The Resolution Law Group: Ex-Goldman Sachs Trader Fabrice Tourre’s Request for New Civil Trial in RMBS Fraud Case is Denied

The federal district court in Manhattan has turned down former Goldman Sach’s (GS) trader Fabrice Tourre’s request that he get a new civil securities fraud trial after he was found liable on seven counts of federal securities law violations related to his involvement in the firm’s sale of the Abacus 2007-AC1, which is a synthetic collateralized debt obligation that was backed by residential mortgage-backed securities. Goldman has already paid a $550 million fine over the matter.

The district court is saying that his claim that there was no evidence backing a finding that he violated Section 17(a)(20) of the Securities Act by getting property or money via the alleged fraud can’t be supported. The court noted that to prove liability this section of the Act does not make it necessary for the SEC to show that Tourre got a “fraud bonus”—only that he got the property or money through omission or material statement. The court said Tourre could have given evidence to show that the compensation he received from Goldman would have been the same without such a transaction, but since he didn’t put on a case during his trial the jury was free to infer otherwise.

The court noted that there was sufficient evidence backing the jury’s finding that the ex-Goldman Sachs trader’s conduct abetted and aided violations of SEC regulations. Also, the court is rejecting Tourre’s contention that he should get a new trial because he believes that the other court acted inappropriately when it took away from the jury the question of whether the swaps agreements involved were security based swap agreements within the meaning of securities law. This court said that for securities law purposes, the swap agreements were security-based swap agreements, and it granted summary judgment to the SEC on this.

The Resolution Law Group represents RMBS fraud and CDO fraud customers that have lost money due to the negligence of members of the securities industry.

The Resolution Law Group: Merrill Lynch Settles with SEC Over CDO Disclosures for Almost $132M

The Securities and Exchange Commission says that Merrill Lynch Pierce Fenner & Smith Inc. (MER) will pay $131.8M to settle charges involving allegedly faulty derivatives disclosures. The regulator claims that the firm, which is the largest broker-dealer by client assets, misled investors about certain structured debt products before the economic crisis. By settling, Merrill is not denying or agreeing to the allegations. Also, the brokerage firm was quick to note that the matter for dispute occurred before Bank of America (BAC) acquired it.

According to the Commission, in 2006 and 2007 Merrill Lynch did not tell investors that Magnetar Capital impacted the choice of collateral that was behind specific debt products. The hedge fund purportedly hedged stock positions by shorting against Norma CDO I Ltd. and Octans I CDO Ltd., which are two collateral debt obligations that the firm was selling to customers.

The SEC contends that Merrill used misleading collateral to market these CDO investments. According to Division of Enforcement co-director George Canellos, the materials depicted an independent process for choosing collateral that benefited long-term debt investors and customers did not know about the role Magnetar Capital was playing to choose the underlying portfolios.

Also sanctioned by the SEC were Joseph Parish and Scott Shannon, two managing partners of IR Capital Management LLC. This was the investment adviser that took care of choosing collateral for the CDO Norma. They are accused of compromising their supposed lack of bias by letting a third party with its own interests affect the portfolio-selection process. The SEC says Shannon accepted assets that Magnetar chose while Parish let the hedge fund impact how other assets were selected. The two men will pay over $472,000 to settle the allegations against them and they were suspended from the industry.

Meantime, the US government continues to pursue Wall Street firms over their alleged misconduct involving the mortgage-backed securities creation that is attributed to helping cause investor losses during the financial crisis and the housing slump. The SEC has also pursued claims against Citigroup Inc. (C), Goldman Sachs Group Inc. (GS), and JPMorgan Chase & Co. (JPM) over their involvement in structuring and promoting investments linked to home loans that were faulty.

If you suspect that you have been the victim of securities fraud, contact The Resolution Law Group’s CDO fraud lawyers today.  The Resolution Law Group represents investors with securities claims against financial firms, investment advisers, brokerage firms, brokers, and others. Contact our securities fraud law firm.

The Resolution Law Group: SIFMA, ISDA, and IIB Sue CFTC Over Alleged Unlawful Rulemaking Regarding Cross-Border Rules, Swap Regulations

The Securities Industry and Financial Markets Association, Institute of International Bankers, and Swaps and Derivatives Association, Inc. are suing the US Commodity Futures Trading Commission over rules that they believe are hurting its members’ businesses, which includes among the biggest broker-dealers in the world. The plaintiffs contend that the agency engaged in unlawful rulemaking involving CFTC Interpretive Guidance and Policy Statements about Compliance With Certain Swap Regulations and other cross-border matters. They want the CTFC’s reach in its overseas rules curtailed.

ISDA, SIFMA, and IIB, whose members include swaps dealers such as Deutsche Bank AG (DB), Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and many others, want to vacate a number of rules having to due with cross-border application completely. According to Bloomberg.com, at least half the largest banks work with overseas clients in their swaps business. The CFTC approved the overseas swaps guidelines this summer, and last month, two staff opinions came out shedding more light on the breadth of the guidelines.

