored by the U.S. Department of Justice and the U.S. Securities and Exchange Commission (SEC), with participation by the FINRA Investor Education Foundation.

The FBI reports an unprecedented rise in investment fraud schemes, involving thousands of victims and staggering losses. Since 2011, the Justice Department’s Criminal Division and 85 U.S. Attorneys’ offices have reported that approximately 800 defendants have been charged, tried, pleaded or sentenced in approximately 500 federal prosecutions involving investor fraud. The total reported amount cheated from victims for this time period tops more than $20 billion. This staggering number includes cases where the total amount victims lost range from tens of thousands of dollars to hundreds of millions, and, in some cases, billions in hard-earned savings.

Fraud avoidance is a goal of the seminars, which are designed to protect investors from losses due to fraud. In addition to the SEC, FINRA and the Department of Justice, participating agencies include the FBI, the Federal Trade Commission (FTC), the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), the Commodity Futures Trading Commission, the Bankruptcy Trustees, AARP and the Better Business Bureau.

Miami Investor Fraud Summit Time and Location

Miami Dade College
Chapman Conference Center
245 N.E. Fourth Street, Bldg. 3, Room 3210
Miami, FL 33132

9:00 a.m. to 1:00 p.m. EDT
Friday, October 12, 2012
Admission is FREE to the Public
Register by phone at 305-416-6211

U.S. Attorney for the Southern District of Florida Wifredo Ferrer will host the summit that will feature Attorney General Eric Holder. They will be joined by U.S. Attorney for the Middle District of Florida Robert O’Neill, U.S. Attorney for the Northern District of Florida Pamela Marsh, U.S. Attorney for the Northern District of Alabama Joyce Vance, Director of the SEC’s Miami Regional Office Eric Bustillo and other agency representatives.

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.

Investor Alert on Stock Trading Halts & Suspensions

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“When Trading Stops: What You Need to Know About Halts, Suspensions and Other Interruptions” is the title of a new investor alert published by the Financial Industry Regulatory Authority (FINRA).

While trading in most stocks takes place without interruption, FINRA’s new Alert explains how, when and why interruptions in trading occur, and discusses both what brokers are required to do and what investors should do in these situations.

When a company is listed on a U.S. stock exchange, it agrees to notify the listing exchange about any corporate developments that could affect trading activity in its stock—before announcing them to the public. Stock exchanges have the authority to halt trading based on their evaluation of a given announcement. These regulatory halts tend to be relatively short and are designed to allow prompt and full dissemination of the news to the marketplace at large. While the halt is in effect, brokers are prohibited from publishing quotations or indications of interest, or trading the stock.

In contrast to trading halts, the Securities and Exchange Commission (SEC) is authorized under federal law to suspend trading in any stock for a period of up to 10 business days when it believes that the investing public may be at risk. Many factors influence the SEC’s decision, including a company’s failure to keep up the required filing of periodic reports and whether market manipulation may be taking place.

For the most part, companies subject to trading suspensions have been quoted in the over-the-counter (OTC) market. When a trading suspension ends, a broker that wants to resume quoting the stock immediately must first obtain current information about the company from a reliable source, file a form with that information and obtain approval from FINRA.

“In sharp contrast to trading halts, the trading suspensions the SEC imposes usually aim to help stop fraud. Investors should exercise real caution before purchasing a stock after a trading suspension has ended,” said Gerri Walsh, FINRA’s Vice President for Investor Education.

When Trading Stops also discusses single stock trading pauses, currently triggered when the price moves up or down by specified percentages in a rolling, five-minute period, as well as marketwide circuit breakers that may be activated by specified percentages declines in the Dow Jones Industrial Average.

Click on the link to read the full investor alert, “When Trading Stops: What You Need to Know About Halts, Suspensions and Other Interruptions.”

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.

Facebook IPO Arbitration Claims Expected

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Investors who bought shares in Facebook’s IPO at or near the offering price of $38.00 are now looking at losses as the stock trades in the $20.00 range.

According to an article in the Wall Street Journal titled “Facebook’s Next Fight: Suits, and More Suits,” over 50 lawsuits have been filed against Facebook by angry investors. Many more shareholders are expected to file arbitration claims against the brokers and securities firms from whom they bought the Facebook stock.

