Protecting Investors - Leveraged ETFs, Inverse ETFs, Lehman Brothers Principal Protected Notes, Structured Products, REITs, Bonds

Shine-Vernon legal team forms alliance with former SEC regulators to investigate Schwab YieldPlus Fund, files claim on behalf of investor who lost more than $225,000 on YieldPlus (SWYSX, SWYPX)

Naples, Fla. — The Shine-Vernon legal team has formed a coast-to-coast alliance with other former Securities and Exchange Commission regulators, former prosecutors and investor advocates to investigate misconduct and seek recovery of losses for purchasers of the Schwab YieldPlus Fund.

 

Securities fraud litigators in the alliance have now filed claims on behalf of both corporate and individual investor clients in California, New York, Texas, Florida, Missouri, Minnesota, Illinois and Hawaii, and are currently investigating claims on behalf of investors in multiple other states.

 

The team filed another arbitration claim today on behalf of a California retiree who sustained more than $225,000 in Schwab YieldPlus Fund losses in his retirement savings account. Just prior to investing in the Schwab YieldPlus Fund, the retiree had the bulk of his retirement savings in cash or money market funds. Today’s claim follows earlier claims filed by the team on behalf of corporate and small business owners, a retired publisher, a retired accountant, a retired emergency room physician, a retired computer consultant and an 82-year-old widow — among others.

 

Charles Schwab & Co. marketed its Schwab YieldPlus Fund as a safe “cash alternative” to retirees and others around the country, but that safety was a charade: The Schwab YieldPlus Fund has lost more than 40 percent of its value in the past 18 months because of the reckless concentration of mortgage and asset-backed securities in the fund by former high-profile fund manager Kimon Daifotis.
 
Charles Schwab issued inaccurate statements or omitted information regarding 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 touted the fund’s safety on its web site and to financial advisors who recommended the fund, the claim states. Charles Schwab compared the safety of its Schwab YieldPlus Fund to that of one and two-year certificates of deposit.

 

“People from all walks of life invested in Schwab’s YieldPlus Fund, and investors who sought safety in YieldPlus are now paying dearly for Schwab’s betrayal,” securities attorney Christopher Vernon said. “We believe we’ve assembled an exceptional group of attorneys to bring claims on behalf of Schwab YieldPlus investors seeking recovery.”

 

For in-depth information about the Schwab YieldPlus Fund, see  http://www.protectinginvestors.comand http://www.thomasfshinelawblog.com

 

The alliance includes:

— Christopher Bebel, a former Securities and Exchange Commission Division of Enforcement attorney, former regulator with the Financial Industry Regulatory Association (aka NASD) and former federal prosecutor, (Texas, 281-348-2572, www.chrisbebel.com);
— Timothy Dennin, a former Securities and Exchange Commission Division of Enforcement attorney and former assistant district attorney, (New York, 212-826-1500, www.denninlaw.com);
— Thomas Mauriello, an investor rights attorney who represents investors throughout the United States, (California, 888-612-1961, www.maurlaw.com);
— Howard Prossnitz, an investor rights attorney who represents investors throughout the United States (Illinois, 312-960-1800, www.prossnitzlaw.com);
— Thomas Shine, a former Securities and Exchange Commission Division of Enforcement attorney (Florida, 321-724-4445, www.thomasfshinelaw.com);
— Christopher Vernon, an investor rights attorney who represents investors throughout the United States (Florida, 239-649-5390, www.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

Shine-Vernon legal team adds Minnesota and Missouri to list of states in which it has filed investor claims to recover Schwab YieldPlus Fund losses (SWYSX, SWYPX)

The investor rights’ legal team headed by former Securities and Exchange Commission attorney Thomas F. Shine and investor rights’ attorney Christopher T. Vernon filed claims on behalf of Schwab YieldPlus Fund investors in Minnesota and Missouri today.

The Shine-Vernon team has now filed arbitration claims on behalf of investors from California, New York, Texas, Florida, Missouri, Minnesota, and Hawaii as part of its nationwide fraud investigation of Charles Schwab’s misrepresentations to investors about its Schwab YieldPlus Fund.

Charles Schwab promoted its 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. More and more investors are seeking to file claims with the Financial Industry Regulatory Association (FINRA) in their quest for legal recourse.

Charles Schwab deceived Schwab YieldPlus 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 to investors. According to the claims filed today, Schwab issued inaccurate statements or omitted information regarding material facts about the fund’s lack of diversification.  

In addition, Charles Schwab executives and former high profile fund manager Kimon Daifotis embarked on a “damage control” campaign to avert liquidations of Schwab YieldPlus by Charles Schwab clients, the claims contend. Behind the scenes, Schwab quietly dumped 2.9 million YieldPlus shares from the portfolios of its other mutual funds during that time — from Jan. 31, 2008 to April 1, 2008 — while clients held their shares.

