Criminal Law

ARS Crisis Over?

Posted on August 08, 2008
Well, in just a few short days (OK, a week) it looks like the ARS crisis is coming to a close.On Thursday, Citigroup settled state and federal claims, agreeing to buy $7.3 billion of the debt from individual investors and pay $100 million in fines, as well as pledging to help 2,600 institutional customers unload $12 billion of securities...

UBS' General Counsel Aufhauser Quits

Posted on August 06, 2008
UBS In-Houser Quits Over Securities InvestigationNo surprise here. As we discussed last week UBS investment banking general counsel David Aufhauserhas been named in the press as one of the UBS executives who sold his personal ARS holdings in December 2007 based on information he received from other executives, while the firm was pushing the securities on its customers.

ARS Solution? - Citigroup to Buy Back ARS?

Posted on August 06, 2008
Citi talks with regulators may lead to buybacksHere is an interesting solution to the ARS liquidity problem. Reuters and the WSJ are reporting that Citigroup is in settlement talks with regulators to resolve allegations that it engaged in wrongful conduct in selling auction rate securities to its customers...

NY AG to Sue Citigroup over ARS?

Posted on August 02, 2008
It appears that the New York Attorney General is getting ready to go after Citigroup, not only for ARS violations, but for destruction of evidence.We originally thought that the various headlines lines like "Citigroup subject of ARS investigations, too, filing shows - Financial Week were a bit over the top, since the substance behind the headline was that Citigroup disclosed in a 10-Q that it had received state and federal subpoenas...

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Merrill Accused of Securities Fraud

Posted on August 02, 2008
How many hits can a brokerage firm take? Merrill was at the center of the research analyst scandal just a few years ago, and now it looks like they may be center stage in the ARS scandal.According to the Wall Street Journal, Massachusetts regulators accused Merrill Lynch of co-opting "supposedly independent" research analysts to help them dump collapsing auction-rate securities on unsuspecting customers...

UBS General Counsel Implicated in Auction Rate Securities Party

Posted on August 02, 2008
It seems that UBS just can't keep themselves out of the news. First the tax fraud investigation, then the Auction Rate Securities lawsuits, then the Massacheuttes Attorney General's suit, and the New York AG's suit.Now this revelation from the Wall Street Journal - Today, the WSJ?s Liz Rappaport reports that David Aufhauser, the former general counsel to the Treasury Department and the current GC for UBS?s investment-banking arm is at the center of the complaint that New York AG Andrew Cuomo recently filed against the Swiss bank for fraud in the ARS market...

UBS Exec Admits Bank?s Sham Tax Shelters Broke U.S. Law

Posted on July 28, 2008
UBS exec admits bank?s sham tax shelters broke U.S. law - Financial Week: "UBS admitted it broke U.S. law in setting up sham offshore tax shelters for wealthy Americans and agreed to work with U.S. authorities in reviewing 19,000 accounts to identify clients who may have committed tax fraud...

NY AG sues UBS for Securities Fraud

Posted on July 24, 2008
I have not seen the complaint yet, but according to the AP story, the complaint is similar to the one brought last month by the AG's office in Massachusetts.The interesting part of this story is that the the NY AG - Andrew Cuomo is quoted as saying " UBS is not alone in this scheme...

Brokers Target of Criminal Investigation in ARS Scandal

Posted on July 14, 2008
First the State of Mass. went after UBS. Now Federal prosecutors are investigating whether two former Credit Suisse Group brokers lied to investors about how they placed their money into short-term securities.Obviously the ARS issue is a hot topic, but I am concerned at the attempt to criminalize the conduct of individual brokers, when it appears that the ARS marketplace was as close to a fraud as one could imagine...

UBS Charged With Fraud in Auction Rate Securities

Posted on July 04, 2008
Last week, the Massachusetts Securities Commission filed administrative proceedings against UBS Financial alleging that it defrauded its investors (and its own brokers) in connection with its sales of auction rate securities.Of course, the Commission's complaint are only allegations, thus far unproven, and UBS has not yet responded to the compliant...

Another Executive Convicted - Of Lying

Posted on June 24, 2008
Incredible. Henry Samueli, the co-founder of Broadcom has pled guilty to charges in connection with the backdating investigation at Broadcom. What is incredible is that Mr. Samueli did not plead guilty to backdating, or fraud, or any of the underlying crimes, he pled guilty to making a false statement to the SEC staff during the course of their investigation...

Obama Proposes a 52% Tax Rate

Posted on June 21, 2008
I hate to raise political discussion here, but this presidential election has to be one the most concerning in my lifetime. There is simply no good choice among the candidates. Sure, McCain supporters will tell you that he is a war hero, and Obama's supports will tell you that he is a great speaker, but neither of them will, IMHO, be a great president...

The 'Perp Walk' Debate: Prejudicial or Legit?

Posted on June 20, 2008
The WSJ Law Blog is discussing one of my pet peeves - the perp walk - when prosecutors take an innocent person, in handcuffs, and parade him or her before the press for a photo op. It is a disgusting practice, undermines a basic tenant of our constitution, and is simply low class...

Mel Weiss Sentenced to 30 Months for Kickback Scheme

Posted on June 03, 2008
Mel Weiss, the former king of the plaintiff's class action bar, was sentenced to 30 months in prison after plead guilty to charges that he and some of his partners obtained $251 million dollars in attorney fees, by paying $11 million in illegal kickbacks to lead plaintiffs...