Facebook reported the following legal outlook in its 10Q for the quarter ended June 30, 2012:

“Beginning on May 22, 2012, multiple putative class actions, derivative actions, and individual actions were filed in state and federal courts in the United States and in other jurisdictions against us, our directors, and/or certain of our officers alleging violation of securities laws or breach of fiduciary duties in connection with our IPO and seeking unspecified damages. We believe these lawsuits are without merit, and we are vigorously defending these lawsuits. In addition, following our IPO, the events surrounding our IPO became the subject of government inquiries, and we have received requests for information in connection with certain of those inquiries.”

Options typically available to investors with a securities-related dispute include discussions with the brokerage firm involved, arbitration through the Financial Industry Regulatory Authority (FINRA), or mediation.

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.

Florida Lawyer Cameron Linton Barred from Penny Stock Offerings

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Writing legal opinion letters for clients involving transactions under the federal securities laws was a primary legal focus for Florida attorney Cameron H. Linton from approximately 2009 to 2012, according to the Securities and Exchange Commission.

On September 21, 2012, the Commission issued an Order Instituting Public Administrative Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions (Order) against Cameron H. Linton, Esq. (Linton).

On April 30, 2012, the Commission filed a complaint in federal court against Linton alleging, among other things, that from January 2010 through October 2011, clients of Linton’s unlawfully sold approximately 3.3 billion shares of penny stock in unregistered transactions. They were able to acquire and sell most of this stock only because Linton, their attorney, issued baseless legal opinions stating that the transactions were exempt from the registration requirement of Section 5 of the Securities Act of 1933 (Securities Act).

Linton failed to make necessary factual and legal determinations when he concluded that the transactions qualified under the Section 4(1) exemption and the Securities Act Rule 144 safe harbor. When Linton wrote the opinion letters, he lacked an understanding of the applicable legal principles and failed to substantiate the factual predicate for his opinions.

On September 14, 2012, the court entered an order permanently enjoining Linton from violation of Section 5 of the Securities Act and from providing professional legal services to any person in connection with the offer or sale of securities pursuant to, or claiming, an exemption under Securities Act Rule 144, or any other exemption from the registration provisions of the Securities Act, including, without limitation, participating in the preparation of any opinion letter relating to such offerings.

Linton was also permanently barred from participating in an offering of penny stock pursuant to Section 20(g) of the Securities Act and Section 21(d)(6) of the Securities Exchange Act of 1934. Linton was also ordered to pay $6,250 in disgorgement of ill-gotten gains and a $7,500 civil money penalty.

Based on the above, the Order suspends Linton from appearing or practicing before the Commission as an attorney. Linton consented to the issuance of the Order without admitting or denying any of the findings in the Order, except he admitted to the entry of the injunction.

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.

Beware of “Pump and Dump” Stock Fraud

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A market manipulation stock scheme known as “pump and dump” creates artificial buying pressure for a targeted security. According to the FBI, the fraud perpetrators generally target a low-trading volume issuer in the over-the-counter (OTC) securities market.

This artificially increased trading volume has the effect of artificially increasing the price of the targeted security (i.e., the “pump”), which is rapidly sold off into the inflated market for the security by the fraud perpetrators (i.e., the “dump”); resulting in illicit gains to the perpetrators and losses to innocent third party investors.

Typically, the increased trading volume is generated by inducing unwitting investors to purchase shares of the targeted security through false or deceptive sales practices and/or public information releases.

A modern variation on this scheme involves largely foreign-based computer criminals gaining unauthorized access to the online brokerage accounts of unsuspecting victims in the U.S. These victim accounts are then utilized to engage in coordinated online purchases of the targeted security to affect the pump portion of a manipulation, while the fraud perpetrators sell their pre-existing holdings in the targeted security into the inflated market to complete the dump.

Tips for Avoiding Market Manipulation Fraud:

  • Don’t believe the hype
  • Find out where the stock trades
  • Independently verify claims
  • Research the opportunity
  • Beware of high-pressure pitches
  • Always be skeptical

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.

Argentines Surpass Brazilians in Miami Condo Market

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Downtown Miami condos are being purchased in increasing numbers by Argentines, according to a recent New York Times article titled “Argentines Turn Cash Into Condos in Miami.”

A weakening currency in Argentina is reportedly behind an increasing number of Miami apartment purchases, which are being made on a site-unseen basis by wealthy Argentines who are anxious to safeguard their cash.

