Securities Arbitration and Litigation

Settlement and Judgment Reached in SEC Investigation into Striker Petroleum, LLC.

2009-12-18T12:13:00.000-08:00

Last week a judgment was entered against Striker Petroleum, LLC in US District Court. Striker is a limited liability company based out of Frisco, Texas involved in acquiring oil and gas properties with the intent to increase production. The company, however, was charged in an Securities and Exchange Commission (SEC) investigation with perpetrating multiple wrongdoings.

The judgment against Striker and its two main officers, Mark Roberts and Christopher Pippin, calls for Striker to be disgorged of its ill-gotten gains. Further, the judgment seeks to impose prejudgment interest as well as civil penalties. The actual amount Striker will be charged, and consequently, how much investors will get back, however, remains unclear. An asset freeze has been imposed and a court appointed receiver is currently reviewing the resources held by Striker with the hope that investors will eventually recoup at least some of their initial investment.

The settlement does not require Striker to admit or deny any wrongdoing. For more information on this situation, please see our current investigation.

SEC Charges Four in Insider Trading Case in Northern California

2009-12-16T11:32:00.000-08:00

The SEC has charged former TPG Capital L.P. associate Vinayak Gowrish and former Lazard Freres & Co. LLC vice president and investment banker Adnan Zaman with orchestrating an insider trading scheme. The scheme involved the two aforementioned individuals stealing confidential merger and acquisition information from their former employers and passing it along to two friends who then executed favorable trades.

The friends, Sameer N. Khoury and Pascal S. Vaghar, traded stocks and options based on this nonpublic information and in the process generated almost $500,000. Gowrish and Zaman benefitted from this relationship in the form of kickbacks including free rent and cash.

The activities were shielded from the SEC and other regulatory bodies through a system concocted by the four to evade regulatory measures. The four developed a system of coded text messages and also passed along sensitive information through the use of sticky notes. Despite their measures to the contrary, all four now face charges of violating Section 14(e) of the Securities Exchange Act of 1934 and Rule 14e-3.

Three of the four, Zaman, Vaghar, and Khoury, have offered to settle with full injunctive relief and disgorgement. Also, Zaman will be permanently barred from associating with any broker or dealer. Gowrish, however, has yet to settle, and the SEC is seeking the imposition of fines and penalties against him.

Proposed Financial Reform Endangered by "Hat Switching" Provision

2009-12-15T10:49:00.000-08:00

The investment adviser world is frenzied over a provision included in the financial services reform legislation recently approved by the House of Representatives. The so-called, “hat switching,” provision is one sentence long and buried within the expansive legislation. The provision, part of H.R. 4173, reads as follows:

“Nothing in this section shall require a broker or dealer or registered representative to have a continuing duty of care or loyalty to the customer after providing personalized investment advice about securities.”

This can be read as meaning that the fiduciary standard owed to a client disappears once investment advice is given.

The move towards creating a single fiduciary standard would be greatly hindered if such a provision makes it into the final language of the bill. The provision would protect discount brokerage firms from a continued fiduciary relationship with a client after initial advice and/or sale of a product.

It can be expected that this is not the last time we will hear of this provision.

FINRA - Private Placement Enforcement Cases to Come

2009-12-14T17:26:00.000-08:00

James Shorris, executive director of enforcement at the Financial Industry Regulatory Authority (FINRA) has been quoted by Investment News as saying that enforcement cases on multiple private placement deals can be expected to begin by next year.

Private placement memorandum (PPM) deals, also known as Reg D offerings, have come under increased scrutiny after enjoying a period of great popularity. Issues that have been brought to the attention of FINRA include:

- Potential misrepresentations made by brokers regarding the sale of PPMs
- Due Diligence issues, including conflicts of interest over the authorship of due diligence reports
- Whether or not the PPM was suitable for many of the clients holding them

These and other issues are currently being examined by FINRA in connection with multiple PPM offerings.

House Kills Amendement Aimed at Expanding FINRA's Power

2009-12-11T09:36:00.000-08:00

The House passed an amendment killing a proposal that would have given the Securities and Exchange Commission (SEC) the power to allow the Financial Industry Regulatory Authority (FINRA) to carry out oversight on investment advisers working at broker-dealer firms.

The amendment, submitted by Republican Representative Spencer Bachus, R-Alabama, was part of the Investor Protection Act of 2009. The bill, which also includes a single fiduciary standard for registered investment advisers and independent broker-dealers, is one part of a move by Congress to reform the financial industry.

