Toothless Watchdogs Need More Bite

by zamassoc on December 6th, 2011 at 3:37 pm : Comments 000

Below is a recent article published by Securities Attorney Jake Zamansky on Forbes.com:

A refreshing-if improbable-turn of events in the upcoming Presidential campaign would be for candidates to weigh in on how they would actually strengthen the Securities and Exchange Commission and the Commodity Futures Trading Commission. Only by giving them more firepower that we will see justice for what the big banks did over the past few years-and hopefully head off a repeat performance like we just saw with MF Global.

Fat chance. Talk about making government agencies stronger is not in vogue these days; indeed, it’s anathema to many on the right. The Republican field competes to one-up each other on how many agencies they would eliminate (even if they can’t always remember which ones they would put on the chopping block).

But if the two parties could only put aside their differences for a few moments and look at the damage done to investors since 2008, they would see the necessity of giving much sharper teeth to the government agencies that oversee the markets. Simply put, our regulators are not up to the job of investor protection. They’re like toothless watchdogs, all woof, snarl and howl, with little or no ability to bite.

Indeed, it’s the job of the President and Congress to give the regulators, namely the SEC and CFTC, the power, authority and resources-the snapping jaw-to meet their missions and keep market players honest.

As James Stewart noted in a column in the New York Times over the weekend, Wall Street’s giant firms-and their top executives-have so far dodged a day of legal reckoning from their roles in the collapse of the global economy.

Sure, everybody on the Street knew that creating crummy mortgage-backed securities for clients and then betting against them was immoral. Whether it was criminal is a different question and law enforcement has so far shied away from taking a hard line against the perps.

Goldman Sachs, in the person of ”Fabulous Fab” Tourré, last year had its day in the sun for putting together such a deal and then shorting it. The latest headline-grabbing case is the $1 billion package of mortgages that Citigroup sold to clients late in the boom. Citigroup traders then put a tidy $160 million profit in the company’s coffers by taking a short position on some of the mortgages, while clients lost $700 million.

After Citigroup and the SEC tried to settle fraud charges for $285 million, federal judge Jed Rakoff last week tossed out the agreement, saying the proposed settlement didn’t give him enough facts to evaluate the settlement and ordered the two sides to trial.

And here’s where the politicians can sharpen the teeth of our regulators.

A huge stumbling block for regulators is the watery semantics contained in the offering documents on deals that collapsed during the mortgage crisis, as well as the murky rules that govern what can and cannot be done by big banks pitching their clients on exotic products and then trading those same products for the banks’ own accounts.

President Obama has said as much. “One of the biggest problems with the collapse of Lehman the subsequent financial crisis and the whole subprime lending fiasco is that a lot of that stuff wasn’t necessarily illegal, it was just immoral or inappropriate or reckless,” he said at a press conference in October.

Last week, Mary Schapiro, the head of the SEC, formally asked Congress for stronger penalties to punish and deter securities law violations, to give the SEC sharper teeth.

Sounds reasonable and entirely necessary. We hope the Presidential candidates agree.

Disclosure: Zamansky & Associates are securities attorneys representing investors in arbitration and state and federal litigation against large financial institutions including Goldman Sachs and Citigroup.

Read article by Securities Lawyer Jake Zamansky on Forbes.com

Filed under SEC, Securities Arbitration, Securities Law News
and securities law

Zamansky & Associates Files Federal Class Action Lawsuit on Behalf of MF Global Employees

by zamassoc on December 5th, 2011 at 10:28 pm : Comments 000

December 5, 2011 - Zamansky & Associates today filed a federal class action lawsuit on behalf of MF Global employees who purchased MF Global shares .

** View Class Action Complaint

The suit is brought against the firm’s former Chief Executive Jon Corzine, other senior executives and directors on behalf of current and former employees who acquired stock in the company while Corzine led the firm. The complaint alleges that the defendants provided false information regarding the company’s financial condition and made statements that artificially inflated the stock price.

Plaintiffs are seeking class action status for all employees who acquired MF Global shares between May 20, 2010 and Nov. 3, 2011 through company-supported plans. Describing the case theory, Jacob Zamansky said, “Jon Corzine and the board breached their fiduciary duty to their employees and destroyed their careers and retirement savings.” At the time of the company’s bankruptcy Oct. 31, the firm had close to 2,900 employees.

Zamansky & Associates is working with co-counsel Girard Gibbs LLP on this matter.

