Investors Topics

Malecki Law Announces Investigation of Carr Miller Capital LLC

November 2, 2011 | Nick Curley

Malecki Law takes a proactive and informed approach to the financial news of today: actively engaging in fact-finding analysis on prospective cases from around the world. Our thorough knowledge of securities law’s history and fine points makes us ideal consultants for investors who have suffered losses due to misadvice from their broker or other financial counsel. Information on a selection of funds and companies currently under investigation by Malecki Law can be found below. Our pursuit of excellence is constant, but our opportunities to make lasting positive change to the securities industry begin and end with determined clients who seek justice.

Malecki Law is currently investigating allegations against Carr Miller Capital LLC, a New Jersey investment firm, accused in a lawsuit by the state Attorney General’s office of creating a Ponzi scheme that defrauded investors of over $40 million. Company CEO Carr Miller has since been banned from practicing within the securities industry by state legislators.

Companies who shared investments with Carr Miller have been named as defendants. Among those cited is energy company Indigo-Energy (“Indigo”), a group in which Carr Miller had previously invested. Indigo has been named in the lawsuit against Carr Miller because Carr Miller invested in the energy company, who was then deemed by the state to be unjustly enhanced by Carr Miller’s money, obtained through illegal actions taken by the firm.

Malecki Law Announces Investigation of David Lerner Associates and Apple REITS

November 2, 2011 | Nick Curley

Malecki Law takes a proactive and informed approach to the financial news of today: actively engaging in fact-finding analysis on prospective cases from around the world. Our thorough knowledge of securities law’s history and fine points makes us ideal consultants for investors who have suffered losses due to misadvice from their broker or other financial counsel. Information on a selection of funds and companies currently under investigation by Malecki Law can be found below. Our pursuit of excellence is constant, but our opportunities to make lasting positive change to the securities industry begin and end with determined clients who seek justice.

Malecki Law is investigating possible unsuitability claims against David Lerner Associates (DLA), a New York based real estate firm based in Syosset, NY. In May of 2011, FINRA regulators accused the brokerage entity of selling shares in illiquid real estate investment trusts, or REITs, to unsophisticated and elderly customers.

In addition, FINRA’s suit against the firm argues that DLA’s trusts were unsuitable for the consumer to whom the group was targeting. It is alleged that Lerner provided misleading information that failed to show that distributions far exceeded income and were financed by debt.

Malecki Law Announces Investigation of LaeRoc Income Funds, LP

November 2, 2011 | Nick Curley

Malecki Law takes a proactive and informed approach to the financial news of today: actively engaging in fact-finding analysis on prospective cases from around the world. Our thorough knowledge of securities law’s history and fine points makes us ideal consultants for investors who have suffered losses due to misadvice from their broker or other financial counsel. Information on a selection of funds and companies currently under investigation by Malecki Law can be found below. Our pursuit of excellence is constant, but our opportunities to make lasting positive change to the securities industry begin and end with determined clients who seek justice.

Malecki Law is currently investigating Financial Industry Regulatory Authority (FINRA) brokerage firms who have advised customers to purchase a private placement called LaeRoc Income Funds, LP. LaeRoc is a real estate investment firm started in 1988, creating and owning property throughout the United States. Among those who sold the funds to investors are LPL Financial and Commonwealth Financial Network. We believe these investments were often marketed as modest, fixed income products.

The LaeRoc 2005-2006 Income Fund, LP is presumed to be at least $49 million in debt and presently aims to raise $12 million to $15 million, with lenders threatening foreclosure. The Fund currently owes $105 million dollars in total mortgage debt. Such an urgent pursuit of fast cash is a foreboding sign for investors. Malecki Law is researching a potential failure on the part of brokerage firms to properly disclose risk.

All in the Timing: What Judge Rakoff’s Decision Against Madoff’s Trustee Teaches Us About Managing Our Securities

October 14, 2011 | Nick Curley

In a follow up to our recent critique of dividing defrauded consumers into “net winners” and “net losers” comes a decision from U.S. District Judge Jed Rakoff, who has dismissed Bernie Madoff trustee Irving Picard’s claims filed to regain nearly $1 billion from Fred Wilpon and Saul Katz, the owners of baseball’s New York Mets. The decision may potentially limit Picard’s future chances of recouping investors’ initial investments with Madoff, in what analysts have dubbed “clawback suits” filed by the trustee against the defrauded.