Bauchus agreed with the decision to scrap the amendment, but indicated that he would investigate alternatives to regulate advisers.

Notice to Striker Petroleum Investors - Aidikoff, Uhl & Bakhtiari Files FINRA Arbitration Claims on Behalf of Defrauded Investors

2009-12-10T21:20:00.000-08:00

Aidikoff, Uhl & Bakhtiari (www.securitiesarbitration.com) announces the filing of FINRA arbitration claims against brokerage firms that sold Striker Petroleum and other private placements to investors.

Striker Petroleum raised approximately $57 million from September 2006 through September 2008 from the sale of debentures collateralized through oil and gas properties to approximately hundreds of investors nationwide.

“Investors should be aware that a federal court issued permanent injunctions at the request of the SEC against Striker Petroleum and its principals due to allegations of fraudulent debenture offerings,” said attorney David Harrison. “The SEC alleged that Striker Petroleum made material misrepresentations to its investors regarding the firm’s earnings and assets, in addition to the use of investor proceeds.”

Striker Petroleum and its principals consented to a permanent injunction, the appointment of a receiver and asset freeze.

The receiver was appointed by the court to collect, marshal, manage and distribute Striker Petroleum’s assets for the benefit of investors. “Often times, a receiver is appointed when it’s too late for an investor to recapture from the issuer a significant amount of their investment,” said attorney Ryan K. Bakhtiari.

“Unfortunately investors including retirees who sought fixed income and preservation of capital purchased Striker Petroleum,” said Mr. Bakhtiari.

The individual brokers and individual advisors who sold Striker are not targets of investor claims.

Guilty Plea in Westgate Capital Ponzi Likely

2009-12-10T16:27:00.000-08:00

James Nicholson, a Saddle River hedge fund manager accused of bilking investors of as much as $160 million, has tentatively agreed to plead guilty to charges his Westgate Capital Management LLC was a Ponzi scheme.

A plea hearing is set for noon Friday in federal court in Manhattan, according to a court order signed by U.S. District Judge Richard Sullivan.

Erika Edwards, one of Nicholson's attorneys, said Monday she and federal prosecutors have verbally reached an agreement, but she declined to provide details as they continue to work out a formal settlement that would be signed by Nicholson.

Nicholson, 43, ran Westgate, based in Rockland County, for a decade, until he was arrested in late February. His alleged scheme collapsed in December 2008, when $5 million in investor redemption checks bounced, and other investors were unable to claim millions of dollars, prosecutors in New York said. Nicholson is charged with securities, investment adviser and mail fraud as well as structuring [for allegedly trying to avoid reporting currency transactions], and faces a maximum of 65 years in prison.

A conclusion of the criminal case against Nicholson would set the stage for prosecutors to begin helping Westgate's more than 370 investors — some of whom have apparently lost much of their savings, retirement and children's college funds — recoup some

SEC Alleges that Sunwest Mangement Commited Fraud

2009-12-10T16:19:00.000-08:00

U.S. regulators charged Sunwest Management and its former chief executive with securities fraud on Monday, alleging that the retirement home operator lied to investors and eventually operated the business as a kind of Ponzi scheme.

The Securities and Exchange Commission accused Oregon-based Sunwest, which operates more than 200 retirement homes in the United States, and former chief executive Jon Harder of concealing the risks of investments and exposing investors to “massive losses,” Reuters said.

Between 2006 and 2008, Sunwest raised at least $300 million from investors and used the funds for down payments on approximately 100 retirement homes with the balance financed by institutional lenders and banks, according to the S.E.C.’s lawsuit.

Investors were told they were buying an ownership interest in a specific retirement home that would generate enough profit to pay a 10 percent annual return, and that Sunwest had a history of never missing a payment, the suit said.

FINRA Arbitrations Filed Seeking Damages of More Than $10 Million -- Medical Capital

2009-12-09T17:24:00.000-08:00

Aidikoff, Uhl & Bakhtiari (www.securitiesarbitration.com) announces the filing of additional FINRA arbitration claims against brokerage firms that sold Medical Capital and other securities to investors.

To date the firm has filed claims on behalf of more than 25 families seeking more than $10 million in damages against several brokerage firms. The individual brokers and individual advisors who sold Medical Capital are not targets of investor claims.

“Investors should be aware of a pending class action, said attorney David S. Harrison. “The class case may have certain pitfalls that investors should be aware of in selecting an attorney. Most individual investors will fare better by pursuing an individual FINRA arbitration.”

