News Archive

Stockbroker Litigation News

Worker Lawsuit Over Ford Stock to Go Forward
A judge has ordered Ford Motor Co. to start discussing settlement of a lawsuit filed on behalf of employees who had company stock as a retirement investment. Current and former nonunion workers claim it was a mistake for Ford to offer company stock as an investment for retirement. From 2000 to 2006, the stock fell approximately 70 percent and now trades under $2.20. The lawsuit claimed that Ford's stock was an investment option, and a company match, during a volatile period for the automaker. The judge ruled in the workers' favor, finding that Ford failed to apprise participants of the myriad of systemic, internal and marketplace problems which threatened the viability of the company. 

SEC to Charge Executives at Failed Money Market Fund
Reserve Management Co., which is facing a slew of investor lawsuits after its money market fund fell below a key safety benchmark, said the SEC plans to charge the company and its management with violations of securities laws. Reserve Management claimed its Reserve Primary Fund "broke the buck," with its underlying assets falling below $1 for each investor dollar put in, after its value fell sharply because of soured investments in Lehman Brothers. The SEC's Division of Enforcement have informed the company's counsel that the SEC intends to bring action against Reserve and three company executives. 

Lehman Broker Charged in Insider Trading Case
A former Lehman Brothers broker who gleaned tips about pending mergers from his wife, a partner at a high-powered public relations firm, has been charged in a wide-ranging insider trading scheme that earned $4.8 million in profits for several people including a former Playboy model and two lawyers. Federal prosecutors and the Securities and Exchange Commission claim that the broker enabled clients and friends to make millions of dollars while he was rewarded with gifts including cash, a Cartier watch, a widescreen television and tuition at a Porsche driving school. Prosecutors allege that by providing inside information, he curried favors with his friends and business associates and received in return cash, luxury items and other benefits.  

Six Charged in $40 Million Securities Class Action Scheme
Six people participated in a scheme to obtain more than $40 million from some of the largest securities class action settlements in the last 10  years. Between 2001 and 2007, the group allegedly created fake companies and submitted fraudulent claims to receive shares of various settlements. According to the charges, in all three settlement agreements unnamed accounting firms acted as claims administrators responsible for disturbing the settlement funds. 

SEC Charges Pennsylvania Billionaire with Insider Trading
The U.S. Securities and Exchange Commission charged Mark Cuban, former Pennsylvania resident and one of the richest people in the world, with insider trading, saying he used confidential information about an Internet company's stock offering to avoid losses of more than $750,000. The SEC claims that in 2004 he sold 600,000 shares of a search engine business hours after he learned through confidential discussions that the company's public stock sale would be below market price. Cuban, owner of the Dallas Mavericks, was told the confidential information by the CEO of the search engine company, after which he called his broker and told him to sell all his holdings in the company.  

SEC Brings Second-Highest Number of Enforcement Actions in History
The Securities and Exchange Commission brought 671 enforcement actions in fiscal year 2008, the second-highest total in the agency's history. The SEC also repeated last year's total of distributing more than $1 billion to investors harmed by others' actions during fiscal year 2008. The agency's higher enforcement caseload includes a spike of more than 25 percent in insider trading cases and more than 45 percent in market manipulation cases, compared with fiscal year 2007 actions. The SEC also reported that it is conducting more than 50 investigations related to the subprime mortgage market.  

Broadcom Founder and Prosecutors Decline to Withdraw Plea Bargain in Backdating Case
The founder of Broadcom Corp. and federal prosecutors in the criminal backdating case involving the manufacturer have declined to withdraw a plea agreement that the federal judge overseeing the case has said would "erode the public's trust in the fundamental fairness of our justice system." A judge rejected the plea deal last month. Under those arrangements, the founder would serve five years probation, pay a $250,000 fine and make a $12 million payment to the U.S. Treasury. The judge said the deal would give the perception that "justice is for sale." However, both the founder and the prosecutors who negotiated the plea are refusing to reject it. 

Former CEO and CFO of Duane Reade Charged with Securities Fraud
Duane Reade Inc.'s former chief executive and chief financial officer were indicted on charged of exaggerating the income of the New York area's largest drug store chain by millions of dollars. The two are alleged to have deceived the investing public by providing false and misleading information about Duane Reade's financial condition while lining their own pockets with millions of dollars in compensation. 

