Paying for False Investment Recommendations
Making investment decisions based on fraudulent information can lead to disastrous results. Even more harrowing is when you are convinced to pay for such information, as many investors did when they purchased access to Gryphon Holdings Inc.’s investment recommendation services. Gryphon charged clients as little as $99 and as much as $250,000 for access to its investment recommendations, according to an SEC lawsuit. Clients often lost money on trades suggested by Gryphon, the SEC has said.
In the latest development, Kenneth Marsh, who ran Gryphon Holdings Inc., pleaded guilty to charges that he misled investors into paying fees for phony stock tips and investment advice. Agreeing with a statement read by Judge Jack Weinstein in a U.S. District Court in Brooklyn, New York, Marsh admitted that he "put false statements into the marketplace in order to induce potential customers of Gryphon to subscribe to the $99 introductory price of Gryphon."
These types of practices are egregious and should not be tolerated. If you purchased access to Gryphon Holdings Inc.’s investment recommendation services, Napoli Bern Ripka & Associates LLP may be able to assist you in recovering your losses. Our Securities Fraud Department represents numerous Claimants in both arbitration and litigation related to securities fraud and has been able to recover losses in many of those claims. We look forward to any inquiries related to fraudulent securities practices whether by brokerage firms, financial advisors, investment advisory firms, or financial services companies such as Gryphon Holdings Inc.
FINRA FINES SANTANDERS $2 Million For Its Sale of Structured Products
The Financial Industry Regulatory Authority (Finra) said it has fined Banco Santander SA’s (STD, SAN.MC) Santander Securities of Puerto Rico unit $2 million for "deficiencies in its structured-product business," according to Finra.
Finra said those deficiencies included "unsuitable" sales of reverse convertible securities to retail customers, inadequate supervision of sales of its structured products, and inadequate supervision of accounts funded with loans from its bank.
Finra noted that Santander grew its sales of its structured products but failed to have sufficient regulatory procedures in place approving a structured product prior to offering it to a customer, Finra said.
In addition to the fine and the $7 million it paid back to its customers for losses that resulted from reverse convertible securities, Santander is required to review its training, supervision and written procedures.
"Santander Securities failed its customers through significant deficiencies in its systems and procedures, which allowed unsuitable recommendations of concentrated positions in risky reverse convertibles–sometimes using funds that the firm helped customers borrow–to proceed without detection or review," said Finra Chief of Enforcement Brad Bennett.
Santander settled with Finra while neither admitting nor denying the charges.
Santander is simply one of example of numerous banks that were inappropriately selling structured products. Napoli Bern Ripka is currently investigating and retaining clients that invested in structured products at numerous. If you invested in structured products with Banco Santander or any bank give us a call for a free analysis of your potential claim.
FINRA WARNS BROKERS THAT LEVERAGED ETFS ARE NOT FOR RETAIL CUSTOMERS
In its regulatory ruling, FINRA warns brokers of the risks of leveraged exchange traded funds (ETF) and reminds financial advisors and broker dealers of their fiduciary responsibilities regarding the marketing, suitability, and understanding of these products. The ruling requires firms to have adequate supervisory procedures in place to ensure that these obligations are met. FINRA summed up their position:
"While the customer-specific suitability analysis depends on the investor’s particular circumstances, inverse and leveraged ETFs typically are not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets."
This is a major step forward toward protecting individual investors from having exposure to these products unwittingly inserted into their portfolios.
FINRA leaves open the possibility that certain types of leveraged ETF’s could still be suitable for the average investor like commodity-linked exchange-traded derivative funds. Still, we would encourage FINRA to post a ruling similar to this one that also encompasses the commodity-linked exchange-traded derivative funds and addresses the suitability of these products.
Overall, FINRA’s firm and clear stance on the use of leveraged and inverse ETFs is a move in the right direction. The new rule places the burden for education and suitability on the brokers and advisors for these products should go a long way toward keeping them out of the hands of the uninitiated.
If your financial advisor recommended leveraged ETFs to you, call us.
REITs Gone Awry
What is a REIT?