FINRA Files Series of Consolidated Rules

Posted on May 27, 2008
FINRA has been undertaking the daunting task of combining the rules of the NASD and the NYSE, since the merger of the regulatory functions of the NASD and the NYSE last July. FINRA has said that as new rules are written and approved those rules will become part of the FINRA Consolidated Rulebook, and the NASD and NYSE version of the rule will be deleted from their respective rulebooks...

Cox Blames Other Regulators For Sub Prime Mess

Posted on May 23, 2008
The SEC has been taking a bit of heat for the subprime disaster. That heat is a bit unfair, since the SEC has nothing to do with the oversight of banks and mortgage lenders, and very little to do with the credit markets.Certainly the SEC takes part of the blame, at least so far as the valuation of those assets fell into the capital computations of brokerage firms, but even then, they are not the regulator that fell down on the job...

Law Professors and the SEC

Posted on May 12, 2008
Race to the Bottom has an interesting article and I learned something new.The White House announced that Troy Paredes from the University of Washington in St. Louis would be appointed to the Commission to replace Paul Atkins. What I didn't know is that there is a long history of law professors as members of the Commission - including William Douglas, James Landis, Bill Carey and David Ruder...

UBS Investigated for Tax Fraud

Posted on May 11, 2008
According to Bloomberg.com, the Department of Justice is investigating whether UBSank helped clients evade American taxes. The article reports that the Justice Department is investigating UBS's conduct in relation to services provided by Swiss-based client advisers to U...

Ailing UBS sells assets to BlackRock - InvestmentNews

Posted on May 06, 2008
Ailing UBS sells assets to BlackRock: Investment News reports - "Facing more than $37 billion in subprime-related write-downs, UBS AG announced today a preliminary deal with New York-based asset manager BlackRock Inc. to sell off some of its troubled assets"

Restrictive View of 10b-5 Statute of Limitations Prevails

Posted on May 01, 2008
Law.com - Judge Finds Securities Lawsuit Over Zyprexa Is Time-BarredJudge Jack B. Weinstein, in the federal district court in New York, dismissed a securities class action case against Eli Lilly and Company that challenged the drug manufacturer's alleged misrepresentations about the anti-psychotic drug Zyprexa, holding that the plaintiffs failed to file their suit within the statute of limitations...

Citigroup in Trouble?

Posted on April 30, 2008
Citigroup just sold $4.5 billion of shares of its stock, and sold an additional $6 billion preferred stock sale. Reports are that it is likely to face more write-downs in the future and may need to raise even more capital. According to reports of analyst reports, Citigroup management has shifted from believing it was essentially done raising new capital to signaling it is interested in raising more capital...

Citigroup Loses 5.1Billon and 9,000 jobs

Posted on April 18, 2008
Losing $5.11 billion dollars in a quarter is bad enough, but Citigroup is also cutting 9,000 jobs. I wonder how many of those jobs are going to be in the executive suite?

Merrill Lynch posts big loss - Yahoo! News

Posted on April 17, 2008
Merrill Lynch posted a nearly $2 billion first-quarter loss, and said it plans to cut 4,000 jobs after suffering several billion dollars of write-downs for subprime mortgages and other risky assets.Merrill Lynch posts big loss - Yahoo! News

Comment Period on Motions to Dismiss Ends Thursday

Posted on April 08, 2008
As everyone now knows, FINRA has a rule proposal pending to eliminate motions to dismiss in arbitrations. The comment period ends on Thursday, and very few comments have been submitted. The ones that have been made are almost uniformly in favor of the rule...

Ex-Brookstreet brokers file $36M claim

Posted on April 08, 2008
According to InvestmentNews, five brokers at the center of the collapse of Brookstreet Securities Corp. have filed a $36 million arbitration complaint against Brookstreet?s former clearing firm, National Financial Services LLC, alleging that hundreds of millions of dollars that clients lost in highly leveraged collateralized mortgage obligations were directly attributable to National Financial Services?wrongful conduct...

SEC Charges Five San Diego Officials with Securities Fraud

Posted on April 08, 2008
It is rare that you see the SEC filing charges against government officials, but yesterday the Commission announced that it had filed securities fraud charges against five former San Diego city officials who played key roles in the city?s inadequate municipal securities disclosures in 2002 and 2003...

Bear Stearns, Deloitte Sued Over Hedge Fund

Posted on April 08, 2008
The problems for Bear Stearns seem to keep on coming. After its fire sale to JP Morgan, today's news is that the liquidators of two of its hedge funds that collapsed last year, have filed suit against the company and its auditor, Deloitte & Touche seeking to recover over $1 billion in losses...

Comments Due on FINRA's Proposed Ban of Motions to Dismiss

Posted on April 06, 2008
FINRA's controversial rule change proposal, which would effectively force every arbitration case to a full hearing, regardless of the merits of the claim, is before the SEC for approval.The comment period ends on April 10, 2008. The claimant's bar has submitted their glowing support for the ban (not too much of a surprise there), there have been very few comments from the defense bar...

J.P. Morgan Offers Retention Deal To Bear Reps

Posted on March 31, 2008
JP Morgan would certainly like to hold on to the Bear Stearns reps - or at least their assets...or does it?First, reps who gross less than $250,000 a year can apparently take a hike. No retention bonus for them, or at least not one that has been announced...

Regulators Start Auction Rate Investigations

Posted on March 31, 2008
Auction rate securities are quickly becoming the next big retail investor problem. I am now getting calls almost daily from investors who say that they were sold the securities as an alternative to money market funds, and paid higher interest, and who now cannot sell their investments, which have become completely illiquid...

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