Now, the plaintiffs are contending that with these rules the CFTC illegally circumvented the Administrative Procedure Act and Commodity Exchange Act by saying its regulations were “guidance,” did not set up cost-benefit analysis even though the law mandated it, performed a rulemaking process that was flawed, and set up rules that contradict international cooperation and could hurt global markets.

The complaint tackles the way agencies establish policies. Formal agency rules typically require commissioner votes and cost benefit-analysis. (Commissioners who vote were selected by the president and received senate confirmation.) The plaintiffs are unhappy because they say that the guidance document that came out about overseas swaps guidelines did not have economic analysis and the two advisories that were issued also lacked this analysis and were never put through a formal vote. They want the court to vacate the CFTC policy.

In a formal press release, SIFMA CEO Judd Gregg, who used to be a US Senator, said his constituents are in favor of regulatory reform that will lead to accountability and transparency in the derivatives market and that the association wants to engage constructively with regulators and for procedures to be fair and open. He called the CFTC’s handling of cross-border regulation “arbitrary… unilateral.. backdoor rulemaking.” Meantime, ISDA chairman Stephen O’Conner said that the CFTC’s current Cross-Border Rule is a “step backward” in attempts to set up a “consistent” vibrant, “global framework” regarding OTC derivatives regulation that gets rid of systemic risk.

Also commenting in the press release, IIB CEO Sally Miller noted that while the banker group’s members have made efforts to comply with CFTC regulations that were not properly adopted, still they are growing concerned with what they believe are the agency’s efforts to use “unpredictable ‘guidance documents.. directives” to regulate the global swaps market.

The Resolution Law Group represents institutional investors and high net worth individual investors in recouping their securities fraud losses.

The Resolution Law Group: Groupon Loses Dismissal Bid Over IPO Securities Fraud Case

A district court judge has ordered Groupon Inc. to face a securities lawsuit filed against it accusing the deal-of-the-day coupon company of misleading investors regarding its financial state right before its IPO in 2011. The Illinois-based company had sought to have the securities fraud case brought by investor Michael Carter Cohn, dismissed. Cohn wants his claim to get class action securities status.

The investor claims that Groupon committed securities lawsuit and used refund accounting that was not allowed to spike revenues in a prospectus related to its initial public offerings, as well as in filings with the Securities and Exchange Commission. According to U.S. District Judge Charles Norgle in Chicago, the claims “present plausible violations.” Norgle also turned down requests by Morgan Stanley (MS) and Goldman Sachs (GS), and Credit Suisse (CS) to throw out the claims against them. These banks arranged the public offering.

On March 30, 2012—not long after opening at $28 in Nasdaq stock exchange trading on November 4, 2011—Groupon reported a “material weakness” in its financial controls, as well as first reported quarterly sales as a company that was now publicly traded were not as high as stated earlier because of high refunds received by merchants. This lowered revenue during 2011’s last quarter to $492 million—that’s a $14.3 million difference. The company’s shares by November 13, 2012 hit $2.63 dollars.

Judge Norgle has yet to decide on whether Cohn can pursue his securities case for a class. Cohn did not purchase his shares straight from the IPO.

At The Resolution Law Group, our securities fraud lawyers represent institutional investors and individual investors wishing to pursue their investment losses from negligent parties. You can call us today to ask for your free case assessment.

The Resolution Law Group: NCUA Sues Morgan Stanley, JPMorgan, UBS, & Other Banks Over $2.7B in Allegedly Fraudulent RMBS Sales to Credit Unions

The National Credit Union Administration has filed residential mortgage-backed securities lawsuits against JPMorgan (JPM), Morgan Stanley (MS), UBS (UBS), Royal Bank of Scotland Group (RBS), Barclays (BARC), and Credit Suisse (CS) accusing the financial firms of selling $2.7 billion of these fraudulent securities to the credit unions. The Members United Corporate Federal Credit Union and Southwest Corporate Federal Credit Union paid over $416 million for the RMBS in the case against Morgan Stanley and $1.9 billion from the other defendants. One of the credit unions contends that Wachovia (WB), Goldman Sachs (GS), Ally Securities and Wells Fargo (WFC) also defrauded it.

According to the NCUA’s RMBS fraud lawsuits, the investment banks issued misrepresentations related to the underwriting and sale of the securities. Offering documents allegedly contained false statements or omitted facts that were material. The government regulator is accusing the originators of systematically ignoring underlying guidelines in offering documents, which made the mortgage-backed securities’ risks higher than what was presented.

The MBS fraud lawsuits make claims under state and federal securities laws. Whatever is recovered will go toward the Temporary Corporate Credit Union Stabilization Fund.

Already, NCUA has settled RMBS fraud lawsuits against Bank of America (BAC), Citibank (C), Deutsche Bank (DB), and HSBC for more than $335 million.