Real estate investment trusts (or REITs) are corporate entities that own and often manage income-producing real estate. REIT is a tax designation that reduces or eliminates corporate income taxes, by allowing pass-through taxation. This tax benefit also comes with certain obligations: a REIT is required to distribute 90% of its annual income to its shareholders in the form of dividends; a REIT must invest at least 75% of its total assets in real estate; and it must derive at least 75% of gross income as rents from real property or interest from mortgages on real property.
A REIT may deduct dividends from its corporate taxable income. For example, if a REIT remits 100% of its taxable income to its shareholders it will have no federal income tax liability. Consequently, this structure places the tax burden on shareholders who pay taxes on dividends and capital gains.
Congress created REITs in 1960 as a means to allow individuals, through the purchase of securities, to invest in “large-scale, income-producing real estate.” REITs are a combination of a real estate investment and a stock-based investment and sometimes referred to as “real estate stock.” They may be listed on public stock exchanges, similar to how other corporations list common stock.
REITs may be classified in three different ways:
Equity REIT – usually owns and manages commercial and residential properties. Currently, 83% of the 134 publicly traded U.S. REITs are equity REITs, which derive most of their revenue and income from rents.
Mortgage REIT – provides debt financing for commercial or residential properties through its investments in mortgages and mortgage-backed securities. A mortgage REIT does not own or operate real estate, but mainly derives its revenue from interests earned on mortgage loans.
Hybrid REIT – runs both real estate operations and transacts in mortgage loans.
The Market for REITs
REITs were developed to provide the average investor with access to potentially lucrative real estate investments. Prior to the creation of real estate equities, investment returns from commercial real estate equities were only available to those who had the means to invest directly in real estate. Initially, REITs were championed for providing diversity and liquidity, however, since the recent economic downturn a secondary market for REITs is almost non-existent. This is especially true for the already illiquid non-traded REIT discussed in detail below. As a result, average investors who purchased these real estate securities are stuck with them.
In March 2009, the Financial Industry Regulatory Authority (FINRA) launched an investigation into how non-traded or unlisted REITs are sold and promoted to customers. A non-traded REIT may be defined as: (1) a REIT that is registered with the Securities Exchange Commission (SEC) but is not listed on an exchange or over the counter (OTC) market, or (2) a REIT that is sold pursuant to an exemption to registration (also known as a Private REIT). The only way an investor may exit this type of investment is if the company offers to repurchase a limited amount of the investment at a specified price, or else the investor must wait until the REIT lists its shares, sells, mergers, or in rare case the investor is able to find a private buyer.
FINRA’s investigation was prompted by customer complaints that they were not properly informed of the risks when purchasing non-traded REITs. FINRA’s initial inquiry into REITs was meant to determine whether firms were properly analyzing and disclosing risks associated with REITs. It seems that many brokers made fraudulent misrepresentations to elderly and unsophisticated investors in order to induce them into purchasing REITs. However, any customer would be less equipped to analyze returns on non-listed REITs versus publicly traded REITs. Moreover, brokers touted REITs as maintaining a stable share price and regular dividends in order to provide investors with a false sense of security. Under particular scrutiny are Oak Brook-based Inland Group’s: Inland American Real Estate Trust and Inland Western Retail Real Estate Trust because their financial advisers misrepresented the risks and characteristics associated with non-traded REITs.
Some of the risks that brokers failed to disclose include: lack of share trading, fees that cut into returns, conflicts between investors and REIT managers, and dividends that may be paid with cash from new investors or debt rather than operating income. In recent years these problems have become even more apparent as several unlisted REITs cut dividends and slashed redemption programs or both in response to lower occupancy rates, falling rents and tight credit.
On February 2, 2011, FINRA’s Enforcement Department announced that non-traded REITs are high risk, illiquid securities, which are sold as high yield investments to investors seeking income. FINRA’s examinations have revealed investment firm’s failure to comply with suitability, supervision, and advertising rules.