Brazilians were previously the largest South American group purchasing Miami condos, according to the article. Opera Tower, located at 1750 North Bayshore Drive, is one of the popular locations for Argentine purchasers.

Click here to read the full article, “Argentines Turn Cash Into Condos in Miami.”

Miami Condominium and Real Estate Attorney

Contact South Florida condominium attorney Marcy Resnik to discuss your need for legal services with a condominium purchase, sale, or business dispute. You can contact Ms. Resnik online or call her at 954-321-0176.

Former Systemax Director, Miami, Charged in Compensation Scheme

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Gilbert Fiorentino, a former director of Systemax Inc. (“Systemax”), a Port Washington, N.Y.-based consumer electronics retailer, is the subject of a Securities and Exchange Commission (SEC) civil action for fraud and associated proposed settlement.

The Commission’s Complaint, filed in the U.S. District Court for the Southern District of Florida, alleges that Gilbert Fiorentino, who in addition to serving on the board was the former chief executive of Systemax’s Technology Products Group in Miami, obtained over $400,000 in extra compensation directly from firms that conducted business with Systemax.

Fiorentino also stole several hundred thousand dollars worth of company merchandise that was used to market Systemax’s products online and in mail order catalogs.  Because Fiorentino was one of Systemax’s highest-paid executives, the federal securities laws required the company to disclose all compensation he received each fiscal year as well as his perks and other personal benefits.  Since Fiorentino failed to disclose his extra compensation and perks to Systemax or its auditors, the amounts were not reported to shareholders correctly.

Systemax placed Fiorentino on administrative leave in April 2011.  After the SEC began investigating the conduct, Fiorentino agreed to resign from all of his positions with Systemax, surrender stock and stock options valued at approximately $9.1 million, and repay his 2010 annual bonus of $480,000.

According to the SEC’s complaint, the misconduct occurred from January 2006 to December 2010.  Systemax sells personal computers and other consumer electronics through its websites, retail stores, and direct mail catalogs.  Fiorentino arranged the extra compensation as he dealt directly with external service providers, manufacturer representatives, and other entities that conducted business with Systemax.  For example, he demanded and received $5,000 to $10,000 monthly from an entity that supplied materials to Systemax’s subsidiaries for use in retail and mail order operations.

The SEC further alleges that through his executive position at Systemax, Fiorentino had access to company merchandise used to market Systemax products in mail order catalogs and online.  Fiorentino routinely misappropriated some of this merchandise and failed to disclose it to Systemax and its auditors.

According to the SEC’s complaint, as a result of Fiorentino’s actions, the information that Systemax filed with the SEC and provided to investors materially understated his compensation and omitted his personal financial interest in certain related-party transactions.  Fiorentino reviewed and signed each Systemax Form 10-K from fiscal year 2006 to 2010 while knowing that it failed to make the required disclosures.  Fiorentino also routinely signed management representation letters to Systemax’s independent auditors stating that he did not know of any fraud or suspected fraud involving Systemax’s management.

Fiorentino has consented to the entry of an injunctive order without admitting or denying the allegations in the Commission’s complaint.

Fort Lauderdale Securities Litigation and Arbitration Attorney

Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.

Florida Mortgage Foreclosures Continue to Increase

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Foreclosures in Florida increased on a year-over-year basis last month for the seventh time in eight months, according to a recent Miami Herald article titled “Foreclosure rate falls nationally, but Florida still trending up.”

Florida now has the second highest foreclosure rate in the country (1 for every 328 housing units), behind only Illinois. New Florida foreclosure filings increased 26% annually in August.

The chart below shows Florida foreclosure activity by county for August, including Palm Beach, Broward, and Miami-Dade counties.

If you and your lender agree that you can not keep your home, there may still be options to avoid foreclosure, according to the Florida Attorney General:

  • Short Payoff: If you can sell your house but the sale proceeds are less than the total amount you owe on your mortgage, your mortgage company may agree to a short payoff and write off the portion of your mortgage that exceeds the net proceeds from the sale.
  • Deed-in-lieu of foreclosure: A deed-in-lieu of foreclosure is a cancellation of your mortgage if you voluntarily transfer title of your property to your mortgage company. Usually you must try to sell your home for its fair market value for at least 90 days before a mortgage company will consider this option. A deed-in-lieu of foreclosure may not be an option if there are other liens on the property, such as second mortgages, judgments from creditors, or tax liens.
  • Assumption: An assumption permits a qualified buyer to take over your mortgage debt and make the mortgage payments, even if the mortgage is non-assumable. As a result, you may be able to sell your property and avoid foreclosure.
  • Refinancing: While refinancing is not necessarily a good option when facing foreclosure and can sometimes even be a predatory practice, there are instances where it may help. Talk to your lender to see if refinancing is an option for you.