The claims filed today are on behalf of investors with close to $300,000 in losses. They include one claim filed on behalf of a retired publisher of a faith-based journal and another on behalf of a business owner. Both investors were seeking safety for the funds that they invested in the Schwab YieldPlus Fund.

The Shine-Vernon team was the first legal team to name Daifotis in claims filed on behalf of investors. Schwab disclosed in June that it had replaced Daifotis as the fund’s lead portfolio manager and Daifotis has been terminated by Charles Schwab, the brokerage firm. 

Investors have been encouraged by a recent case in which a FINRA arbitration panel awarded a Schwab YieldPlus Fund investor more than $500,000.

Although the economic outlook of many financial industry firms has been damaged in the ongoing credit crisis and recession (in no small measure because of the imprudent risks these firms took at investors’ expense), the Shine-Vernon team believes that Charles Schwab is financially strong enough to pay all damages awarded against it.

Investors who lost relatively small amounts of their principal may be able to get relief from a class action lawsuit now pending against Charles Schwab, to the extent they cannot resolve their claims through Schwab’s Client Advocacy Team.  However, investors who have lost significant amounts of principal as a result of investing in YieldPlus, should pursue securities arbitration, the Shine-Vernon legal team believes.    

Shine and Vernon legal team files claims to recover Schwab YieldPlus Fund losses (SWYSX, SWYPX) on behalf of investors from California, Texas and New York in October

As part of its investigation on behalf of Schwab YieldPlus Fund investors, the Thomas F. Shine –Christopher T. Vernon legal team has discovered that former high-profile Schwab fund manager, Kimon Daifotis, has been replaced as the fund’s lead portfolio manager and has been terminated by Charles Schwab, the brokerage firm.

Shine and Vernon were the first attorneys to file an investor claim naming Daifotis as a respondent. One day after filing that claim in June, Charles Schwab announced that it had replaced Daifotis as the YieldPlus Fund manager. 

The revelation about Daifotis’ departure and his termination by brokerage firm Charles Schwab is part of an investor rights claim filed today by the Shine-Vernon legal team on behalf of a retired U.S. Air Force officer and nurse anesthetist from Texas.

The investor rights’ legal team headed by former Securities and Exchange Commission attorney Shine and investor rights’ attorney Vernon has filed claims on behalf of Schwab YieldPlus investors in California, New York & Texas during the month of October. The claims follow earlier claims filed in Florida and Hawaii. The team is preparing to file claims on behalf of investors in New Mexico, Missouri, Minnesota, and Illinois and is interviewing clients from other states as well.

Charles Schwab marketed its 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. More and more investors are seeking to file claims with the Financial Industry Regulatory Association seeking legal recourse. The claims, including one filed today on behalf of the Texas investor, assert that Charles Schwab deceived YieldPlus investors with the reckless mortgage and asset-backed security strategy orchestrated in the Schwab YieldPlus Fund. The claim contends that Charles Schwab committed gross misconduct when it embarked on a “damage control” campaign to avoid liquidations of YieldPlus by its clients. Behind the scenes, Schwab quietly dumped 2.9 million YieldPlus shares from the portfolios of its other mutual funds during that time — from Jan. 31, 2008 to April 1, 2008.

Investors represented by the Shine-Vernon legal team also claim that Charles Schwab and Daifotis misrepresented the safety of YieldPlus and failed to disclose material facts to investors about the fund. The bond mutual fund’s price has decreased by almost 40 percent during the past sixteen months.  This price decrease has resulted in the virtual liquidation of the Schwab YieldPlus Fund (SWYSX, SWYPX) with the fund’s total net assets under management declining by more than $13 billion or — 96 percent — over the past year.

Investors have been encouraged by a recent case in which a FINRA arbitration panel awarded a Schwab YieldPlus Fund investor more than $500,000.

Independent investment advisors who use Charles Schwab as a platform have referred clients to the Shine-Vernon legal team, and some are even considering their own recourse in the face of damage to their business reputations and loss of clientele due to misrepresentations surrounding the safety of the Schwab YieldPlus Fund.     

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.

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

Conservative investors betrayed by Wall Street excesses

These are chaotic times on Wall Street. With each passing day it’s becoming more and more evident that conservative “Main Street” investors — both businesses and individuals — have been profoundly damaged by the deceptive and speculative excesses that have plunged Wall Street’s major brokerages into a wide and deep crisis.

 

The rub is so raw because many of the investment products that have been contaminated by the subprime mess and ensuing credit crisis were marketed and sold to investors as ultra-conservative and safe “cash equivalents.”