Read Wall Street Journal article about class action lawsuit

Filed under Class Action Lawsuits, Jon Corzine, MF Global, MF Global Employees
and MF Global

Rakoff Rejection of Citi / SEC Settlement Pierces Wall Street’s Alice-in-Wonderland Thinking

by zamassoc on November 29th, 2011 at 6:17 pm : Comments 000

Below is a recent article published by Securities Lawyer Jake Zamansky on Forbes.com:

It’s not every day that a federal judge issues a landmark decision, particularly one that could help investors wanting to sue giant financial institutions. But that’s what happened Monday, when U.S. District Judge Jed Rakoff rejected a proposed $285 million settlement between Citigroup and the Securities and Exchange Commission that would have allowed Citi to put the SEC’s mortgage-backed-securities case in the rear-view mirror.

The SEC claims that Citigroup misled investors in a $1-billion fund holding assets the bank had projected would lose money. And just as Citigroup was selling the fund to investors, it shorted many of the fund’s underlying assets for its own account.

Under the proposed settlement, Citigroup would have avoided admitting any wrongdoing. Instead, Judge Rakoff struck a blow for investors by employing a little common sense-he essentially ruled that if a court is going to sign off on a settlement, it has to understand the merits of the allegations.

Since 1972, the SEC has allowed defendants like Citigroup to settle cases and pay substantial fines without admitting liability. Why should a bank pay a huge fine without admitting wrongdoing? According to Bloomberg news, the SEC adopted that policy so defendants could later claim publicly-and in private litigation-that they really hadn’t done anything wrong.

Such is the Alice-in-Wonderland logic of Wall Street. In the case of Citigroup, the bank was apparently happy to write a check for $285 million, as long as it didn’t have to admit it had done anything wrong. That admission would make for bad publicity for banks like Citigroup and also hand a hammer to investors looking to sue the bank.

Judge Rakoff is telling us that these “no-fault” settlements make no sense. How can a judge sign off on such a settlement when he or she doesn’t have enough facts to fairly evaluate it?

His decision also means that the SEC should only start fights it can finish, and shouldn’t plan on “wrist-slap” settlements. “If the allegations of the complaint are true, this is a very good deal for Citigroup,” he wrote. “Even if they are untrue, it is a mild and modest cost of doing business.”

Rather than allow Citi-or really its shareholders-to just cut a check and move on, Rakoff scheduled a public trial regarding Citi’s misconduct for this coming July.

The four-years-and-counting Great Recession, caused in large part by Wall Street’s deceptive packaging subprime-mortgage junk products, has apparently had an impact on Judge Rakoff’s thinking. “In any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth,” Judge Rakoff wrote. The proposed settlement is “neither fair, nor reasonable, nor adequate, nor in the public interest.”

Thank you, Judge Rakoff, for forcing Wall Street to finally face the music instead of allowing them to go on living in Wonderland.

Disclosure: Zamansky & Associates are securities attorneys representing investors in arbitrations and state and federal litigations against financial institutions, including Citigroup.

Read article by Securities Attorney Jake Zamansky on Forbes.com

Filed under Citigroup, SEC, Wall Street
and Citigroup

The Search for MF Global’s Missing 1.2 Billion Video

by zamassoc on November 29th, 2011 at 4:58 pm : Comments 000

Zamansky & Associates LLC (“Zamansky”) is investigating MF Global Holdings Inc. (“MF Global”) for possible violation of the federal securities laws.

Below is a video from CNBC about the search for the missing MF Global money with Jake Zamansky talking about the class action lawsuits filed against MF Global.

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Filed under MF Global, MF Global Employees, Zamansky Videos
and MF Global

MF Global: Where Did the Money Go?

by zamassoc on November 16th, 2011 at 4:18 am : Comments 000

Below is a recent article published by Securities Lawyer Jake Zamansky on Forbes.com:

When you’re a “Master of the Universe” like Jon Corzine, taking huge risks and betting billions of dollars on European government bonds is no problem-it’s fun! It’s what you do!

But when it comes to finding $600 million of missing client funds when your firm, MF Global, collapses into bankruptcy, that’s a different matter. Responsibly keeping track of client money, keeping accurate books and records-those are the basic skills that this Master of the Universe apparently lacks.

Indeed, acting prudently and putting your clients’ interests ahead of your own is kind of boring. And it is becoming painfully obvious that the Wall Street titans who ran MF Global can’t find $600 million.

As Rick Perry so memorably put it: Oops.

The drama of missing customer money that is unfolding from the wreckage of MF Global is enough to turn your stomach. Simply put, where on earth is the $600 million in MF Global customer funds?