Goldman Sachs Hit with Suit Over Student-Loan Auction Securities
Two institutional investors have sued Goldman Sachs Group Inc. for allegedly convincing them to continue buying auction rate securities when the Wall Street firm knew the market for them was collapsing. Both investors claim that Goldman hid a drop in third-party demand for the securities in August 2007 and even began secretly increasing purchases for its own accounts to create and maintain "the illusion of continuing liquidity in the market." 

Former UBS General Counsel Settles Insider Trading Allegations
The former chief lawyer for UBS' investment bank has agreed to pay $6.5 million to settle an allegation that he dumped his investments in auction-rate securities after getting a company e-mail warning that the market was in trouble. As part of the deal, he will give up a $6 million bonus that he had been scheduled to receive from UBS and the money will go to the state instead. He will also pay a $500,000 penalty.

Shareholder Suits Face Uncertainty and Higher Hurdles
The bailouts and bankruptcies of some of Wall Street's most prominent financial firms could hinder the claims of plaintiffs who have filed shareholder lawsuits against those companies. Also, attorneys warn that shareholder actions face much greater difficulty than those filed against Enron and WorldCom. The bankruptcies of Lehman Brothers, AIG and Freddie and Fannie have put a temporary freeze on the dozens of shareholder lawsuits filed in recent months against those companies. While most of the companies have not responded to the suits, which generally allege securities fraud and breach of fiduciary duties, many defense attorneys anticipate that plaintiffs could have a difficult time blaming specific companies and their individual directors and officers for what could be interpreted as uncontrollable economic forces that caused the unprecedented collapse of so many firms.

Fidelity to Buy Back $300 Million in Auction-Rate Securities
Fidelity Investments will buy back $300 million worth of auction-rate securities from its customers, becoming the first major retail brokerage to make restitution in a wide-ranging investigation. Fidelity is the first so-called "downstream" distributor to settle an auction-rate securities probe. Fidelity has agreed to buy back the securities from any of its customers including individuals, businesses and charities. The securities were marketed as being as safe as cash until the market froze up.

Former UnitedHealth Group CEO to Pay $30 Million to Settle Options Lawsuit
The former chief executive of UnitedHealth Group will pay $30 million and return stock options representing more than 3 million shares to settle a class action lawsuit. The $30 million will be added to the $895 million UnitedHealth agreed to pay earlier this year to settle the lawsuit. The securities class action accused company executives of wrongdoing over the backdating of stock options. 

Bank of America in $4.5 Billion Auction-Rate Settlement
Bank of America Securities will buy back $4.5 billion in auction-rate securities form customers who purchased the flawed investment instruments in a settlement. The deal settles another in a series of investigations into various financial services firms' marketing of what had been touted as a safe investment bet but proved virtually useless when the market for them collapsed. The settlement's terms call for Bank of America to buy the securities back from retail and small business customers holding up to $10 million worth of them and from charitable organizations holding up to $25 million worth. 

Apple to Settle Backdating Case for $14 Million
Apple Inc. and several of its officers and directors, including chief executive Steve Jobs, have agreed to settle a stock options backdating case for $14 million, plus attorney fees and costs. Apple also agreed to pay $7.3 million in attorney fees and $300,000 to plaintiffs in the federal actions, as well as $1.2 million in attorney fees and $50,000 in expenses to plaintiffs in the state cases.

SEC Takes Notice After Company Ignores Lawyers' Advice on Backdating
In 2004, lawyers told the chief financial officer at Embarcadero Technologies Inc. that stock options should "absolutely not" be granted "retroactively." However, the technology company did not heed their lawyers' advice, and were charged by the San Francisco Securities and Exchange Commission with backdating stock options from 2000 to 2005.

Judge Green Lights Most of Option Backdating Suit
A California judge has compounded the stock option backdating woes of Maxim Integrated Products by allowing investors to proceed with most of their suit against officers and directors of the beleaguered company for illegal options manipulation. The judge said that most of the plaintiffs' securities fraud and breach-of-duty claims in the consolidated suit contained enough specifics to survive a motion to dismiss. The ruling is significant because few shareholder stock-option-backdating actions have cleared a threshold test required of all suits brought in the name of the company and because closely watched actions filed against Maxim in several courts have generated numerous important decisions. 