Medical Capital Corporation and Medical Provider Funding Corporation VI raised more than $2.2 billion through the offering of notes in Medical Provider Funding Corp VI and earlier special purpose entity offerings.

“Often the most important choice an investor makes following a disaster like Medical Capital is the remedy they will pursue to vindicate their rights,” said attorney Ryan K. Bakhtiari. “Investors should carefully consider their options.”

Important Facts to Consider Prior to Joining a Medical Capital Class Action
- Many investors may have viable claims based on the investments’ unsuitability. Because a suitability claim is dependent on an individual’s circumstances, this claim cannot be prosecuted on a class wide basis.

- Investors with significant losses are likely to recover only pennies on the dollar through a class action.

- Class actions sometimes create hurdles to recovery for individual investors including depositions and motion practice which are generally not permitted in securities arbitrations decided before FINRA. The FINRA arbitration process can usually be completed in a much shorter period of time, often 15 months. Recovery through a class action may take several years.

Brookstreet and CEO Charged with Fraud

2009-12-08T15:33:00.000-08:00

The Securities and Exchange Commission (SEC) has charged California-based Brookstreet Securities Corporation and its President/CEO, Stanley Brooks, with fraud. The charges stem from Brookstreet’s habitual selling of risky mortgage-backed securities to clients with conservative investment objectives.

This risky and unsuccessful strategy was part of an internal Brookstreet program aimed at selling collateralized mortgage obligations (CMO) to clients, many of whom were categorically ill-suited to hold such investments. Through the internal CMO program, approximately $300 million of client funds were invested, a great deal of which were ultimately lost.

As markets deteriorated, CMOs being hit particularly hard, Brookstreet customers found themselves taking massive losses. Many clients lost their savings, homes, and retirements because of the program, and eventually, Brooks lost his company. Brooks, for his part, was warned multiple times about the errant logic in his program.

Brooks was personally warned on multiple occasions regarding the risk inherent in the CMO program with whistleblowers including his own Compliance Department, registered representatives, and institutional bond traders…among others.

Brookstreet and its CEO have been charged under the antifraud provisions of the Exchange Act.

SEC OBTAINS ASSET FREEZE OF JOSEPH S. BLIMLINE FOR HIS INVOLVEMENT IN THE PROVIDENT ROYALTIES $485 MILLION NATIONWIDE OFFERING FRAUD

2009-12-07T11:17:00.001-08:00

On December 3, 2009, the Securities and Exchange Commission obtained a temporary restraining order and emergency asset freeze against Joseph S. Blimline relating to his involvement in a $485 million offering fraud and Ponzi scheme. The scheme was orchestrated by Joseph S. Blimline, Paul R. Melbye, Brendan W. Coughlin and Henry D. Harrison through a company they owned and controlled, Provident Royalties LLC. The Commission had previously filed a complaint against Melbye, Coughlin and Harrison and on July 7, 2009, obtained a temporary restraining order, asset freeze and appointment of a receiver with respect to those defendants. In addition to the asset freeze against Blimline, the court has extended the authority of the receiver over the newly-frozen assets.

The Commission alleges in its amended complaint that Provident advanced approximately $93 million of investor funds to Blimline and entities he controlled. The funds were for the purported purchase of oil and gas interests, or loans, to which Provident often never received title or repayment. The amended complaint also alleges that in presentations to investors and representatives of broker-dealers marketing Provident securities, Blimline failed to disclose his receipt of such funds, his involvement in the management of Provident and a prior sanction imposed against him by the Michigan securities authorities for prior conduct.

The Commission's amended complaint charges the defendants with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The amended complaint seeks a temporary restraining order and preliminary and permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest and financial penalties. Officer and director bars are sought against Blimline, Melbye, Harrison and Coughlin. An additional 36 affiliated entities that did not sell securities are named as relief defendants in the amended complaint for purposes of disgorgement.

UBS Held Liable In Lehman PPN FINRA Arbitration

2009-12-04T14:36:00.001-08:00

According to the WSJ today:

In what will likely be a closely studied ruling, a retail investor was awarded $200,000 after a Financial Industry Regulation Authority arbitration panel decided the investor's UBS AG (UBS) broker inappropriately sold her risky Lehman Brothers principal protected notes.

The case is one of the first involving the Lehman notes to be heard by a Finra arbitration panel. While the arbitration ruling won't set a precedent, it could be an indicator of how future rulings on similar cases will play out.