Contact The resolution Law Group. Our institutional investor fraud law firm to find out whether you have grounds for securities case. Your RMBS fraud case consultation is free.

The Resolution Law Group: Goldman Sachs Appeals Vacating of Securities Award, Non-Customers of Brokerage Firm Can’t Compel Arbitration, & Three Governors Named To FINRA Board

Goldman Sachs Wants Third Circuit To Look at Vacated Arbitration Award
Goldman Sachs (GS)wants the U.S. Court of Appeals for the Third Circuit to look at a decision by a lower court to vacate a FINRA securities award issued by a panel member that included arbitrator Demetrio Timban, who was indicted on criminal matters and suspended. The securities case is Goldman Sachs & Co. v. Athena Venture Partners LP and involves an investor accusing the firm of making misrepresentations. The U.S. District Court for the Eastern District of Pennsylvania remanded the award, which favored the financial firm.

The district court said FINRA didn’t give the parties three arbitrators who were qualified and said the respondent’s rights were prejudiced. Judge J. Curtis Joyner said that therefore, a “final and definite award” was not issued. Following the scandal involving Timban, FINRA said it now would perform yearly background checks of arbitrators and other reviews before they are given a case.

District Court Says Buyers Who Are Not Broker-Dealer’s “Customers” Cannot Compel Arbitration
A district court has preliminarily enjoined an arbitration proceeding involving real estate investments. In Orchard Sec. LLC v. Pavel, the U.S. District Court for the District of Utah said that buyers were not a managing brokerage firm’s “customers” and did not have the right to compel arbitration under the SRO’s rules. The court also said that as the plaintiff firm Orchard Securities clearly demonstrated that its chances of success on its claim’s merits.

Margaret and Michael Pavel had filed an arbitration proceeding with FINRA contending that they had securities claims involving their purchase of tenant-in-common interests, including a New York offering that Orchard Securities LLC managed as a brokerage firm. Orchard Securities contended that it could not be made to arbitrate because there was no arbitration agreement or facts showing that the Pavels were its customers and therefore could compel arbitration. The NY offering had been recommended by a registered rep. with Direct Capital, which was a third-party broker-dealer enlisted by Orchard Securities.

Three Governors Are Elected to SRO’s Board, Four Are Reappointed
FINRA says that its members have elected two industry governors: Robert Keenan, who is St. Bernard Financial Services CEO, and James D. Weddle, who is Edward Jones’s managing partner. Keenan was elected small firm governor, while Weddle will be his large firm counterpart. Shelly Lazarus, who is an ex- Ogilvy & Mather chairman and CEO, was named a public governor.

Four other governors received reappointments to the board, which oversees FINRA. The board is comprised of 22 people—10 industry governors and 11 public ones. FINRA’s CEO also has a seat.

If you feel you are the victim of FINRA Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

Bank of America, JPMorgan Chase Among Banks Sued by Danish Pension Funds in Credit Default Swaps Lawsuit

In U.S. District Court for the Northern District of Illinois, Danish pension funds (and their investment manager) Unipension Fondsmaeglerselskab, MP Pension-Pensionskassen for Magistre & Psykologer, Arkitekternes Pensionskasse, and Pensionskassen for Jordbrugsakademikere & Dyrlaeger are suing 12 banks accusing them of conspiring to take charge of access and pricing in the credit derivatives markets. They are claiming antitrust violations while contending that the defendants acted unreasonably to hold back competitors in the credit default swapsmarket.

The funds believe that the harm suffered by investors as a result was “tens of billions of dollars” worth. They want monetary damages and injunctive relief.

According to the Danish pension funds’ credit default swapscase, the defendants inflated profits by taking control of intellectual property rights in the CDS market, blocking would-be exchanges’ entry, and limiting client access to credit-default-swaps prices, and

This securities case comes four years after the US Justice Department acknowledged that it had begun an investigation into possible anticompetitive activities involving credit derivatives clearing, and trading (a probe that is ongoing) and just a few months after the Sheet Metal Workers Local No. 33 Cleveland District Pension Plan sued the banks, Markit, and ISDA also for allegedly taking control of the CDS market, which it says resulted in customers being overcharged some $7 billion annually. The plaintiff contends that there may be billions of dollars in damages and it wants treble damages. Last month, it was the European Commission’s turn to claim that 13 banks, ISDA, and Markit worked together to stop CDSs from being able to trade on open exchanges.

If you think you may have been the victim of securities fraud involving credit default swaps, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

There are over a dozen defendants in the Danish pension funds’ CDS fraud case including:

J.P. Morgan Chase & Co. (JPM)
Citigroup Inc. (C)
Morgan Stanley (MS)
Bank of America Corp. (BAC)
Credit Suisse Group AG (CS)
Deutsche Bank AG (DB)
UBS AG (UBS)
• Royal Bank of Scotland Group PLC (RBS)
Goldman Sachs Group Inc. (GS)
Markit Group Ltd, a financial data provider
• International Swaps and Derivatives Association (ISDA)