According to a report in Tuesday’s Wall Street Journal [subscription required for full article], the hundreds of millions of dollars missing from MF Global accounts may have disappeared four days before the firm filed for bankruptcy at the end of October.

Regulators are trying to assess whether hundreds of millions of dollars in customer accounts were transferred in the week before the firm’s collapse. In a highly suspicious finding, regulators from the Commodity Futures Trading Commission say that those transfers were not recorded in MF Global’s general ledger.

“We’re still trying to assess how far back this goes,” said Thomas Smith, a CFTC official, according to the Journal. Mr. Smith made his comments on Monday before the Senate’s agricultural and banking committee.

The CFTC believes the missing money could still be somewhere inside MF Global, but admits that is a “remote possibility,” according to the Journal.

Here is the fundamental question: How, in late 2011, can we still have a system that allows this to happen?

The segregation of customer funds, a cardinal rule in our securities industry for the safety of investors, was of no importance at MF Global. And apparently, it had no real interest in keeping accurate books and records.

We have to ask: Is MF Global a possible re-run of Madoff, Stanford and the other scandals from the darkest days of 2008 and 2009? Let’s hope not, but as the days pile up with no answer to the mystery of the missing funds, the question has to be asked.

Read article by Securities Lawyer Jake Zamansky on Forbes.com

Filed under MF Global

Zamansky & Associates Announces Investigation on Behalf of MF Global Employees

by zamassoc on November 12th, 2011 at 9:45 pm : Comments 000

NEW YORK–(BUSINESS WIRE)–Zamansky & Associates has launched an investigation into the collapse and bankruptcy of MF Global, which has resulted in substantial harm to its employees, including job loss and the drop in value of MF Global stock, restricted stock or options awarded or held as a result of participation in an Employee Stock Ownership Plan (ESOP) or Stock Option Plans.

The firm is investigating claims that may be maintained by MF Global employees, including claims under the Employee Retirement Income Security Act (ERISA), the Worker Adjustment and Retraining Act (WARN) and other state and federal labor laws.

If you were employed by MF Global and wish to discuss your legal rights, please contact Jake Zamansky at (212) 742-1414 or jake@zamansky.com.

Filed under MF Global, MF Global Employees
and MF Global

MF Global: Big Bets Are Still the Rage on Wall Street

by zamassoc on November 12th, 2011 at 8:21 pm : Comments 000

Below is a recent article published by Securities Attorney Jake Zamansky on Forbes.com:

The macho, bet-the-house-on-red mentality is alive and well on Wall Street. And that’s despite the disastrous meltdown of 2008, which was caused by massive Wall Street bets on derivatives. Those ill-fated gambles nearly destroyed the global capital markets and have put our economy in a hole that it will take years to dig out of.

If you’re skeptical that the gambling spirit is back with a vengeance, all you have to do is look at Jon Corzine and the wreckage of the firm he ran for little more than a year, MF Global.

Details of the firm’s collapse into bankruptcy are still emerging, but one thing is clear: Mr. Corzine will spend the holidays far away from the casino of Wall Street. Instead, he’ll be huddling with his lawyers in deep discussions about his mismanagement of the bank, his billions in misguided bets on European debt, and the location of $600 million of missing customer funds.

Remember, MF Global was a highly specialized institution. It was designed for a select group of investors, those who used its platform to trade in commodities, futures and derivatives. This is heady stuff, for the smartest guys in the room only.

But that doesn’t make Mr. Corzine-who made his career by betting on Treasuries for Goldman Sachs in the 1990s-a genius. Sure, he was right in the 1990s, and Wall Street guys love to believe that, since they got it right once and got rich, they will get it right always.

A schoolboy could tell Mr. Corzine and his former traders at MF Global that history doesn’t work like that.

For all its pretentions to headiness, MF Global, we believe, failed to perform several of the basic tasks required of securities houses.

First, MF Global broke the cardinal rule in this industry: it failed to segregate customer funds.

Second, it appears that Jon Corzine used the firm’s capital to play his own hunches, placing bets on European bonds and ignoring the advice of other managers and senior executives.

Third, MF Global issued a $25 million bond offering in August and it’s already worthless.

While Mr. Corzine repeatedly said he wanted to build the next Goldman Sachs, this all reminds me more of Lehman Brothers.

This mess could wind up with civil and criminal charges against management, including Mr. Corzine, as well as massive lawsuits brought by the firm’s victims-its shareholders, bondholders and employees.

The management at MF Global was scrambling weeks before its collapse. The balance sheet was eroding as the firm’s Euro debt trades were rapidly moving against them. They were doing whatever they could to prop up firm as long as they could, but it was like using a spoon to bail out a sinking ocean liner. Senior manager and traders will be held accountable.

