Madoff Sentenced to 150 Years

This morning, U.S. District Court Judge Denny Chin sentenced Bernard Madoff to the maximum sentence of 150 years of prison for his role in a “historic” multi-billion dollar fraud.

Judge Chin stated “Here the message must be sent that Mr. Madoff’s crimes were extraordinarily evil and that this kind of manipulation of the system is not just a bloodless crime that takes place on paper, but one instead that takes a staggering toll.”

Mr. Madoff’s “error of judgment” or “tragic mistake” (as he referred to his fraud) devastated the lives of thousands of people. While it is unlikely that Mr. Madoff’s former clients will receive any significant restitution, it is comforting to see that he was not able to buy leniency and that the maximum sentence was ordered.

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Another day, more advisers alleged of fraud

On June 11, 2009, the Securities and Exchange Commission filed two fraud actions against different financial/investment advisers.

Morgan European Holdings ApS, et al.

On June 11, the SEC obtained an emergency court order and asset freeze to shut down a fraudulent prime bank scheme. The action was filed in the United States District Court for the Middle District of Flordia against Morgan European Holdings ApS, a/k/a Money Talks, Inc. ApS, John Morgan, Marian Morgan, Bowman Marketing Group, Inc., Stephen E. Bowman, and Thomas D. Woodcock, Jr.

According to the Litigation Release, the SEC has alleged that the Defendants solicited investments in fictitious prime bank trading programs. As noted in the Release,

the Complaint alleges that, during 2006 and 2007, the defendants raised millions of dollars from investors to participate in a fictitious investment program involving the trading of financial instruments among top financial institutions. The defendants told investors that their principal was guaranteed or never placed at risk. However, according to the Complaint, the defendants used investor funds for various undisclosed purposes, including Bowman’s gambling expenses, mortgage payments by the Morgans, and Ponzi payments to some investors. The SEC claims that John Morgan, Marian Morgan, and Stephen Bowman have continued to lull investors into remaining complacent by promising the imminent payment of their principal and returns. None of the relevant offerings was registered with the Commission, nor were any of the defendants registered as a broker-dealer or associated with a registered broker-dealer.

The SEC claims that the Defendants’ actions violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. In addition the individual defendants were charged with violation of Section 15(a) of the 1934 Act. A hearing on the preliminary injunction is scheduled for June 25.

Aura Financial Services, Inc.

The SEC also charged an Alabama Broker-Dealer, Aura Financial Services, Inc., with engaging in fraudulent sales practices and high pressure sales tactics to convince customers to open an account and invest money with the firm. The SEC alleges that the firm and six of its representatives unfairly enriched themselves by more than $1 million in commissions and fees. At the same time, the customers’ accounts were largely depleted “through trading losses and excessive transaction costs.”

More information about this matter can be found by reading the SEC’s Litigation Release.

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Considering Investing in Mutual Funds?

The New York Times published an informative article by Tara Siegel Bernard on December 16, 2008 that discusses a lot of the basics of mutual funds.

This is a great article for anyone who is unfamiliar with mutual funds, but who has or is considering incorporating mutual funds into their investment portfolio.

Too often, investors are misled as to key features of the investments they are sold. Having a fundamental understanding of how different investments work serves two important benefits: (1) it allows an investor to better understand and communicate with their stockbroker or financial advisor; and (2) it provides the investor with a better means by which to interpret their periodic statements and other documentation so they can monitor their accounts.

The Kueser Law Firm represents investors that have been the victims of securities fraud, investment fraud, as well as other forms of stockbroker and financial adviser misconduct. In addition, the firm represents consumers that have been defrauded. If you would like to contact the firm for a free consultation, please call 816.374.5865 or visit our website, www.jmkesquire.com, for more information.

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Where to Turn for Financial Advice?

It seems that each day there is another story about allegations that an investment adviser has stolen money from their clients. Yesterday, the SEC filed a complaint alleging that a New York investment adviser had bilked his clients, many of whom were terminally ill or mentally impaired, out of $6 million.

Where do you turn? The New York Times published an interesting article on June 5, 2009, discussing this issue. The Financial Industry Regulatory Authority has a publicly available repository of information related to securities professionals (BrokerCheck) and the SEC maintains the IAPD, which is a database containing information related to investment advisers. While these are valuable sources in checking the background of investment professionals, they are often inadequate. The New York Times also published an article about financial planners in their “need to know” series that is worth reading.

Unfortunately, investors do not learn that their adviser has taken advantage of them until after they have suffered devastating financial losses. The Kueser Law Firm represents investors that have been the victims of securities fraud, investment fraud, as well as other forms of stockbroker and financial adviser misconduct. In addition, the firm represents consumers that have been defrauded. If you would like to contact the firm for a free consultation, please call 816.374.5865 or visit our website, www.jmkesquire.com, for more information.

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Another adviser allegedly defrauds clients

On June 10, 2009, the Securities and Exchange Commission charged Matthew Weitzman, a New York investment adviser, with defrauding his clients out of $6 million. According to the SEC’s Litigation Release (No. 21078), some of these clients were terminally ill or mentally impaired.

The SEC filed its complaint in the U.S. District Court for the Southern District of New York. The Litigation Release also states that:

The SEC alleges that Matthew D. Weitzman sold securities in clients’ brokerage accounts and illegally funneled their money to a bank account that he secretly controlled. While Weitzman spent the money on a multi-million dollar home, cars, and other luxury items, he provided false account statements to clients often showing inflated account balances and securities holdings. Weitzman also submitted to a broker-dealer phony letters from clients that purported to authorize the money transfers. When clients questioned Weitzman about the transfers they did not authorize, he misrepresented that he was withdrawing their funds to make legitimate investments.

Mr. Weitzman is the co-founder and a principal of AFW Wealth Advisors, which is an alternative name for AFW Asset Management, Inc., a registered investment advisor located in Puchase, New York. According to the SEC’s release, Mr. Weitzman was also the Compliance Officer for AFW.

This is another example in a long line of instances just this year where an investment adviser has been alleged to have abused the trust and confidence placed in them by their clients. Fortunately, securities regulators are taking a more active role in finding, investigating, and, where appropriate, prosecuting offenders. Unfortunately, clients are suffering millions, if not billions of dollars in losses.

The Kueser Law Firm represents investors that have been the victims of securities fraud, investment fraud, as well as other forms of stockbroker and financial adviser misconduct. In addition, the firm represents consumers that have been defrauded. If you would like to contact the firm for a free consultation, please call 816.374.5865 or visit our website, www.jmkesquire.com, for more information.

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