Protecting Investors - Securities law attorneys investigating financial fraud and Wall Street misconduct involving Lehman Brothers, non-traded REITs, bonds, ETFs

Madoff tentacles reach Southwest Florida; Judge orders bankruptcy court to oversee Madoff firm liquidation as Securities Investor Protection Corporation steps in to provide some relief.

The Naples Daily News reports today in a front page story that the tentacles of the $50-billion Bernard Madoff Ponzi scheme have reached Southwest Florida. To view the Naples Daily News story and my comments about the situation, click here.

Also, the U.S. District Court Judge for the Southern District of New York overseeing the Madoff case ordered that Madoff’s brokerage firm be liquidated under the supervision of a bankruptcy court.

The Securities Investor Protection Corporation, which oversees a fund created by Congress to help investors of failed brokerage firms, asked the court for the liquidation so investors can be afforded protections available under the federal Securities Investor Protection Act.

While SIPC may be able to provide some relief for investors, customer claims are capped at $500,000 for an individual customer. According to SIPC’s web site, that amount includes a maximum of $100,000 on claims of cash.

These capped amounts may mean that larger investors may want to consider other additional recovery options. At Vernon Healy, we are helping Madoff investors explore their recovery options in the wake of this massive fraud.

In a statement released Monday, SIPC President and CEO Stephen Harbeck said that based on information provided by the Securities and Exchange Commission and the Financial Industry Regulatory Authority, Madoff’s customers need protections under federal law.

However, Harbeck said the massive scope of the fraud and the state of the firm’s records will make providing relief to customers more difficult.

“It is unlikely that SIPC and the Trustee will be able to transfer the customer accounts of the firm to a solvent brokerage firm,” Harbeck said in a statement. “The state of the firm’s records may preclude a transfer of customer accounts. Also, because the size of the misappropriation has not yet been established, it is impossible to determine each customer’s pro rata share of ‘customer property.’”

“Judge signs order to protect Madoff investors and moves case to bankruptcy court” – Associated Press

Liquidation proceeding for Bernard l. Madoff Investment Securities LLC undertaken by Securities Investor Protection Corporation

For more information, contact Chris Vernon at (239) 649-5390 or e-mail cvernon@vernonhealy.com

   

Advising Clients Who Invested With Bernard Madoff and His Investment Company

As you might imagine, we have received a number of phone calls from investors or their professional advisors (trust and estate attorneys, etc.) who entrusted Bernard Madoff and his investment firm with significant sums. Investors are both shocked and devastated by the arrest of Madoff and the charges that he ran a massive Ponzi scheme for years. 

Therefore, we wanted to pass along to you some of our thoughts based on our review of legal proceedings thus far and our experience in these types of cases. We have previously worked as receiver’s counsel and as counsel for investors in these type of cases. 

As you are probably aware, the Madoff fraud came to light as a result of many investors seeking to get out of the fund due to the economic crisis and Madoff’s apparent inability to cover these investor redemption requests. Madoff confessed his long-time fraud to some of his high-level employees. The $50 Billion in losses figure came from Madoff himself, and we suspect that he is referring to false profits as well as lost principal. Thus, we suspect and hope the total principal investment by investors is less than $50 billion. However, this still appears to be a massive case in terms of this type of investment fraud.

The Securities and Exchange Commission filed a civil lawsuit on Thursday, Dec. 11, and the receiver was appointed a day later. The receiver is now attempting to move very quickly to freeze and take control of the Madoff accounts and assets subject to the receivership.  Unfortunately, during Madoff’s confession to senior employees he indicated that he only had $200-300 million in funds left. 

To the extent this is accurate and he is referring to investor funds, that does not bode well for investors as it seems to indicate that most investor funds no longer exist or are no longer in the investor accounts.  Hopefully, Madoff was not referring to investor accounts and the receiver will find far more than this referenced amount in the accounts where investor funds were maintained.

In addition to the Madoff investment accounts and Madoff personal assets that the receiver is able to freeze and control, the receiver may also pursue legal action against third parties. For example, the receiver may pursue third parties who are in possession of funds or assets that can be traced back to investor assets or funds. 

The receiver may also pursue investors who previously received more money from the Madoff fund than the receiver believes they should have received. (The receiver may claim these investors are profiteers and received more than their fair share of the remaining funds).  Additionally, the receiver may also pursue third parties who may be liable to investors as a group for their involvement in or knowledge of activities related to the fraud. Or, third parties may be liable based on a duty they had to investors that was not carried out or not carried out adequately.  

Unfortunately, due to the daunting investigative task of the receiver and costs of the receivership, combined with the limited funds likely to be recovered and the constraints of the receiver to only pursue claims common to all victims, investors are often disappointed by the ultimate recovery they receive from the receiver and the amount of time it takes to receive that recovery.   

