The Resolution Law Group: Three Ex-GE Bankers Convicted of Municipal Bond Bid Rigging Are Set Free

In a 2-1 ruling, the U.S. Circuit Court of Appeals in New York panel has decided that three ex-General Electric Co. bankers charged with conspiring to bilk cities in a muni bond bid rigging scam can go free because the US government waited too long to prosecute them. Reversing last year’s convictions of Dominick Carollo, Steven Goldberg, and Peter Grimm, the court dismissed the criminal case against them and ordered that they be released from prison.

According to prosecutors, the three men worked with guaranteed investment contracts that allowed municipalities to make interest on money made from bond sales until they wanted to spend on local projects. The government believes that between August 1999 and May 2004 Carollo, Goldberg, and Grimm gave three brokers, including UBS PaineWebber, kickbacks to win actions for the contracts even if it meant the bank would make interest payments that were artificially low.

A federal jury convicted the former GE bankers of defrauding the country and conspiracy to commit wire fraud. They appealed, appealed, contending that the indictment on July 27, 2010 exceeded the statute of limitations, which is six years for conspiracy to bilk the US via tax law violations and five years for conspiracy. The government disagreed, arguing that the limitations’ statute went on as long as GE was paying rates that were not competitive.

Meantime, GE on Friday consented to settle for $18.25M a class action securities case over municipal bond fixing. The plaintiffs accused the company of rigging municipal bond bids. GE is among the financial firms and lenders accused of working together to rig prices for municipal derivatives. Investors say that the price fixing of the bonds violated antitrust laws and caused them to get lower interest rates.

GE had previously settled similar securities claims made by state attorneys general for $30 million, Three years ago it settled for $70 million municipal bond rigging allegations made by the US Justice Department.

If you are a municipal bond investor who suffered financial losses you think may be due to securities fraud, contact our municipal bond fraud law firm today.



The Resolution Law Group: SEC Sanctions Three Investment Advisory Firms for Custody Rule Violations

The SEC has sanctioned registered investment advisory firms Further Lane Asset Management, Knelman Asset Management Group, and GW & Wade with violating the rules that obligate them to fulfill certain standards while keeping custody of the securities or funds of clients. The regulator says that all three firms either did not keep up client assets with the help of a qualified custodian or failed to work with an independent public accountant to perform surprise exams. They also allegedly committed additional federal securities law violations. All three firms have consented to settle the charges against them.

Per the SEC order, although Further Lane Management, which is based in New York, and its CEO Jose Miguel Araiz did keep up custody of hedge fund assets that it managed along with Osprey Group Inc., they did not set up a yearly surprise exam to verify these assets. They also allegedly committed fraud involving fund-of-funds they controlled and other violations.

Araiz, Further Lane Management, and Osprey Group Inc. have consented to pay disgorgement and prejudgment interest of $347,122. Araiz also has to pay a $150,000 penalty and he is suspended from the industry for a year.

As for Massachusetts-based GW & Waid, the firm is accused of not having the right safeguards required of a client funds’ custodian and failing to identify itself as a custodian in public disclosures or to independent auditors. The SEC says that as a result clients were exposed to possible harm, including one customer who was exposed to third party fraud when someone got into an email account pretending to be that client. The scheme wasn’t discovered until three wires totaling $290,000 were transferred to a foreign bank at the imposter’s request. The client has since been reimbursed. GW & Wade has agreed to a cease-and-desist order and a censure. The firm will pay $250,000.

As for Knelman Asset Management Group in Minnesota, the SEC says that the firm and its chief compliance officer/CEO Irving P. Knelman did not subject the assets of a Rancho Partners I, a fund of private equities it had custody of, to yearly surprise exams. Fund members also did not get quarterly account statements from a qualified custodian.

The SEC is contending a number of securities law violations, including improper cash distributions to Rancho members, failure to perform yearly compliance reviews, and not putting put into place (and executing ) controls to protect client assets. Knelman Asset Management Group will pay a $60,000 penalty and Knelman will pay a $75,000 one. He also has agreed to a bar from serving as a chief compliance officer for at least three years.

Failure by a firm to follow custody rules can jeopardize customers’ assets, placing these funds at risk of fraud and/or financial loss. Contact our securities lawyers if you believe firm error or negligence caused your investment losses.

The Resolution Law Group: New York to Sue Wells Fargo Over Mortgage Settlement

Eric Schneiderman is the attorney general of New York.Mike Groll/Associated Press Eric Schneiderman is the attorney general of New York.

Fielding complaints from borrowers struggling to save their homes, New York’s top prosecutor is preparing a lawsuit against Wells Fargo, accusing the bank, the nation’s largest home lender, of flouting the terms of a multibillion-dollar settlement aimed at stanching foreclosure abuses.

The lawsuit, which is expected to be filed as early as Wednesday, accuses Wells Fargo of violating the guidelines of a broad agreement reached last year between five of the nation’s largest banks and 49 state attorneys general.