Legal options against gas drilling companies discussed at meeting
Attorneys from New York City and Aspen outlined options in a meeting Tuesday for Garfield County residents to consider suing over perceived negative impacts from gas drilling in their neighborhoods.
Few of those who attended the public meeting signed on right away.
“That wasn’t actually the main idea,” said Kathleen Wanatowicz of the Aspen law firm Thomas Genshaft, which is working with the New York firm of Napoli Bern Ripka LLP.
Rather, she said, the idea was to give local residents an idea of their options, and to hand out business cards for anyone who might want to call them later.
About 100 people crowded into a meeting room Tuesday evening at the Glenwood Springs Community Center to hear New York attorney Marc Bern give a wide-ranging talk about his firm’s successes with environmental law.
“It was a good sales pitch,” said Battlement Mesa resident Bob Arrington, a retired engineer and member of the Battlement Concerned Citizens. Arrington said he has more questions to ask before he signs.
The Battlement Concerned Citizens group is resisting plans by gas drilling operator Antero Resources to drill up to 200 wells within Battlement Mesa, an unincorporated community of about 5,500 people near Parachute.
“I think he was right on,” said Joann Elderkin, a resident of Silt Mesa, whose home is about half a mile from a rig.
“His issue about the quality of life was important to us,” she added, including her husband, Bob, in her remark. “We have the right not to live in an industrial zone.”
Former Garfield County commissioner Trési Houpt said the gathering was “an opportunity to give residents some hope that they have a larger voice in determining their own destiny.”
Residents couldn’t find attorneys to take their case
Bern’s firm is perhaps best known for winning a settlement of about $800 million for the emergency responders to the 9/11 terrorist attacks in New York and Washington, D.C.
Bern explained the prospects for successful suits against companies working to extract natural gas from the vast Piceance Basin reserves.
“A lot of change happens because of lawsuits,” Bern told his audience. “It’s a shame, but that’s what it takes to make companies responsible.”
Following his opening remarks, Bern told the Post Independent he was contacted by people frustrated that they couldn’t find lawyers that would take on cases against the oil and gas industry in Garfield County. He said more than two dozen Garfield County clients have signed on for lawsuits against the industry.
He said he plans to start with individual suits on behalf of his clients, but said he may add “medical monitoring” class-action suits on behalf of residents who have been exposed to drilling but have yet to develop serious symptoms.
Gas industry reps attended meeting
At least two men with ties to the natural gas industry — Glenwood Springs attorney Scott Balcomb, who represents Antero Resources, and David Ludlam, executive director of the Western Slope Colorado Oil and Gas Association — attended the meeting.
The two men listened, but did not make any public comments.
Also in the room was Garfield County Commissioner John Martin, who stood quietly at the back of the room and left soon after the presentation was completed.
Fracking cases filed in several states
Bern told the crowd that his firm plans to file lawsuits for individual cases concerning such matters as illness, contaminated water and air, and loss of property values, due to nearby gas drilling.
He said his firm has considerable experience in cases involving allegations of chemical contamination of groundwater, citing cases involved in poisoning from exposure to MTBE, a gasoline additive, in New York, Pennsylvania, Virginia and West Virginia.
In addition, Bern said, his firm already is involved in cases over hydraulic fracturing of gas wells in Pennsylvania and New York.
Hydraulic fracturing, or “fracking,” is a widely used method of forcing water, sand and chemicals into a well bore to break up deeply buried sandstone and shale formations, thereby releasing trapped oil and gas to flow to the surface.
The method is in use in natural gas fields in the East and in Colorado. People living near drilling and fracking have voiced concerns about the potential to contaminate drinking-water aquifers, compromise air quality or cause human health problems.
Industry officials say there is no proof that fracking compromises drinking water sources or is a hazard to human health, noting that the technique has been in use for more than half a century without any verifiable public-health problems.
Gas drilling should still protect health and safety
Bern stressed in his talk that he is not opposed to natural gas extraction and is not trying to drive the industry out of the county or out of business.
“Believe me, I am all for cheap, clean, efficient sources of energy,” he said. “We need it.”