As we have in past situations similar to the Madoff fraud, we anticipate representing investors who invested significant sums with Madoff and who did not previously receive significant sums back from Madoff (either as return on investment or return of investment).  The purpose of our representation is to both assist significant investors through the receivership process and, more importantly, investigate whether any third parties may have liability for the losses (i.e. third parties that the receiver either chooses not to pursue or has no standing to pursue).   If our investigation reveals third parties who may be liable and are collectible who are not being vigorously pursued by the receiver (either due to standing or any other reason), we anticipate pursuing those third parties on behalf of our clients.    

Please feel free to call us if you would like to discuss this matter further or would like us to provide you with any additional information to assist your clients in this very difficult time.

Chris Vernon, attorney at law
Vernon Healy
(239) 649-5390
E-mail: cvernon@vernonhealy.com

Shine-Vernon legal team files claim on behalf of corporate client in California over Schwab YieldPlus Fund losses (SWYSX, SWYPX)

Melbourne, Fla. — Charles Schwab & Co.’s misrepresentations about the safety of the Schwab YieldPlus Fund caused considerable harm to the business operations of a California-based company, according to a claim filed with FINRA Dispute Resolution today by the investor rights’ legal team headed by former Securities and Exchange Commission attorney Thomas F. Shine and investor rights’ attorneys Christopher T. Vernon and Thomas D. Mauriello.

The San Diego-based corporation, which develops service solutions for small businesses and consumers, had recently sold one of its business segments and its executives were looking for a safe place to invest the sales proceeds while they laid the groundwork for developing a new line of business for the company. 

Charles Schwab’s web page promoting its Schwab YieldPlus Fund invited investors to “discover a smart alternative for your long-term cash.” Charles Schwab touted the Schwab YieldPlus Fund as a safe and conservative “cash alternative” and compared its safety to that of one and two-year certificates of deposit, but investors have seen the bond mutual fund’s price fall by almost 40 percent during the past sixteen months.

The claim alleges that Charles Schwab issued inaccurate statements and omitted material facts about the fund’s lack of diversification and deceived Schwab YieldPlus Fund investors by concentrating the fund in mortgage and asset-backed securities while it recklessly touted the fund’s safety on its web site and to financial advisors who recommended the fund.

In addition, Charles Schwab executives and former high profile fund manager Kimon Daifotis committed misconduct when they embarked on a “damage control” campaign to avert liquidations of Schwab YieldPlus by Charles Schwab clients, the claim contends. Behind the scenes, Schwab dumped 2.9 million YieldPlus shares from the portfolios of its other mutual funds from Jan. 31, 2008 to April 1, 2008 while unwitting Schwab clients simultaneously held on to their shares. 

The Shine-Vernon legal team believes that this case is a prime example of the adverse economic consequences of the misconduct and deceptions engaged in by financial firms like Charles Schwab in recent years. It’s not only retirees who’ve been hurt, but also companies small and large who thought they were maintaining their operating capital in safe, conservative accounts.

“This is the type of financial institution behavior that can have a direct impact on Main Street’s ability to create and protect jobs and this misconduct should not go unpunished,” Vernon said.

In addition to the arbitration claim filed on behalf of the corporate client described herein, which will be heard in San Diego, the Shine-Vernon team has filed arbitration claims against Charles Schwab with the Financial Industry Regulatory Association (FINRA) on behalf of investors from California, New York, Texas, Florida, Missouri, Minnesota, Illinois and Hawaii and is currently investigating claims in New Mexico, Virginia, and several other states as part of its nationwide fraud investigation of the Schwab YieldPlus Fund.

Thomas Shine, a former enforcement attorney with the Securities and Exchange Commission in Washington, D.C., is in private practice in the Melbourne, Fla. area. Securities attorney Chris Vernon is a founding partner of the Naples, Fla. based law firm Vernon Healy, which represents investors throughout the United States. Thomas Mauriello is in private practice in Southern California and represents investors throughout California.

Release URL:

For information, contact:

Thomas F. Shine, attorney at law
http://www.thomasfshinelaw.com
http://www.thomasfshinelawblog.com
321-724-4445
1-800-838-8320
e-mail: tfshine@aol.com

or

Christopher T. Vernon, attorney at law
http://www.vernonhealy.com
http://www.protectinginvestors.com
239-649-5390
1-877-649-5394
e-mail: cvernon@vernonhealy.com

or

Thomas D. Mauriello, attorney at law
http://www.maurlaw.com
949-542-3555
1-888-612-1961
e-mail: tomm@maurlaw.com