The judge’s decision illustrates a difference between U.S. bankruptcy law and securities law regarding when investors should return money previously received from their broker. A thorough, easy-to-read explanation of fraud can be found on our home site. For New York law, that period spans up to six years prior to a broker’s bankruptcy, while Federal law caps that limit at only two years. What Picard will be able to recoup depends greatly upon whether he will continue to be held to Federal standards. Several district court judges have in recent months sided with Madoff investors’ requests to move cases out of bankruptcy court, a setting that typically favors the trustee.

What we can all learn from these rulings is that where and when an investment is made – as well as where and when any necessary litigation takes place – can be just as important as the venture you’ve chosen to pursue. For one, it’s notable that our national standard for “clawback” measures is more favorable than that of New York, a state housing Wall Street and an immense amount of high stakes real estate, as well as many entertainment and banking endeavors. Clearly, it pays for investors to be informed about their state’s “clawback” legislature: for those of us engaging the market longterm, timing is everything, and how recently you’ve been the victim of fraud sets crucial perimeters.

Casting a Wider Net: Deconstructing the Supposed “Winners” and “Losers” of Investment Fraud

September 16, 2011 | Nick Curley

There’s an old pun making a comeback among New York securities lawyers: “Don’t count your check-ins before they’re cashed.” The divide between so called “net winners” and “net losers” is a hot topic, particularly with regard to the defrauded victims of vilified Ponzi schemer Bernard Madoff. A thorough explanation of affinity fraud can be found in our Investors section, with a set of Ponzi scheme red flags available here from Investor.gov.

In August, the U.S. Second Circuit Court of Appeals upheld Madoff trustee Irving Picard’s decision to award upfront recovery payments of as much as $500,000 solely to the scheme’s “net losers”: investors whose withdrawals from Madoff’s fund did not match their initial investment. “Net winners” – those who withdrew more than their initial entry into the fund – seek the same recovery, but have been denied by Picard in a motion that has now held up in court.

Branding either party winners or losers is problematic, and discredits the fact that all of these investors suffered and were betrayed by the same scheme. Moreover, a precedent was set favoring “net winner” restitution in the case of Randall v. Loftsgaarden 478 U.S. 647 (1986), in which the Supreme Court ruled that “[t]his deterrent purpose is ill-served by a too rigid insistence on limiting plaintiffs to recovery of their ‘net economic loss'”. A 2001 ruling in California Ironworkers Field Pension Trust v. Loomis Sayles, 259 F.3d 1036, (9th Cir. 2001) binds respondents to an “Anti-Netting Rule”, concluding that gains in one investment do not offset losses in another. Why then might Picard’s whims prove to be, as one Wall Street Journal headline wonders, “the Final Word on This Issue?“

FINRA Fines Three New York Based Broker-Dealers For Mischaracterizing Customer Fees

September 8, 2011 | Malecki Law Team

New York securities law saw quite the news day, as the Financial Industry Regulatory Authority (FINRA) issued a news release on September 7, 2011 announcing fines against five Broker-Dealers, three of them based in New York, for mischaracterizing fees charged to customers. The three New York based firms were John Thomas Financial of New York, NY, A&F Financial Securities, Inc. of Syosset, NY and Salomon Whitney, LLC of Babylon Village, NY. FINRA alleged that the firms understated commissions but charged additional handling fees to make up transaction based income for the firm. FINRA found that by structuring their fees this way, the firms ended up charging fees significantly higher than the actual cost of the services the firms provided.

In making their findings, FINRA reiterated that broker-dealers must accurately disclose commissions earned. By settling these charges with FINRA, the firms did not admit or deny wrongdoing, but they did consent to the entry of FINRA’s findings and also agreed to implement actions sufficient to remedy the handling-fees violations.

Such mischaracterization of handling-fees is one example of how broker-dealers can put their own interests ahead of the interests of their clients, and represent what is essentially securities fraud. If you held an account with one of these firms or you think your broker-dealer may have charged fees in excess of what they disclosed to you, your entire portfolio may need a thorough review for suitability.

Is my account down because of the market, or is it something else?

September 2, 2011 | Malecki Law Team

In rough economic times such as these, many investors have seen their accounts suffer large losses. As New York securities lawyers, we’ve seen some investors’ accounts lose 25-50% over the course of a few months or years, while others have seen their accounts lose such large amounts seemingly overnight. A large drop in account value is unsettling for every investor, but for those nearing retirement or senior citizens living off their savings, large losses are extremely alarming and can be devestating. Regardless of their age or situation, investors who have suffered large losses often find themselves asking the same questions, “Is my account down because of the market, or is it something else?”