Fort Lauderdale Foreclosure Defense Attorney

Choosing the best approach to protecting yourself and your family from a mortgage foreclosure involves many legal considerations. Contact Fort Lauderdale mortgage foreclosure attorney Marcy Resnik to discuss how you can defend your legal rights in a foreclosure. You can contact Ms. Resnik online or call her at 954-321-0176.

Honoring the Victims of 9/11

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South Florida will commemorate the victims of the Sept. 11, 2001 attacks in a series of memorial activities in Broward and Miami-Dade Counties. Click on the link to view a list of local 9/ll anniversary events.

A live national webcast of the commemoration ceremony at the 9/11 Memorial in New York City, starting at 8:30 a.m. EST on September 11, 2012, can be viewed at www.911memorial.org/.

The lawyers and paralegals at the Fort Lauderdale law firm of Kahn & Resnik join the nation in honoring those who died.

“Buckets of Money” Radio Host Misled Investors, Says SEC

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Investment adviser Ray Lucia, Sr. conducted misleading investment seminars promoting his “Buckets of Money” strategy, according to SEC charges.

Mr. Lucia claimed his wealth management strategy had been empirically “backtested” over actual bear market periods. Backtesting is the process of evaluating a strategy, theory, or model by applying it to historical data and calculating how it would have performed had it actually been used in a prior time period.

Lucia, who lives in the San Diego area, and his company formerly named Raymond J. Lucia Companies Inc. (RJL) allegedly presented a lengthy slideshow at the seminars indicating that extensive backtesting proved that the Buckets of Money strategy would provide inflation-adjusted income to retirees while protecting and even increasing their retirement savings. However despite the claims they made publicly, Lucia and RJL performed scant, if any, actual backtesting of the Buckets of Money strategy.

“Lucia and RJL left their seminar attendees with a false sense of comfort about the Buckets of Money strategy,” said Michele Wein Layne, Regional Director of the SEC’s Los Angeles Regional Office. “The so-called backtests weren’t really backtests, and the strategy wasn’t proven as they claimed.”

According to the SEC’s order instituting administrative proceedings against Lucia and RJL, they held the seminars highlighting their Buckets of Money strategy in an effort to obtain advisory clients who would be charged fees in return for their advisory services. They promoted the seminars on Lucia’s radio show and on Lucia’s personal and company websites.

A backtest must utilize actual data from the time period in order to get an accurate result, as explained in the SEC’s order. Lucia and RJL have admitted during the SEC’s investigation that the only testing they actually performed were some calculations that Lucia made in the late 1990s – copies of which no longer exist – and two two-page spreadsheets.

The two cursory spreadsheets that Lucia claims were backtests used a hypothetical 3 percent inflation rate even though this was lower than actual historical rates, according to the SEC’s order. Lucia admittedly knew that using the lower hypothetical inflation rate would make the results look more favorable for the Buckets of Money strategy. These alleged backtests also failed to account for the negative effect that the deduction of advisory fees would have had on the backtesting of their investment strategy, and their “backtesting” did not even allocate in the manner called for by Lucia’s Buckets of Money strategy. The slideshow presentation that Lucia and RJL used during the seminars failed to disclose the flaws in their alleged backtests and was materially misleading.

Lucia and RJL also failed to maintain adequate records of the backtesting as they were required to do under an SEC rule, according to the SEC’s order. The pair of two-page spreadsheets was the only documentation of their backtesting calculations, and those spreadsheets failed to duplicate their advertised investment strategy.

The SEC’s order finds that RJL violated Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-1(a)(5) thereunder. The order finds that Lucia willfully aided and abetted and caused RJL’s violations of Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-1(a)(5) thereunder. The SEC’s Division of Enforcement is seeking financial penalties and other remedial action in the proceedings.

Fort Lauderdale Securities Litigation Attorney and FINRA Arbitrator

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.