Colling, Gilbert, Wright & Carter Securites Fraud

According to a November 29, 2010 Wall Street Journal article, on the day after Thanksgiving, the trustee filed multiple suits against former Madoff employees customers and relatives in an attempt to recover some of the billions of dollars in investor losses.

The timing of the suit was brought about by the two year limitation on filing suits to "claw back" funds from former investors. So far the trustee, Irving Picard, has recovered approximately $1.5 billion for defrauded investors. How much additional funds may be recovered remains to be seen.

If you have lost money due to a ponzi scheme or other fraudulent acts by an investment adviser, please contact our offices for a case evaluation. Thank you.

Labels: broker misconduct, unauthorized investment

The actor Larry Hagman seems to be reprising his role as J.R. Ewing. Mr. Hagman is fighting with Citigroup over an $11.6million arbitration award he won last month. Larry Hagman who played the villainous oil tycoon J.R. Ewing in the 1980s hit TV series "Dallas recently won $11.6 million in a securities arbitration case against Citigroup. The arbitration panel award $1.6 million in compensatory damages and an additional $10 million in punitive damages to be given to a charity of Mr. Hagman's choice.

It was the largest arbitration award an individual investor received this year and the ninth largest award ever, according to the Financial Industry Regulatory Authority (FINRA) which administered the arbitration.

Now Citi is claiming the award should be overturned based on arbitrator bias. Citi's attorney filed a motion to dismiss the award in Los Angeles Superior Court, alleging that the chairman of the arbitration panel failed to disclose a potential conflict of interest. It should be noted that arbitration awards are rarely overturned and appealing them may have grave consequences for the appealing party...including additional damages and interest penalties. In this instance, Citi must feel they have little to lose given the size of the award as such motions are rarely successful.

According to Citi's petition, the lead arbitrator had a potential conflict because he was once a plaintiff in a lawsuit involving the same claims and the same subject matter involved in this arbitration proceeding. The FINRA Statement of Claim included allegations of of fraud and breach of fiduciary duty and stated the Hagmans sustained losses on stocks and bonds and a life insurance policy they held with Citi.

Two years earlier, the lead Finra arbitrator sued his real estate investment partner for fraud and breach of fiduciary duty, according to Citi's petition. The arbitrator alleged that he and his wife had 'trusted and relied upon the investment advice of their former real estate partner with respect to almost all their life savings, Citi's petition said. Some observers believe these are two entirely different matters and the facts are easily distinguished.

The memo filed by the Hagman's attorneys noted that the arbitrator's case did not involve securities investments nor did the two cases involve the same facts or parties and referred to the Motion to Overturn the award as a last ditch effort to avoid paying the huge award.

A hearing in Los Angeles Superior Court is scheduled for Dec. 17. Meanwhile, Citigroup is on the hook for paying 10 percent interest on Mr. Hagman's award. That is good news for the Hagman's designated charity. As arbitration awards are supposed to be binding and mostly non-appealable, this case will be watched closely by both Plaintiff's attorneys and the securities industry. Stand by for the next episode and see if J.R. prevails again.

If you believe you lost money due to your broker or investment adviser's breach of fiduciary duties or fraudulent acts, contact our office for a free case evaluation. Thank you.

The Securities and Exchange Commission (SEC) has been weighing competing interests for the regulation of registered investment advisers (RIAs). As it stands now, RIAs are regulated by the SEC but some feel there needs to be better regulation and more accountability to ensure the RIA's are not given free reign to reek havoc in the client's portfolios.

One suggestion is to transfer the regulation to the Financial Industry Regulatory Authority (FINRA). FINRA is a self-regulatory organization (SRO) that is comprised of member broker dealers and licensed representatives. FINRA agrues they are well positioned to take on the regulation of RIA's. However, the RIA's are not so sure. They like the less stringent regulatory environment afforded by the SEC and the very loose and sometimes prohibitively expensive arbitration system. Estimates show the SEC will only examine roughly 9% of all advisers this year. By contrast, FINRA requires all broker dealers and representatives adhere to strict compliance procedures, on-line training and regular compliance review.

However, the recently passed Dodd-Frank bill calls on the SEC to analyze adviser examination and enforcement, and to recommend whether Congress should authorize an SRO to increase the number of adviser examinations. The SEC's report is due to be sent to Congress in January.

FINRA representatives have been lobbying hard stating they "believe there should be an SRO for investment advisers," and "the layer of protection that exists in the broker-dealer space also should exist in the investment adviser space." Plaintiff securities attorney no doubt agree more needs to be done to regulate and prosecute wrong doing by RIAs.

But the idea of Finra regulation does not sit well with many in the advisory business. RIA industry spokesmen argue FINRA regulation would lead to higher costs and heightened regulatory burdens for advisers. Finra argues the advisors simply want seeking less regulation.

The Attorneys at Colling Gilbert Wright & Carter specialize in prosecuting cases involving broker and advisor negligence and fraud. If you have or have had investment accounts with a RIA and believe they were managed improperly, please contact our offices. Thank you.