The Feds have been AWOL with Lehman Brothers and its executives got off scot-free, so there’s a good chance they will take a very different tack with MF Global. Regulators and law enforcement have to take serious steps to restore confidence in the market.

And Mr. Corzine, please, do us all a favor. In the future stay away from making big bets on the markets. Maybe one of his lawyers can get him a game of Yahtzee for an early Christmas present.

Disclosure: Zamansky & Associates are securities lawyers representing customers in arbitrations and state and federal court litigations against their brokerage firms.

Read article by Securities Lawyer Jake Zamansky on Forbes.com

Filed under MF Global
and MF Global

CNBC Interview of Jake Zamansky on MF Global Holdings

by zamassoc on November 3rd, 2011 at 5:42 pm : Comments 000

Zamansky & Associates LLC (“Zamansky”) is investigating MF Global Holdings Inc. (“MF Global”) for possible violation of the federal securities laws.

Below is the CNBC video interview of Jacob Zamansky discussing the MF Global Holdings investigation.

Filed under AFW Asset Management, Investment Banking, Jake Zamansky, MF Global, Zamansky Videos
and MF Global

TICs Suck Investors Dry

by zamassoc on November 3rd, 2011 at 3:28 pm : Comments 000

Below is a recent article published by Securities Attorney Jake Zamansky on Forbes.com:

Investors: watch out for TICs — no, not the bloodthirsty kind you have to be on guard for after a charming walk in the woods. We’re talking about a strange type of real estate partnership that promises safe, guaranteed returns but can wind up sucking the capital from your retirement account.

It seems that during the gold rush mentality that was the real estate market over the last decade, incompetent or unscrupulous stock brokers sold clients TIC partnerships as a way to defer paying taxes on real estate investments. Problem is, the value on the partnership, which is privately held and completely illiquid, can be extremely volatile and not nearly as safe as promised.

TICs stands for “tenant-in-common” exchanges, and became a phenomenon of sorts about 10 years ago after a change in the tax code. This is how they work: TICs allow the sellers of real estate to roll their proceeds over into other properties without incurring capital gains taxes.

Sounds great, right? As Jason Zweig of the Wall Street Journal on Saturday noted: “TICs were tailor made for a real estate bubble.”

Indeed, investors bought $13 billion of TIC securities from brokers from 2004 to 2008.

One huge problem that brokers sometimes fail to note when selling a TIC is the quality of the real estate the investor is rolling money into. In Mr. Zweig’s column, he tells the story of an elderly couple from Tennessee who sold a local theater for $1.2 million, and then bought two TICs with that money. The offering documents projected an annual yield of 6.5%.

That has not turned out to be the case. The monthly income from the investments has dropped from about $5,000 per month to $300. A big problem has been vacancies at one of the buildings.

Mr. Zweig notes that it’s hardly worth paying a 7% or greater commission to avoid a 15% capital gains tax. Add the troubles of the bloated real estate market, and these TICs are revealed for what they really are: a high-fee, illiquid product pumped out by unscrupulous brokers for investors who are “chasing yield.”

In this case, it’s paying high fees for tax deferral when investors sell real estate that has appreciated. TICs are simply bad news, whether from a walk in the woods, or if a broker tries to sell you one. Buyer beware.

Read article by Securities Lawyer Jake Zamansky on Forbes.com

Filed under TIC, Tenants in Common
and TIC

Lehman Brothers Structured Note Holders Deadline

by zamassoc on November 2nd, 2011 at 12:04 am : Comments 000

Zamansky & Associates Announces Notice of 11/4/11 Deadline for All Lehman Brothers Structured Note Holders

All holders of structured notes issued by the now-bankrupt Lehman Brothers Holdings, Inc., including so-called “100% Principal Protection Notes,” recently received a notice from the committee representing unsecured creditors in the bankruptcy proceeding. The committee recommends that noteholders vote to accept a plan under which they would receive 21¢ on each dollar invested. The committee provides a voting deadline of November 4, 2011.

Many noteholders have questions about this notice. They should be aware that the bankruptcy proceeding should be viewed as separate and apart from any legal claims they may have against the brokerage firm that sold them their Lehman structured notes, including UBS Financial Services, Inc.

If you would like to discuss this notice or legal claims to recover losses that resulted from investing in Lehman structured products, please contact our  Securities law firm at 212-742-1414 or email us jake@zamansky.com.

Filed under Lehman Brothers, UBS
and lehman ubs