Under that deal, the banks must comply with 304 servicing standards. The guidelines map out how banks should field and process requests from distressed homeowners.

Vickee J. Adams, a spokeswoman for Wells Fargo, said the bank had not been served with a copy of the lawsuit. But, she added, “if true, it is very disappointing that the New York attorney general continues to pursue his course, given our commitment to the terms of the National Mortgage Settlement and ongoing engagement.

“Wells Fargo has been a leader in preventing foreclosures, helping families maintain homeownership with more than 880,000 modifications nationwide and 26,000 in New York over the last four years,” she said.

The New York attorney general, Eric T. Schneiderman, sent a previous warning shot to Bank of America and Wells Fargo, announcing in May that he had found that both banks violated the terms of the mortgage settlement. That announcement prompted negotiations between the New York prosecutor’s office and the two banks.

The outcomes for the lenders are starkly different. While Wells Fargo is bracing for a lawsuit, Bank of America is poised to announce a series of additional protections that it has adopted after discussions with Mr. Schneiderman’s office. Those additional protections — including an agreement to designate a “high-level” employee dedicated to fielding and responding to questions from housing counselors — appear to have won the bank a reprieve from a lawsuit.

“We are pleased to resolve these matters without litigation,” said a spokesman for Bank of America, Dan B. Frahm. “Along with the settlement monitoring committee, we continue to improve the experience for eligible customers and groups that represent them.”

Wells Fargo is also working with the monitor on additional consumer protections.

More state attorneys general may follow Mr. Schneiderman’s lead. The Massachusetts attorney general, Martha Coakley, has also sent a letter to Joseph A. Smith, the settlement monitor, outlining “recurring issues” with servicers, according to a copy of the letter reviewed by The New York Times.

For Wells Fargo, though, the discussions with the New York attorney general’s office resulted in a standoff. Mr. Schneiderman’s office, people briefed on the matter said, had pushed Wells Fargo to acknowledge a systematic pattern of mortgage servicing errors and to commit to a new agreement codifying changes to the way the bank services mortgages. Wells Fargo balked, the people said, and the talks broke down last week.

Amid the languishing talks, the bank sent a letter to Mr. Schneiderman’s office, reiterating its commitment to “helping borrowers maintain homeownership and achieve long-term financial success,” according to a copy of the letter reviewed by The Times.

Mr. Schneiderman had found 210 separate violations involving the bank and 96 borrowers. Four of those borrowers, the letter said, were not Wells Fargo customers. In its letter, the bank said it “disagrees with allegations” related to the remaining borrowers. Of the remainder, the bank has approved loan modifications for 39 customers and made a final decision on the loan modification applications for 28 others. Beyond helping the homeowners identified by the attorney general’s office, Wells Fargo voluntarily improved its processes, the bank argued in its letter.

Those concessions apparently did not appease Mr. Schneiderman’s office. Part of the problem, the people briefed on the matter said, was that Wells Fargo refused to improve their processes in a formal agreement.

Some within the attorney general’s office also felt the bank’s proposed fixes constituted a Whac-a-Mole approach in which it addressed only the cases originally highlighted, the people briefed on the matter said. The New York attorney general’s office still receives more complaints about Wells Fargo’s servicing than for any other lender, they added.

The settlement guidelines include requirements that banks provide homeowners with a single point of contact and notify borrowers of missing documentation within five days.

They are intended to help homeowners who are looking to modify their mortgages — a process that can prove frustrating for homeowners asked to submit the same documents again and again.

Such delays can mean the difference between saving a home and losing it to foreclosure, according to housing counselors. When applications for relief languish with borrowers caught in a bureaucratic maze, homeowners amass additional costs.

Ms. Adams of Wells Fargo said that the bank “continuously implements additional customer-focused measures based on the constructive feedback we receive from our customers, the monitoring committee and individual states, including New York.” She added that the bank believed a “collaborative approach” was better for homeowners than “protracted litigation.”

The move against Wells Fargo is the first time that an attorney general has sued one of the five participating banks on charges related to the settlement. That settlement, reached in 2012, sprung from an investigation that began in 2010 amid a national outcry that banks were relying on mass-produced documents to evict homeowners wrongfully.

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


The Resolution Law Group: NY AG’s ARS Lawsuit Against Charles Schwab & Co. Are Revived by Appeals Court

A New York Appellate Division’s panel has unanimously agreed to revive the state attorney general’s auction-rate securities lawsuit against Charles Schwab and Co. (SCHW). The 2009 securities case accuses the financial firm of committing fraud in its sale and marketing of the financial instruments. The decision reverses a state judge’s ruling to throw out the complaint.

According to the NY ARS lawsuit, the broker-dealer’s brokers made false representations that the securities were safe and liquid. In a 4-0 decision, the appeals panel said that the state had given enough evidence to merit a trial on two claims submitted per its Martin Act, a 1921 law that gives the attorney general of New York the ability to prosecute fraud without proof of intent. Under the law fraud is defined as acts that involve misleading or fooling the public.