There are "many pending similar cases," said Jacob Zamansky, of Zamansky & Associates, who represented the investor in the arbitration case. Zamansky stated he is representing a dozen clients in a similar situations around the country.

As in most arbitration awards, the three-person arbitration panel didn't give reasons for its findings. Other panels that hear similar cases don't have to follow precedent so they could rule in different ways on nearly identical cases. Still, the case will likely be cited by other plaintiff lawyers.

The case, submitted for arbitration a year ago, was brought against UBS Financial Services, a unit of UBS, which is also being investigated by numerous regulators for alleged issues around its selling of these notes. Zamansky's client was seeking $300,000 in compensatory damages because the broker recommended structured products. Zamansky argued that the notes were "speculative derivative securities" and were "unsuitable" for unsophisticated investors, according to the Finra claim statement.

The broker purchased two notes for his client: a $225,000 guaranteed principal protection note and a $75,000 return optimization note. The panel ruled that the client should be compensated $150,000 plus interest and attorney fees on the principal protected note; there was no compensation for the $75,000 note.

UBS said in a statement it "is disappointed the arbitration panel in this case awarded the claimant any damages, even if it was the only half the compensatory losses she was seeking. UBS maintains that any client losses were the direct result of the unexpected and unprecedented failure of Lehman Brothers, which affected all Lehman bondholders."

Steven Caruso, attorney with Maddox, Hargett & Caruso, said that there are hundreds or thousands more arbitration cases that are expected to be filed in connection with Lehman principal protected notes. Caruso said his firm alone will represent roughly 100.

Inland Western Retail Real Estate

2009-12-02T14:37:00.000-08:00

A week after the first sale of commercial-mortgage-backed securities in more than a year, another deal is about to hit the market in the latest sign that capital markets are easing for corporate borrowers like real-estate investment trusts.

Inland Western Retail Real Estate Trust Inc., which owns some 300 retail properties nationwide, closed on Tuesday on $625 million in new financing from J. P. Morgan Chase & Co. to pay down its existing debt. The bank is expected to convert the $500 million first-mortgage part of the financing into a CMBS offering and sell through private placements the remaining $125 million in "mezzanine," or junior, debt to investors hunting for higher returns, according to people familiar with the matter. A spokesman at J.P. Morgan declined to comment.

Inland is a "nontraded" REIT whose shares are registered with the Securities and Exchange Commission but don't trade on a stock exchange.

The move comes as investors at mutual funds, pension funds, insurance companies and other institutions have regained their appetite for CMBS debt that features conservative underwriting, simple structures and greater safeguards for investors than CMBS sold during the boom years.

This growing demand reflects a trend in the broader equity and debt markets, which have started to open up for REITs and other corporations. So far this year, REITs have raised more than $20 billion by selling shares and bonds.

To be sure, the turn of the capital markets is still tentative. But it has led scores of small and private real-estate owners - the type that is still finding it hard to access capital - to think about going public to raise capital.

Lawyer Scott Rothstein Pleads Not Guilty To Ponzi Scheme Allegations

2009-12-01T09:52:00.001-08:00

A once high-flying attorney who courted politicians and celebrities was arrested Tuesday on federal racketeering and fraud charges alleging he operated a $1 billion investment scheme involving phony legal settlements.

Lawyer Scott Rothstein was led into the Miami FBI office in handcuffs following his early morning arrest on five charges, including a violation of the Racketeer Influenced and Corrupt Organizations, or RICO law, often used against the Mafia and other criminal organizations.

Rothstein was also charged with wire fraud, money laundering, and mail and wire fraud conspiracy. The combined maximum prison term for convictions on all counts is 100 years, according to court documents.

A few hours after his arrest, Rothstein pleaded not guilty in federal court even though the information charging document — rather than an indictment — used by prosecutors typically means a defendant has agreed to eventually plead guilty.

The Tim Durham Ponzi Scheme

2009-12-01T07:29:00.000-08:00

The case against Indianapolis financier Tim Durham continues to unfold.

On Monday, the U.S. attorney filed a motion dismissing the effort to seize Durham's assets.

U.S. Attorney Tim Morrison said there was probable cause to believe the assets (which include his 30,000 square foot Geist home, along with other properties and bank accounts) were gained through unlawful acts.

Morrison said the government originally moved to seize Durham’s assets in order to ensure Durham didn’t sell off the properties or any of his other assets.

Morrison said once they realized there was no need to seize the assets at this point, they filed the notice of dismissal.

He wouldn't comment further on why they came to this realization.

He did make it clear the government could move forward on seizing assets if the case becomes a criminal matter.

Last week, federal authorities filed civil charges against Indianapolis businessman Tim Durham, alleging he was involved in wire fraud.

The civil suit filed accuses Durham of running a Ponzi scheme where he allegedly used money from new investors to pay off old investors.

CIT InterNotes Purchasers May Be Able To Recover Investment Losses

2009-11-30T12:26:00.000-08:00

Aidikoff, Uhl & Bakhtiari has launched www.citinternotes.com and investigation of the sales practices of Wall Street firms in recommending CIT InterNotes to their clients.

As capital became less available to CIT from institutional investors that it had relied on in the past, the company began marketing products to retail investors. In essence, the retail marketing plan allowed CIT to offload risk without the transparency it would face from institutional lenders.

“Investors who purchased CIT InterNotes may have been led to believe that CIT InterNotes were a suitable, conservative and stable investment at a time when CIT was under considerable financial pressure,” stated attorney Philip M. Aidikoff.

“The Financial Industry Regulatory Authority (FINRA) has taken note of this situation and is currently investigating whether the risks to CIT InterNotes were adequately disclosed to prospective clients,” said attorney Ryan K. Bakhtiari. “Investors should consider all of their options if they have suffered losses in CIT InterNotes.”

The individual brokers and individual advisors who sold CIT InterNotes are not targets of investor claims.

Aidikoff, Uhl & Bakhtiari represents retail and institutional investors around the world in securities arbitration and litigation matters. Attorneys for the firm have appeared before the Financial Industry Regulatory Authority (FINRA) and in numerous state and federal courts to resolve financial disputes between customers, banks, brokerage firms and other financial institutions. More information is available at www.citinternotes.com or www.securitiesarbitration.com or to discuss your options please contact an attorney below.

Administration Pushes For Mortgage Relief

2009-11-30T12:18:00.000-08:00

The Obama administration today announced a renewed push to get lenders to convert hundreds of thousands of temporarily restructured mortgages into permanent ones to help keep struggling homeowners from falling into foreclosure.

The changes include a requirement for mortgage lenders and servicers to provide updates to the administration, sometimes daily, about each mortgage being modified, and possible fines and other sanctions for those who do not meet certain performance obligations.

The moves come amid complaints of bureaucratic nightmares from people who have received the short-term reductions in their payments but have been unable to get their lender or servicer to make the changes permanent. The mortgages have been altered under the administration's $75-billion Home Affordable Modification Program, which uses financial incentives to get banks and other mortgage holders to reduce the payments for homeowners who meet certain qualifications.

The program has temporarily modified more than 650,000 mortgages as of Oct. 30, but few of those three-month trials are estimated to have been made permanent. As of Sept. 1, only 1,711 trial modifications had become permanent, according to oversight panel monitoring the $700 billion Troubled Asset Relief Program. TARP money is used to fund the program.

InvestmentNews -- LPL Sues Pac Life Over Purchase of Broker Dealers

2009-11-30T11:25:00.000-08:00

Indemnification dispute with the insurer won't affect their businesses, firm insists
By Bruce Kelly

At the same time that LPL Holdings Inc. and the three broker-dealers it bought from Pacific Life Insurance Co. were filing suit against the insurer, LPL was reaching out to its advisers to reassure them that the dispute wouldn't affect their businesses.
On Nov. 20, LPL sued Pacific Life, claiming that the latter was in breach of contract and trying to duck paying potentially millions of dollars of settlements and awards stemming from rogue brokers at the three subsidiaries, which were sold to LPL in 2007 for about $100 million in cash and stock.

In its lawsuit, filed in New York State Supreme Court in Manhattan, LPL said that “it is apparent that Pacific Life is merely seeking to avoid its express contractual obligations” over the payment stemming from arbitration claims.

Kathy TarantolaBill Dwyer: "We do not expect this legal matter to have any bearing on your business, your access to Pacific Life products or how you serve your clients," he wrote in a note to advisers. The same day, LPL sent a note to its network of 12,000 advisers, telling them about the legal development.
“We do not expect this legal matter to have any bearing on your business, your access to Pacific Life products or how you serve your clients,” wrote Bill Dwyer, LPL's president for national sales and marketing.

Not 'an issue'

“I don't see this as an issue,” said Frank Congemi, an LPL adviser. Pacific Life needs the broker-dealers and reps to sell its products, he said.
Mr.Congemi also doesn't see how annoying LPL would be good for Pacific Life.

He was formerly affiliated with Mutual Service Corp., one of the former Pacific Life firms. Along with about 1,700 other advisers, his securities license was transferred to LPL Financial, the biggest broker-dealer in the network, in September.

That was when LPL moved the former Pacific Life brokers onto its platform entirely, and industry observers have said that the move may have added to the legal dispute between the two sides.

Although many advisers have no reason to worry about the matter, LPL has set aside money as a result of the transfer of representatives and client accounts from the Pacific Life broker-dealers to LPL. Regulators required LPL to put the cash aside, LPL said.

“As a requirement for the regulatory approval for the transfer, the affiliated broker-dealers were required to deposit $12.8 million into escrow accounts pending the resolution of certain matters,” LPL said in its quarterly earnings report this month.

According to the LPL lawsuit, Pacific Life, as part of the deal's purchase-and-sale agreement, agreed to indemnify LPL from settlements, judgments, awards and defense costs from investor claims against the three firms for actions occurring prior to the closing of the deal.

So far, Pacific Life has ponied up “millions of dollars of settlement and defense costs related to” investor claims, the lawsuit states. However, the firm has suddenly switched tactics, the lawsuit claims, and refused last month to pay $57,000 to fund a settlement involving one of the broker-dealers LPL acquired, Associated Securities Corp.

In addition to that firm and Mutual Service, Pacific Life sold Waterstone Financial Group Inc. to LPL.

The dispute over which company is responsible for paying investors first came to light in LPL's quarterly earnings report this month. In the report, LPL made veiled references to the dispute.

Caving in

According to the lawsuit, Pacific Life has been searching for a way to cut its liabilities for months. In March, it told LPL that it had no obligation to cover an arbitration award of $8.4 million that had been issued against Associated Securities, according to the lawsuit.
When LPL and Associated Securities challenged that position, Pacific Life “abandoned” its argument and paid for the settlement. Representatives of LPL and Pacific Life said that the lawsuit wouldn't affect their continued relationship.

“As happens from time to time in the best of business relationships, LPL and Pacific Life disagree on the interpretation of a certain contractual provision,” Pacific Life spokeswoman Milda Goodman wrote in an e-mail. “This dispute will now be resolved by the courts, and will not disrupt the ongoing favorable business relationship between LPL, their financial advisers and Pacific Life.”

Likewise, an LPL spokesman, Joseph Kuo, said that the company doesn't expect the dispute to have an effect on the relationship between the company and Pacific Life.

SEC OBTAINS ASSET FREEZE OVER LIMITED PARTNERSHIP MANAGED BY CULVER CITY ADVISER

2009-11-29T11:44:00.000-08:00

The Securities and Exchange Commission ("Commission") obtained an asset freeze and other emergency relief to halt the continuing false disclosures being made by a Culver City, Calif. investment adviser.

The Commission alleges that Heath M. Biddlecome ("Biddlecome"), through his firm California Wealth Management Group, doing business as IFC Advisory ("IFC"), operated a limited partnership investment fund, raising $9.8 million from investors, many of whom were IFC clients.

The Commission's complaint alleges that Biddlecome established Homestead Properties, L.P. ("Homestead") to invest in mobile home park communities. The complaint further alleges that Biddlecome, without ever informing investors, changed the partnership's investment strategy to securities day trading. According to the complaint, Biddlecome transferred $4.5 million of the partnership's moneys and began to trade options, trade on margin, and engage in short sales. The complaint alleges that this risky day trading strategy has resulted in erratic performance, alternating between six figure trading losses to profits in various months; in September and October 2009 alone, the account value declined $1.9 million.

The Commission's complaint, which was filed in federal court in Los Angeles, alleges that the defendants falsely claimed that a brokerage firm would sell the partnership interests and an accounting firm would audit the partnership's books yearly. The complaint alleges that, in reality, Biddlecome ever enlisted these third parties to perform such services. In addition, although investors were told distributions would be made quarterly out of net profits and certain investors received distributions, Homestead suffered losses for two years. The complaint also alleges Biddlecome misappropriated partnership moneys to pay for his personal credit card bills.

SEC Charges Two Individuals With Illegal Insider Trading in Advance of Negative News

2009-11-28T11:43:00.000-08:00

On November 19, 2009, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the District of Nevada against R. Brooke Dunn, a former executive at Shuffle Master, Inc., and Nicholas P. Howey for illegal insider trading in Shuffle Master stock and options prior to an announcement of disappointing financial results by Shuffle Master.

The SEC's Complaint alleges that, on February 26, 2007, after he first learned that Shuffle Master would announce disappointing preliminary financial results, Dunn called Howey and provided him with material nonpublic information relating to Shuffle Master's anticipated announcement. Howey then immediately sold all of his previously-purchased Shuffle Master stock and calls and purchased Shuffle Master puts. The next day, after Shuffle Master announced its disappointing financial news, Howey sold all of the Shuffle Master puts he purchased the previous day. Through the foregoing transactions, Howey profited by (or avoided losses of) approximately $237,000.

The Complaint charges Dunn and Howey with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeks permanent injunctions, disgorgement of illegal trading profits, prejudgment interest, and civil penalties. The Complaint also seeks an order barring Dunn from serving as an officer or director of a public company.

SEC HALTS AFFINITY FRAUD TARGETING THE SOMALI COMMUNITY

2009-11-27T11:42:00.000-08:00

The Securities and Exchange Commission ("Commission") obtained a court order to halt a securities fraud targeting investors in the Somali immigrant community in San Diego, Seattle, and elsewhere.

The Commission's complaint names Mohamud A. Ahmed ("Ahmed"), age 45, of Spring Valley, Calif., and his company, Shidaal Express, Inc. ("Shidaal Express"), which operates in the San Diego area. The complaint alleges Ahmed formed Shidaal Express to provide check-cashing, money transfer, and other financial services for the Somali immigrant community, and a sign at one storefront location listed "Investment Opportunities" among the services provided. According to the complaint, Ahmed raised at least $3 million, including $200,000 from a San Diego mosque, by promising exorbitant guaranteed returns of 5% per month, or 60% annually.

The Commission charged Ahmed and Shidaal Express with committing securities fraud by making false and misleading statements to persuade people to invest with them. According to the complaint, Ahmed solicited investors through word-of-mouth, at a mosque in San Diego, at a presentation given in a Seattle-Tacoma hotel, and through Shidaal Express's website. The Commission alleges that Ahmed lured investors by assuring them they could receive their money back at any time. While initially paying investors monthly returns, the complaint alleges Ahmed tried to extract more money from the investors. The complaint alleges Ahmed eventually stopped paying monthly returns but continued lulling investors.

The Honorable Jeffrey Miller, United States District Judge

SEC Sues Dallas Company for Conducting Fraudulent $25 Million Promissory-Note Offering and Obtains the Appointment of a Receiver

2009-11-26T11:41:00.000-08:00

On November 20, 2009, the Commission filed suit in the United States District Court for the Northern District of Texas against Dallas-based company Capital Mountain Holding Corporation, its president Derek A. Nelson, and two other Nelson-controlled entities known as Systems XXI, Act I, LLC ("Act I") and Systems XXI, Act II, LLC ("Act II"). The Commission also named two other entities owned by Nelson, Plouteo, Inc. and Homaide Real Estate Services, Inc. as Relief Defendants.

The Commission alleges that beginning in 2008 Nelson offered and sold promissory notes issued by CMHC, Act I, and Act II. The notes were marketed through a website and by a Canada-based investment club. The proceeds were to be used to buy distressed properties. Nelson told investors that after acquiring the properties at a discount, he would improve, rent, and resell them at prices closer to the properties' true value, thereby generating the returns promised to investors. The CMHC notes promised 10% per month interest for three months. The Act I and Act II notes that paid 18% per annum for two years (Act I) and 21% per annum for five years (Act II). Nelson promised that 90% of Act I and Act II funds would be used to acquire real estate and to rehabilitate the properties for rental or resale. Nelson further represented that Act I and Act II would loan money to CMHC in exchange for first lien positions on CMHC's properties. Nelson persuaded many of the CMHC noteholders to rollover their CMHC note principal into the Act I and Act II notes because they would be "more secure."

Former Stratton Oakmont Executive Charged in Securities Fraud Case

2009-11-25T13:06:00.000-08:00

Irving Stitsky, a former executive at Stratton Oakmont, along with Mark Alan Shapiro and William B. Foster, have been found guilty of committing securities fraud. The crime involved more than 150 investors who together entrusted Stitsky with $18 million.