But, he added, much of the gas produced in the United States is being sold overseas, generating high corporate profits, while those living in the gas fields experience problems and rising fuel prices instead of benefiting from the industry’s work.
Instead of harming the industry, he said, the goal is to see that industry operations focus not only on profits, but first and foremost on “safety, human health, water and air.”
If drilling “can be done in a safe way, that’s how it should be done,” he declared.
Suits won’t target government
A question-and-answer period followed Bern’s presentation, with the questions written on cards and read aloud by a moderator.
Among his answers, Bern said the potential lawsuits would not target government because “generally, the government has immunity.”
But there is “a whole stream” of potential defendants — those on the receiving end of a lawsuit — from mineral rights holders to gas drillers and the industry as a whole.
He noted that the suits will be pursued on a contingency basis, in which lawyers take a share only if a settlement or judgment results in a cash award to those who file the suits.
“If we don’t get you anything, we lose,” he said. “We’re your partners. We take the risks with you.”
Legal options against gas drilling companies discussed at meeting
Attorneys from New York City and Aspen outlined options in a meeting Tuesday for Garfield County residents to consider suing over perceived negative impacts from gas drilling in their neighborhoods.
Few of those who attended the public meeting signed on right away.
“That wasn’t actually the main idea,” said Kathleen Wanatowicz of the Aspen law firm Thomas Genshaft, which is working with the New York firm of Napoli Bern Ripka LLP.
Rather, she said, the idea was to give local residents an idea of their options, and to hand out business cards for anyone who might want to call them later.
About 100 people crowded into a meeting room Tuesday evening at the Glenwood Springs Community Center to hear New York attorney Marc Bern give a wide-ranging talk about his firm’s successes with environmental law.
“It was a good sales pitch,” said Battlement Mesa resident Bob Arrington, a retired engineer and member of the Battlement Concerned Citizens. Arrington said he has more questions to ask before he signs.
The Battlement Concerned Citizens group is resisting plans by gas drilling operator Antero Resources to drill up to 200 wells within Battlement Mesa, an unincorporated community of about 5,500 people near Parachute.
“I think he was right on,” said Joann Elderkin, a resident of Silt Mesa, whose home is about half a mile from a rig.
“His issue about the quality of life was important to us,” she added, including her husband, Bob, in her remark. “We have the right not to live in an industrial zone.”
Former Garfield County commissioner Trési Houpt said the gathering was “an opportunity to give residents some hope that they have a larger voice in determining their own destiny.”
Residents couldn’t find attorneys to take their case
Bern’s firm is perhaps best known for winning a settlement of about $800 million for the emergency responders to the 9/11 terrorist attacks in New York and Washington, D.C.
Bern explained the prospects for successful suits against companies working to extract natural gas from the vast Piceance Basin reserves.
“A lot of change happens because of lawsuits,” Bern told his audience. “It’s a shame, but that’s what it takes to make companies responsible.”
Following his opening remarks, Bern told the Post Independent he was contacted by people frustrated that they couldn’t find lawyers that would take on cases against the oil and gas industry in Garfield County. He said more than two dozen Garfield County clients have signed on for lawsuits against the industry.
He said he plans to start with individual suits on behalf of his clients, but said he may add “medical monitoring” class-action suits on behalf of residents who have been exposed to drilling but have yet to develop serious symptoms.
Gas industry reps attended meeting
At least two men with ties to the natural gas industry — Glenwood Springs attorney Scott Balcomb, who represents Antero Resources, and David Ludlam, executive director of the Western Slope Colorado Oil and Gas Association — attended the meeting.
The two men listened, but did not make any public comments.
Also in the room was Garfield County Commissioner John Martin, who stood quietly at the back of the room and left soon after the presentation was completed.
Fracking cases filed in several states
Bern told the crowd that his firm plans to file lawsuits for individual cases concerning such matters as illness, contaminated water and air, and loss of property values, due to nearby gas drilling.
He said his firm has considerable experience in cases involving allegations of chemical contamination of groundwater, citing cases involved in poisoning from exposure to MTBE, a gasoline additive, in New York, Pennsylvania, Virginia and West Virginia.