Per the panel’s ruling, the claims are revived only as it pertains Schwab’s alleged misconduct before 9/5/07, which is when the first ARS sold by Schwab failed. The state wants the company to repurchase securities from customers and pay civil penalties and restitution.

However, the appeals court also upheld the dismissal of two claims not submitted under the Martin Act. It said that NY’s AG lacked standing to make them. Then-Attorney General Andrew Cuomo is the one that brought the lawsuit.

Unlike Merrill Lynch (MER), Citigroup (C), and UBS (UBS), Schwab was one of the brokerage firms that opted not to settle with Cuomo over ARS fraud claims. A Schwab spokesman maintains that the financial firm did not aggressively market auction-rate securities and that 98% of the ARS have ben redeemed from customers.

Auction-Rate Securities
ARS are long-term debt with interests that periodically reset via auctions. Banks fled the $330 billion auction-rate securities market in early 2008 and the market failed. Thousands of investors were left with illiquid securities they couldn’t sell even though financial representatives told them that the financial instruments were liquid, like cash.

Contact our ARS securities law firm today.

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.

The Resolution Law Group: “It was a billion dollar fraud to feed Wall Street greed,” claimed Matthew Martens, a top lawyer for the S.E.C. in his opening statement to the jury.

The trial of Fabrice Tourre, otherwise known as “Fabulous Fab,” has started in Federal Court in New York. The Securities and Exchange Commission alleges that Fabulous Fab, who used to work for Goldman Sachs, secretly worked with a powerful hedge fund to engineer a mortgage investment that was doomed to fail.

“It was a billion dollar fraud to feed Wall Street greed,” claimed Matthew Martens, a top lawyer for the S.E.C. in his opening statement to the jury.

Geoffrey Broderick, the senior partner of the Resolution Law Group, says “while the trial against a former employee of Goldman Sachs is a step in the right direction, this is still only a civil case, and no one has gone to jail for the criminal conduct that occurred.”

Mr. Broderick adds that “The housing market will continue to suffer until it is fixed by the Courts or the Legislature. Somebody has to fix the problem. That is why The Resolution Law Group continues its fight for homeowners. Homeowners cannot expect the problem to fix itself.”

The Resolution Law Group continues to prosecute ground breaking litigation in Federal Court on behalf of homeowners suing lenders and servicers for, among other things, the illegal use of MERS, robo-signing, and intentionally ignoring underwriting standards and encouraging inflated appraisals.

The Resolution Law Group is currently enrolling clients into the pending lawsuit. For further information, visit its website at

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud

The Resolution Law Group: Major financial crisis trial kicks off in New York

Trial of Ex-Goldman Sachs trader Fabrice Tourre begins

Fabrice Tourre, a former Goldman Sachs mortgage trader, leaves federal court after the first day of a lawsuit being brought against him by the Securities and Exchange Commission.

NEW YORK — He’s either a duplicitous Wall Streeter, or just a scapegoat who never lied to investors.

A jury of four men and five women will decide whether Fabrice Tourre, the ex-Goldman Sachs trader dubbed “Fabulous Fab,” defrauded investors in the lead-up to the financial crisis.

Tourre’s civil securities fraud trial — considered the highest-profile case stemming from the crisis — got underway in a federal court New York on Monday.

The U.S. Securities and Exchange Commission claims Tourre secretly worked with a powerful hedge fund to engineer a mortgage investment doomed to fail.

“It was a billion-dollar fraud to feed Wall Street greed,” said Matthew Martens, a top SEC attorney, in his opening statement.

Tourre’s former employer, the giant investment bank Goldman Sachs, settled parallel claims against the firm for $550 million in 2010.

Pamela Chepiga, Tourre’s lawyer, said her client was merely a scapegoat.

The other large sophisticated, institutional investors involved in the deal knew the hedge fund’s role, and that it was shorting, or betting against, the investment, Chepiga said.

“Fabrice Tourre never lied to anyone,” Chepiga said.

The SEC says hedge fund Paulson & Co. made $1 billion when the investment — tied to subprime residential mortgages — tumbled at the expense of other investors.

The SEC again highlighted Tourre’s colorful emails, one of which infamously described Goldman clients buying the investment as “widows and orphans.”

But Chepiga questioned one email’s role in the case, saying it was merely a late-night personal email taken out of context.

“It’s an old-fashioned love letter to his girlfriend,” she said.

Martens said Goldman actually lost money in the ill-fated deal — but not on purpose. The New York-based bank could not find enough investors to buy the complex investment, known as a collateralized debt obligation, or CDO.

“Sometimes you get tripped up on your own fraud,” Martens said.

The trial is expected to last three weeks and include testimony from Tourre himself.

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

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud