Articles Posted in Investor Fraud

shutterstock_24531604-200x300Our firm is investigating claims made by The Financial Industry Regulatory Authority (FINRA) and the Securities Exchange Commission (SEC) against broker Richard Cody (Cody) that involves potentially millions in either stolen client funds or misrepresentations concerning the state of their accounts.  Cody is a formerly associated broker with brokerage firms Westminster Financial Securities, Inc. (Westminster), Concorde Investment Services, LLC (Concorde Investment), and IFS Securities (IFS).  Cody conducted his business through his advisory firm Boston Investment Partners.  According to brokercheck, Cody has been subject to three regulatory events, two investigations, and 15 customer disputes among other disclosures.

The SEC’s complaint lays out an astonishing scheme to defraud investors.  The SEC alleged that Cody would tell retired clients that their accounts were flourishing and making money when in fact they were dwindling to near-zero balances.  The SEC tells the tale of three clients who were lied to by Cody about their rapidly depleting retirement accounts through monthly deductions that were unsustainable.

Further, to make the scheme work Cody fabricated account statements, told clients they were withdrawing investment gains rather than depleting their principal, and sent a doctored document to indicate that a financial firm was holding an annuity on behalf of one client.  Cody’s conduct occurred over a 12 year period in which Cody was registered as a broker with five different independent firms.

In addition, Cody was suspended from the securities industry by FINRA from January 7, 2013 to January 6, 2014 for allegedly sending clients inflated account statements while at Westminster and Concorde.  Despite the suspension Cody continued to manage his accounts and violate the terms of the suspension by turning the accounts over to his wife Jill who was also registered with Westminster Financial and Concorde Investment.

During his suspension, Cody used personal email accounts to communicate with clients about investment strategies that then forward recommendations to Jill to execute trades.  Cody is also alleged to have forged client signatures to move their accounts to IFS.  Jill Cody was later the subject of separate FINRA sanction for her facilitation of Cody’s conduct.

Finally, Cody was fired by IFS Securities, his seventh and last employer, in September of 2016 on allegations of selling away and forgery.

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shutterstock_184929191Our firm is investigating claims made by Securities and Exchange Commission (SEC) against broker Peter Kohli (Kohli), DMS Advisors, Inc. (DMS Advisors), and Marshad Capital Group, Inc. (Marshal).  See SEC v. Peter R. Kohli, et al, (E.D. Pa.). According to the SEC, from 2012 through 2015 Kohli lied to induce over 120 investors to invest at least $3.2 million in entities owned or controlled by Kohli.  Kohli was a registered representative of Trustmont Financial Group, Inc. (Trustmont) from July 2010 until May 2015 out of the firm’s Leesport, Pennsylvania office location.  In April 2015 Trustmont permitted Kohli to resign for accepting loans from a client.

The SEC allged that Kohli launched the DMS Funds that consisted of four emerging markets mutual fund series.  Kohli allegedly solicited his own customers and clients to invest in the funds using prospectuses and other documents that contained misrepresentations overstating DMS Funds’ sophistication and ignored key risks associated with the investments.  The SEC alleged that as the fund collapsed due to Kohli’s recklessness, Kohli engaged in three other frauds in an effort to keep the funds afloat.  One such alleged fraud was that Kohli made material misrepresentations in connection with the sale of warrants 10 purchase Marshad stock – an entity Kohli controlled. In addition, the SEC accused Kohli of misappropriating investor money that he solicited for the purported purpose of making investments into one of the finds and instead used the money to pay fund expenses. Finally, the SEC accused Kohli of lieing to investozs in connection with the sale of Marshad promissory notes in a desperate attempt to raise money to cover fund expenses and delay the DMS Funds’ collapse.

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shutterstock_97819226The securities lawyers of Gana LLP are investigating a customer complaint filed with The Financial Industry Regulatory Authority (FINRA) against broker Robert Rotunno (Rotunno).  According to BrokerCheck records Rotunno has been subject to at least six customer complaints.  The customer complaints against Rotunno allege securities law violations that including unsuitable investments, churning, and excessive trading among other claims.

The most recent complaint was filed in July 2016 alleging $80,000 in damage stemming from churning and unsuitable investments.  The complaint settled for $20,000.

Rotunno is currently associated with National Securities Corporation (National Securities), a firm recently featured in a study ranking brokerage firms by incidents of misconduct.  According to a study conducted by the Securities Litigation and Consulting Group entitled “How Widespread and Predictable is Stock Broker Misconduct?” the incidents of investor harm at National Securities is extraordinarily high.  The study ranked National Securities as the third worst brokerage firm finding that brokers at the firm had over a 31% misconduct rate.  The study stated that investors should stay away from National Securities “Given their coworkers’ disclosure record as of 2014, 83.7% of the brokers at these six firms would be in the highest risk quintile as defined in the FINRA study and should be avoided by investors. The BrokerCheck reports for most of the brokers at these six firms should prominently display a skull and crossbones warning.”

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shutterstock_177082523The securities fraud lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Christopher Cowans (Cowans).  According to BrokerCheck records Cowans has been the subject of at least nine customer complaints and one regulatory action.  The customer complaints against Cowans allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.

In December 2014, the State of Massachusetts required Cowans brokerage firm, Arthur W. Wood Company, Inc. (Arthur W. Wood), to agree to a heightened supervision plan for Cowans in light of the fact that Cowans “has been the subject of twelve customer complaints…alleging…making excessive trades…”

The most recent complaint was filed in December 2015 alleging that Cowans engaged in excessive trading from March 2011 until December 2013 causing $600,000.  The complaint is still pending.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time.  Often times the account will completely “turnover” every month with different securities.  This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades.  Churning is considered a species of securities fraud.  The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions.  A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements.  Certain commonly used measures and ratios used to determine churning help evaluate a churning claim.  These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

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shutterstock_120556300The securities lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Marc A. Reda (Reda). According to BrokerCheck records, Reda has been subject to fourteen disclosures including seven customer complaints, one Judgment/Lien and one criminal charge, two employment terminations for cause, and one Investigation by FINRA. The customer complaints against Reda allege a number of securities law violations including that the broker made unsuitable investments, breach of fiduciary duty and over concentration of investments in customer’s account among other claims. Five customer complaints have been filed against Reda in 2016 alone.

The most recent customer complaint was filed In June 2016 alleging breach of fiduciary duty and recommending unsuitable investments causing $100,000.00 in damages while employed with PHX Financial Inc (PHX Financial).  In April  2016, another customer alleged unauthorized trading occurred in the customer’s account and breach of his fiduciary duty. This claim settled for $85,000.  FINRA records disclose an Internal Revenue Service lien filed in the Supreme Court of Richmond County in 2011 against Reda in the amount of $575,101.  The inability of a broker to manage his own finances can be a red flag indicator that the broker may be tempted to sell high fee products to clients for the broker’s own benefit.

In addition, Reda is under investigation by FINRA in which the agency claims to be reviewing both current and former clients of Reda and the respective activity in the accounts to see if there were any rule violations.

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shutterstock_94632238In May 2016 the Department of Justice (DOJ) filed a five-count indictment in New York against nine defendants including Jared Mitchell, the Managing Partner of Mitchell & Sullivan Capital LLC; Richard Brown, a registered broker with Chelsea Financial Services; Christopher Castaldo, the Chief Executive Officer of Stock Traders Press Inc. and the President of Wall Street Buy Sell Hold Inc.; Gerald Cocuzzo, also known as “Gerry,” a registered broker formerly with Newbridge Securities Corporation; Naveed Khan, also known as “Nick,” a registered broker formerly with Meyers Associates, L.P.; Herschel Knippa III, also known as “Tres,” the owner and Head Trader at Kenai Capital Management LLC; Maroof Miyana, a registered broker formerly with Legend Securities; Pranav Patel, a registered broker formerly with Dawson James Securities; and Louis Petrossi, the founder and Chief Executive Officer of the Wealth Research Institute.

The DOJ’s charges involve the unlawful sale and activity related to stock ForceField Energy Inc. (ForceField), a publicly-traded company under the ticker symbol “FNRG.”  The charges include securities fraud, conspiracy to commit securities fraud, wire fraud, money laundering and making a false statement to law enforcement officials in connection with the fraudulent market manipulation of the stock.

The DOJ alleged that the defendants employed of scheme together with dishonest registered brokers to perpetrate an elaborate but fraudulent scheme built on lies, kickbacks and manipulated trading activity.  The defendants essentially used a company with no business operations and little revenue and deceived the market and their clients into believing it was worth hundreds of millions of dollars through unauthorized trades and deceptive promotions.

The defendants are alleged to have abused their positions as stock promoters, brokers, or investor relations to push up the stock’s price in a fraudulent fashion costing investors approximately $131 million in losses.

The specific allegations concerning the corrupt brokers focuses on that in October 2014, a ForceField executive hired Mitchell to distribute kickbacks to corrupt registered broker dealers, including Brown, Cocuzzo, Khan, Miyana, and Patel, in exchange for their purchasing of ForceField stock in their clients’ brokerage accounts.  In order to pay the brokers bribes, ForceField paid Mitchell a ten-percent commission or a kickback for purchases of ForceField stock generated by the corrupt brokers using offshore entities and bank accounts.  Mitchell then is alleged to have shared the ten-percent commission with those who had stuffed their clients’ brokerage accounts with ForceField stock.  Investors were never disclosed the secret kickbacks that were received for making the ForceField purchases.

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shutterstock_120556300The securities lawyers of Gana LLP are investigating a customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Mitchell Foote (Foote).  According to BrokerCheck records Foote has been subject to at least four customer complaints.  The customer complaints against Foote alleges securities law violations that including unsuitable investments and misrepresentations among other claims.   Many of the complaints involve direct participation products (DPPs) and private placements including non-traded real estate investment trusts (REITs), variable annuities, and other potentially other alternative investments.

Our firm has represented many clients in these types of products.  All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds.  For example, products like oil and gas partnerships, REITs, and other alternative investments are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed.  However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them.  Further, investor often fail to understand that they have lost money until many years after agreeing to the investment.  In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client.  In order to make a suitable recommendation the broker must meet certain requirements.  First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors.  Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

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shutterstock_155271245The securities lawyers of Gana LLP are investigating a customer complaint filed with The Financial Industry Regulatory Authority (FINRA) against National Securities Corporation (National Securities) broker Jason Wilk (Wilk).  According to BrokerCheck records Wilk has been subject to at least one customer complaint.  The customer complaints against Wilk alleges securities law violations that including unsuitable investments, unauthorized trading, and breach of fiduciary duty among other claims.

In January 2016 a customer filed a complaint alleging $53,532 in damage stemming from unsuitable investment.  The complaint settled.

According to a recent study conducted by the Securities Litigation and Consulting Group entitled “How Widespread and Predictable is Stock Broker Misconduct?” the incidents of investor harm at National Securities is extraordinarily high.  The study ranked National Securities as the third worst brokerage firm finding that brokers at the firm had over a 31% misconduct rate.  The study stated that investors should stay away from National Securities “Given their coworkers’ disclosure record as of 2014, 83.7% of the brokers at these six firms would be in the highest risk quintile as defined in the FINRA study and should be avoided by investors. The BrokerCheck reports for most of the brokers at these six firms should prominently display a skull and crossbones warning.”

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client.  In order to make a suitable recommendation the broker must meet certain requirements.  First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors.  Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

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shutterstock_156562427The securities lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Charles Geraci (Geraci). According to BrokerCheck records Geraci is subject to six customer complaints. The customer complaints against Geraci allege securities law violations that including unsuitable investments, breach of fiduciary duty, fraud, misrepresentations, and negligence among other claims.   Most of the claims appear to largely relate to allegations regarding the inappropriate sale of direct participation products such as limited partnerships, equipment leasing, oil & gas investments, and non-traded real estate investment trusts (Non-Traded REITs) and also variable annuities. The complaints specify certain oil & gas programs and United Mortgage Trust (UMT).

Our firm has represented many clients in these types of products. All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds. For example, products like Non-Traded REITs, equipment leasing, variable annuities, and oil & gas private placements are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products. However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. Further, investor often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

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shutterstock_184149845The securities fraud attorneys of Gana LLP are investigating fraud charges by The Securities and Exchange Commission (SEC) against American Growth Funding II, LLC, Portfolio Advisors Alliance, Inc., Ralph C. Johnson (Johnson), Howard J. Allen III (Allen) and Kerri L. Wasserman (Wasserman) accusing the defendants of repeatedly lying to investors purchasing high-yield securities. Portfolio Advisors Alliance is the brokerage firm that acted as the placement agent for the fund. The SEC alleged that between March 2011 and December 31, 2013, the Fund sold approximately $8.6 million worth of its units to at least 85 investors.

According to the SEC American Growth Funding II and Johnson promised investors 12-percent annual returns and falsely claimed its financial statements were being audited each year. The Fund also made misrepresentations in offering documents about its management and concealed details about deteriorating loan values. The SEC also alleged that Portfolio Advisors Alliance and its owner Allen and president Wasserman knew the offering documents were inaccurate and yet continued using them to solicit sales of the Fund.

According to the SEC’s complaint a number of misrepresentations and omissions were made to investors including: (1) that the company represented in offering documents that its financial statements had been audited and would continue to be audited each fiscal year when Johnson knew this statement was false and no audit of the Fund’s financials occurred until 2014; (2) that the offering documents represented that the Fund was governed by a Board of Managers comprised of Johnson and two other individuals when the two individuals never agreed to serve; (3) that Johnson caused the Fund to send out monthly account statements to investors that concealed the precariousness of its business because the company could not have possibly paid investors their stated account balances; (4) that Allen became aware by no later than June 2012 that the Fund’s offering documents were not accurate but continued using them to solicit investors; and that Allen informed Wasserman that the Fund offering documents contained false information but Wasserman took no action and the firm’s brokers continued using misleading documents to solicit investors.

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