In addition, Bern said, his firm already is involved in cases over hydraulic fracturing of gas wells in Pennsylvania and New York.
Hydraulic fracturing, or “fracking,” is a widely used method of forcing water, sand and chemicals into a well bore to break up deeply buried sandstone and shale formations, thereby releasing trapped oil and gas to flow to the surface.
The method is in use in natural gas fields in the East and in Colorado. People living near drilling and fracking have voiced concerns about the potential to contaminate drinking-water aquifers, compromise air quality or cause human health problems.
Industry officials say there is no proof that fracking compromises drinking water sources or is a hazard to human health, noting that the technique has been in use for more than half a century without any verifiable public-health problems.
Gas drilling should still protect health and safety
Bern stressed in his talk that he is not opposed to natural gas extraction and is not trying to drive the industry out of the county or out of business.
“Believe me, I am all for cheap, clean, efficient sources of energy,” he said. “We need it.”
But, he added, much of the gas produced in the United States is being sold overseas, generating high corporate profits, while those living in the gas fields experience problems and rising fuel prices instead of benefiting from the industry’s work.
Instead of harming the industry, he said, the goal is to see that industry operations focus not only on profits, but first and foremost on “safety, human health, water and air.”
If drilling “can be done in a safe way, that’s how it should be done,” he declared.
Suits won’t target government
A question-and-answer period followed Bern’s presentation, with the questions written on cards and read aloud by a moderator.
Among his answers, Bern said the potential lawsuits would not target government because “generally, the government has immunity.”
But there is “a whole stream” of potential defendants — those on the receiving end of a lawsuit — from mineral rights holders to gas drillers and the industry as a whole.
He noted that the suits will be pursued on a contingency basis, in which lawyers take a share only if a settlement or judgment results in a cash award to those who file the suits.
“If we don’t get you anything, we lose,” he said. “We’re your partners. We take the risks with you.”
Four Tenants Claim Pre-Built Green Suites in Empire State Building
NEW YORK - W&H Properties, strutting LEED-designed space, recently completed 15,000 square feet of leases for a quartet of green pre-built suites on the 53rd and 75th floors of the Empire State Building.
The new tenants are Turkish Airlines,; Aberleen Group, X5 Music Group and Napoli Bern Ripka LLP, which expanded its space in the building.
"The speed of leasing is not the only impressive aspect of these suites," said Fred C. Posniak, senior vice president of Malking Holdings LLC, which supervises W&H. "They’ve also commanded high-watermark rents. In fact, ownership is so happy with the results, it has decided to expand the standard to our other properties."
The pre-built suite are LEED candidate spaces with Energy Star appliances, tenant-controlled HVAC, high-end finishes composed of sustainable materials, an abundance of natural light throughout from glass-walled offices and conference rooms, daylighting, sub-metered electric, and panoramic views. W&H has three more suites on the market, ranging from 3,000 square feet to 4,000 square feet. The building’s largest contiguous block of open space totals 373,479 square feet.
More than $550 million has gone into the Empire State Building’s infrastructure, common areas and amenities. The owner’s partners for the sustainable initiative are the Clinton Climate Initiative, Rocky Mountain Institute, Johnson Controls and Jones Lang LaSalle. The Empire State Building is now a candidate for LEED-EB Gold certification.