Investors who are approaching retirement or who are already retired are typically risk-averse – i.e. willing to accept lower returns to avoid the possibility of devastating losses. However, many of these investors find themselves being sold on “sure thing,” “big winner,” “can’t lose,” and “have your cake and eat it too” investment strategies that seem, and in fact are, too good to be true. Those who buy into these false promises can find themselves unknowingly invested in products and strategies that are much riskier than what they wanted, and most importantly, what they should have been invested in. Unfortunately, good times in the market can hide these risks from the average investor. It is not until a downswing in the market that these risks come to light, often taking the form of large, unexpected and crippling losses.

Many people who want to invest seek out professional guidance in handling their savings and their investments because they feel safer in the hands of professionals whom they trust and whom they believe are looking out for their best interests. Unfortunately, this trust can be abused and investors often find themselves in accounts that are not suitable for their financial needs and the amount of risk they are willing to take with their investments.

Malecki Law Announces Investigation of IRA Services Trust Company and Fiserv, Inc. Arising Out of Investments with the Van Zandt Agency

August 25, 2011 | Malecki Law Team

Malecki Law, a New York securities law firm based in Manhattan, is currently investigating claims against IRA Services Trust Company and Fiserv, Inc. arising out of investments solicited and promissory notes issued through the Van Zandt Agency in relation to real estate investments in the Bronx, New York and elsewhere.

The Attorney General of the State of New York is currently investigating the practices of the Van Zandts and on April 6, 2011, filed an application in the Supreme Court of the State of New York for an order of discovery and preliminary injunction against the Van Zandts and other related agencies.

Based on the initial inquiry of the securities fraud lawyers of Malecki Law and the Attorney General’s investigation, there are questions about whether or not the Van Zandt Agency broke the law by engaging in the fraudulent issuance, promotion offer and sale of securities to the public in the State of New York. It is believed that hundreds and possibly thousands of investors may have lost money invested with the Van Zandts.

FINRA Issues Regulatory Notice 11-39 to Address Business Use of Social Media Websites

August 23, 2011 | Malecki Law Team

The talk among New York securities lawyers this week was all about the Financial Industry Regulatory Authority (FINRA) release of Regulatory Notice 11-39 addressing business use of social media website in the wake of surging popularity of social media tools such as Facebook and Google+. These social media tools make connecting with friends, colleagues and third-parties easy, but also raise novel questions related to the extent to which associated persons may use these sites for business use and registered principals must supervise such use.

Securities Exchange Act Rule 17a-4(b)(4), which requires the retention of copies of communications between members, brokers or dealers and the public of “business as such,” underlies Regulatory Notice 11-39. Thus, a firm’s or an associated person’s communications with the public through social media posts may require pre-approval by the firm and/or registered principal, and be subject to regulation by FINRA, depending on whether the communication is related to the firm’s “business as such” and is “static” as opposed to “interactive.” Generally, all communications related to a firm’s business as such must be recorded and preserved, while all static posting is deemed an advertisement requiring the firm’s pre-approval under NASD Rule 2210.

Regulatory Notice 11-39 begins to address the grey area of posting to message boards. Associated persons, be they advertising in the first place or responding to questions via such message boards, are limited to what they can say and claim. Thus, postings in static forums or blogs on websites would require pre-approval of all statements made relating to the firm’s business.

New SEC Whistleblower Rules Become Effective

August 12, 2011 | Malecki Law Team

Today, the SEC‘s new whistleblower program under the Dodd-Frank Act becomes effective, and is on the minds of many New York securities lawyers. These new rules were devised in such a way to provide an incentive for would-be whistleblowers to come forward and assist the SEC with investigations of possible securities law violations. Under these new rules, if an individual provides the SEC with original information about possible federal securities laws violations, and that information leads to a recovery by the SEC of $1 million or more, that individual would be entitled to receive up to 30% of the sanctions received by the SEC.

Under the new rules, internal reporting is encouraged, but it is not required. Individuals may instead go directly to the SEC. However, the value of internal compliance programs is addressed in the release, and there are incentives in place in the new rules to urge whistleblowers to report internally first.

There are also a few groups of individual who, for public policy reasons, are excluded from participation under the new rules. These include: compliance and internal audit personnel; officers, directors, trustees and partners who only discover the violations as a result of internal compliance procedures; public auditors who learn of the violations in the course of an engagement. However, these people may be eligible under certain circumstances, such as: they reasonably believe that disclosure is necessary to prevent the company from causing substantial injury to the property or financial interests of the company or investors; they reasonably believe that the company is impeding an investigation of the misconduct; or at least 120 days have passed since the initial internal report. Attorneys are also excluded, provided that they learned of the violations directly from attorney-client communications.