The three convicted perpetrated their illegal activity under an umbrella corporation known as, “Cobalt.” The company claimed to acquire and develop real-estate properties, some of which were never under its ownership. The three also lied to investors about the history of their company. In addition to these misrepresentations, Stitsky and Shapiro failed to disclose that they were convicted felons.

Stitsky is most known for his boiler room operations in the 1990s, actions that caused him to lose his securities licenses. Shapiro, on the other hand, served 30 months in prison after pleading guilty to bank fraud and conspiracy to commit tax fraud.

After the three-week trial, Stitsky, Shapiro, and Mr. Foster were found guilty of securities fraud, wire fraud, mail fraud and conspiracy charges.

SEC Charges Swiss National with Insider Trading

2009-11-24T15:55:00.001-08:00

The Commission today announced that it filed a First Amended Complaint against Lorenz Kohler (Kohler), a resident of Mels, Switzerland, and Swiss Real Estate International Holding AG (Swiss Real Estate) alleging that they engaged in insider trading in advance of the October 9, 2006 public announcement of a $566 million merger between CNS and GlaxoSmithKline plc. The First Amended Complaint alleges that Kohler purchased out-of-the-money call options in CNS in his personal account and in an account in the name of Swiss Real Estate, a company controlled by Kohler, based on material non-public information relating to the company's potential acquisition. The Commission alleges that Kohler and Swiss Real Estate realized illicit gains of approximately $387,566. The Commission further alleges that Kohler tipped his wife and his brother-in-law, who then traded in CNS options in advance of the announcement of the acquisition of CNS and realized significant illicit gains.

The First Amended Complaint also names Sacho Todorov Dermendjiev (Dermendjiev) as a relief defendant. The Commission alleges that Dermendjiev, who resides in Bulgaria, was the beneficial owner of banking and securities accounts over which Kohler held power of attorney. According to the First Amended Complaint, Kohler purchased option contracts on CNS stock for Dermendjiev's account just prior to announcement of the acquisition of CNS and sold these options immediately after announcement of the CNS acquisition, resulting in illicit gains of $74,655 for Dermendjiev.

33 Days to Opt Out of Schwab Yield Plus Class Action

2009-11-24T10:46:00.000-08:00

Aidikoff, Uhl & Bakhtiari announces that the deadline to opt out of the Schwab YieldPlus class action lawsuit is fast approaching. Schwab YieldPlus
Fund investors who are members of the class action -- which involves
the Schwab YieldPlus Fund Select Shares (Nasdaq:SWYSX) and the Schwab
YieldPlus Investor Shares (Nasdaq:SWYPX) -- have approximately 33 days
to submit their request to opt out of the class action if they wish to
pursue an individual arbitration claim with the Financial Industry
Regulatory Authority (FINRA).

"Charles Schwab marketed and sold the Schwab YieldPlus Funds as safe,
cash-like investment alternatives. Instead, evidence shows that the
funds contained more than 45% of toxic mortgage- and asset-backed
securities. This exposed investors to not only more risk but also the
potential for more financial losses," says Ryan Bakhtiari, an attorney
whose law firm Aidikoff, Uhl & Bakhtiari has successfully represented
investors in their claims against Charles Schwab and the YieldPlus
Funds.

Bakhtiari adds that investors who suffered financial losses in their
Schwab YieldPlus investments need to carefully consider whether they
remain in the Schwab class action lawsuit or submit their request for
exclusion and pursue a separate individual FINRA arbitration claim.

"For some investors, class action representation in the YieldPlus case
can be an attractive legal option when individual financial losses are
small. In other instances, however, filing an individual claim with
FINRA may be a more economically attractive option. Investors should
consult with counsel to review their options," Bakhtiari says.

Investors must submit their requests for exclusion by December 28,
2009, or they will be bound by the results of the class action lawsuit.

For more information about opting out of the Charles Schwab YieldPlus
class action, please contact us at 866-827-6537.

In 2007, the law firm of Aidikoff, Uhl & Bakhtiari joined an
association of three other law firms to assist investors who suffered
financial losses in the Schwab YieldPlus Funds and other subprime
mortgage-related investments. The laws firms include: Maddox, Hargett &
Caruso, P.C. of Indianapolis, Indiana, and New York, New York; David P.
Meyer & Associates Co., L.P.A. of Columbus, Ohio; and Page Perry, LLC
of Atlanta, Georgia.

Additional information is available at http://www.subprimelosses.com/charles-schwab.php or by contacting an
attorney below.