Four Tenants Claim Pre-Built Green Suites in Empire State Building
<p>NEW YORK -<strong> W&H Properties</strong>, strutting LEED-designed space, recently completed <strong>15,000 square feet</strong> of leases for a quartet of green pre-built suites on the 53rd and 75th floors of the Empire State Building.</p>
<p>The new tenants are <strong>Turkish Airlines,; Aberleen Group, X5 Music Group</strong> and <strong>Napoli Bern Ripka LLP,</strong> which expanded its space in the building.</p>
<p>"The speed of leasing is not the only impressive aspect of these suites," said <strong>Fred C. Posniak</strong>, senior vice president of Malking Holdings LLC, which supervises W&H. "They’ve also commanded high-watermark rents. In fact, ownership is so happy with the results, it has decided to expand the standard to our other properties."</p>
<p>The pre-built suite are <strong>LEED </strong>candidate spaces with Energy Star appliances, tenant-controlled HVAC, high-end finishes composed of sustainable materials, an abundance of natural light throughout from glass-walled offices and conference rooms, daylighting, sub-metered electric, and panoramic views. W&H has three more suites on the market, ranging from 3,000 square feet to 4,000 square feet. The building’s largest contiguous block of open space totals 373,479 square feet.</p>
<p>More than<strong> $550 million</strong> has gone into the Empire State Building’s infrastructure, common areas and amenities. The owner’s partners for the sustainable initiative are the <strong>Clinton Climate Initiative, Rocky Mountain Institute, Johnson Controls </strong>and <strong>Jones Lang LaSalle.</strong> The Empire State Building is now a candidate for LEED-EB Gold certification.</p>
The Fidelity Ultrashort Bond Fund (FUSFX)
The state of Ultrashort bond fund market has wreaked havoc on investors and created massive financial losses for many investors. The Fidelity Ultra-Short Bond Fund, symbol: FUSFX is the subject of investigation by Napoli Bern Ripka and from investors who say the funds were marketed to them as safe investments that would provide "higher potential returns than money market funds, with only marginally higher risk." The fund has lost over 18% of its value since inception.
Ultrashort bond funds are traditionally the most conservative and low-risk funds in the market. However, as market liquidity dried up, it generated a mass sell-off of bond fund investors, forcing fund managers to sell the funds’ assets at depressed prices in order to meet redemptions.
If you invested in the Fidelity Ultrashort Bond Fund or any ultrashort term bond fund that lost money, we want to hear from you.
BofA Agrees to $137 Million Settlement in Municipal Bond Investigation
U.S. Justice Department officials said today that Bank of America has agreed to pay $137.3 million to resolve allegations of bid rigging in the municipal bond industry. B of A entered a global agreement with 20 states and four federal agencies, including the Securities and Exchange Commission. According to SEC documents, Bank of America employees conspired to rig bids in connection to the marketing and sale of tax-exempt municipal bond derivative contracts. SEC documents are here.
Assistant Attorney General Christine Varney, who heads the department’s Antitrust Division, said Bank of America’s illegal conduct happened between 1997 and 2004. She said she is “severely restrained” in talking about the probe, including whether any other banks are cooperating.
In a conference call with reporters this afternoon, Varney called the agreement “unprecedented” and said $137 million is a “significant and appropriate settlement.” The amount that municipalities lost is “something we are looking very closely at,” she said.
“Stay tuned to this channel,” Varney said. “I think you will see a lot more activity in the coming weeks and months. We are committed to getting full restitution to all of the municipalities that were victims of this scheme.”
Under the Justice Department’s leniency program, the bank will not be prosecuted for the conduct as long as there is continued cooperation, Varney said.
Bank of America’s settlement is “likely the tip of the iceberg,” said Andrew Gavil, a law professor at Howard University in Washington, D.C.. He said other conspirators may pay much higher penalties.
The government has identified more than a dozen firms, including JPMorgan Chase & Co., UBS AG, and Societe Generale as unindicted co-conspirators in a criminal case brought by the Justice Department against a Los Angeles investment broker.
JPMorgan, UBS, a unit of General Electric Co. and a former subsidiary of Belgian bank Dexia SA have also reported in regulatory filings that they face civil suits by the U.S. Securities and Exchange Commission. The companies say they are cooperating with the government.
The investigation centers on investment agreements that municipalities enter into with money raised through bond sales. The “guaranteed” investment contracts let B of A earn a return on the funds until the cash is needed for schools, roads or other public works.
Napoli Bern Ripka is conducting its own investigation of Bank of America’s improper sale of municipal bonds and is currently interviewing municipalities who believe they have a claim against B of A or any bank for bid-rigging.
Contact Information
Napoli Bern Ripka LLP
Securities Department
212-267-3700