Two Brokers Accused of $1 Billion Subprime Fraud
Federal prosecutors and regulators accused two former Wall Street brokers of defrauding customers by making more than $1 billion in unauthorized purchases of securities tied to subprime mortgages. The two former Credit Suisse Securities brokers were charged with deceiving customers in a bid to pump up their sales commissions.  

Hedge Fund Founder to Pay Nearly $300 Million
A federal court ordered the former president and founder of a hedge fund to pay nearly $300 million for defrauding clients. The government claims the president stole $200 million from clients between 2001 through 2005. The government also accused him of creating false account statements, hiking management fees based on false profits and transferring clients' money to himself. 

GM and Auditor to Pay $303 Million to Settle Shareholder Suits
General Motors and its auditor have agreed to pay $303 million to settle shareholder charges that for seven years GM's officers and directors used accounting tricks and misinformation to hide the auto giant's declining fiscal health from investors. The suits said investors lost billions of dollars because GM's officers and directors repeatedly inflated the company's stock value with improper accounting practices and misleading fiscal statements beginning in 2000 and that auditor Deloitte & Touche failed to raise a red flagon the fraud. 

JP Morgan and Morgan Stanley Settle Auction-Rate Securities Probes
JP Morgan Chase & Co. and Morgan Stanley will spend more than $7 billion to buy back auction-rate securities in a settlement with New York's attorney general and the SEC Enforcement Division. The deal ends investigations by the SEC and several states' attorneys general into false claims made by the two firms in marketing auction-rate securities. At issue was the firms' continuing effort to bill the securities as a safe investment even after the unraveling credit markets made them risky, less easily liquidated bets.  

New York Attorney General Settles for $7 Billion with Citigroup
The New York attorney general has reached a settlement worth more than $7 billion with Citigroup that requires the company to buy back auction-rate securities from about 40,000 customers nationwide. The company agreed to the settlement after the attorney general threatened to charge Citigroup with fraudulent sales of auction-rate securities and with the destruction of key documents.  

Judge Tosses $277 Million Jury Verdict in Securities Class Action
In January, a jury ordered Apollo Group to pay $277 million in compensatory damages for misling their investors and not disclosing that they were being investigated by the U.S. Department of Education for violating federal law in the way it compensated its college recruits. However, a judge recently overturned the jury's verdict, ruling that investors did not prove that the original disclosure of the Education Department review was the reason Apollo Group stock dropped.  

Prosecutors Recommend One Year of Probation for Milberg Kickback Defendant
Federal prosecutors in the criminal kickback case against securities firm Milberg are recommending that Richard Purtich, a Los Angeles lawyer who was one of the first to plead guilty in the case, be sentenced to one year of probation. Two Milberg partners were indicted in 2006 with obtaining more than $200 million in attorney fees by paying kickbacks to lead plaintiffs in their cases.  

SEC Files Fraud Actions Against Fuel and Wireless Firms
The Securities and Exchange Commission has filed fraud actions against two Southeastern companies, alleging that they engaged in "pump and dump" schemes in which companies distribute bogus information to pump up share prices, only to dump the stock and leave investors with huge losses. One company is a Georgia-based wireless firm and the other is Mississippi-based energy corporation that produces biofuel from soybeans.

Coke Settles Fraud Suit for $137.5 Million
The Coca-Cola Co. will pay $137.5 million in cash to settle a securities fraud suit originally brought in 2000 by Coke shareholders. The suit alleged that former Coke executives in the late 1990s engaged in a massive securities fraud based on a practice known as "channel-stuffing". The practice allegedly involved pressuring soft drink bottlers, who bought concentrated syrup from Coke, into buying at least $600 million worth of excess concentrate to bolster sales artificially. The goal was to mask faltering Coke revenues and persuade Wall Street that Coke stock could sustain an annual 8 percent to 10 percent increase in sales despite fundamental changes in the bottled drink market that were actually driving sales downward.  

Backdating Pays Big with UnitedHealth's $895 Million Settlement
UnitedHealth has announced that it would pay a whopping $895 million to settle a securities class action over stock option backdating. The settlement amount dwarfs a recent $160 million Brocade deal, which until recently had been the previous backdating record holder. The amount was compounded because UnitedHealth's CEO continued to make misleading statements even after the backdating was disclosed.

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