 

This is a complete betrayal.

 

This betrayal is more egregious than what we saw with the Wall Street analyst cases and the bursting of the inflated tech bubble earlier this decade. We knew that tech stocks, the new economy growth stocks of the day, represented the fast lane.

 

The people hurt in the crisis today are people who were led to believe they were in the slow — and safe — lane.  As a result, this crisis is really hurting people who didn’t intend to put their money at risk.

 

These are retirees and folks saving for retirement who carefully guarded their nest eggs. These are small business owners and corporations that carefully guarded their operating funds.  These are funds of charities and churches earmarked for future use to help those in need and the less fortunate among us. Regardless of any perspective or bias, virtually all would agree that these are people who didn’t deserve to lose their principal or have their liquid funds frozen.

 

In the last year, thousands of investors have lost more than $1 billion in Schwab’s YieldPlus Fund, which Schwab billed as a cash equivalent and likened its safety to that of one and two-year certificates of deposit.  Equally disturbing is the almost surreal debacle that’s played out in the $330 billion auction rate securities market that seized up in February and has left tens of thousands of investors unable to readily access their money.   These are just examples of some of the “safe” products that have performed far differently than advertised.

 

State securities regulators, most notably New York Attorney General Andrew Cuomo, have stepped in on behalf of investors to force the Wall Street firms involved to buy back $70 billion worth of auction rate securities from investors. But with the market at $330 billion before it froze, a substantial hole in the economy remains. 

 

Recently, federal regulators stepped in to save Fannie Mae and Freddie Mac,  and more recently AIG, but these actions have not prevented investors in those behemoths from being devastated in ways similar those who invested in the now bankrupt Lehman Brothers. 

 

Certainly there will be more calls for reforms.  Hopefully, lawmakers will recognize that the failure exposed by the current crisis is not that there are too few regulations or too few regulatory bodies.  With the exception of areas that operate outside the current regulatory system — such as credit default swaps which may need to be brought within the regulatory system as insurance or futures products — lack of regulation and lack of regulatory agencies are not the problem.  Rather what we’re seeing is widespread amoral behavior by Wall Street combined with a failure by regulators to regulate effectively — especially on the federal level.  This appears to be due to both the under-funding of existing regulatory agencies and the apparently cozy relationship between Wall Street and some regulatory bodies, specifically the Securities and Exchange Commission and the industry’s self-policing organization, the Financial Industry Regulatory Association or FINRA.

 

Much is at stake for the financial future of Americans in the coming weeks and months.  As we see the most recent misdeeds of Wall Street play out in the press and the political arena, investors need to understand that state regulators have been the most effective in protecting investors’ rights and federal regulators the least effective.  Adding another regulatory body on the federal level or transferring additional regulatory powers from the states to the federal government is unlikely to improve the situation. 

 

Additionally, while the current mess is being cleaned up through litigation, arbitration, and possible reforms, investors need to be wary of Wall Street’s claims that firms’ amoral behavior is an anomaly.  Combined with Wall Street firms’ actions of the past — such as the limited partnership mess of the early 1990s and the analyst debacle early this decade — recent events appear to be part of a familiar pattern.            

Vernon and Shine legal team: Florida retirees file arbitration claim to recover Schwab YieldPlus Fund losses (SWYSX, SWYPX)

A group of Florida retirees — whose losses in the Schwab YieldPlus Fund top $300,000 — have joined together to file arbitration claims today against Charles Schwab & Co. and former fund manager Kimon Daifotis. 

Schwab marketed its YieldPlus Fund as a safe and conservative “cash alternative” and compared its safety to that of one and two-year certificates of deposit on the Schwab web site.

But several Florida retirees who trusted Schwab with their nest eggs are now filing a claim with FINRA, the Financial Industry Regulatory Authority, asserting that Schwab deceived them with the reckless mortgage and asset-backed security strategy orchestrated in Schwab’s YieldPlus Fund.

The bond mutual fund’s price has decreased by more than 30 percent in the last year.  This price decrease has resulted in the virtual liquidation of the Schwab YieldPlus Fund (SWYSX, SWYPX) with the fund’s total net assets under management declining by more than $13 billion or — 96 percent — over the past year.  

The three Florida families who joined together to file today’s small group claim include:  an 82-year-old widow from Vero Beach; a retired computer consultant and artist from Longwood; and a retired accountant and homemaker from Port St. Lucie. All were longtime clients of Charles Schwab & Co.

The claim, filed by former Securities and Exchange Commission attorney Thomas F. Shine and investor rights attorney Chris Vernon, contends that Schwab committed gross misconduct when it embarked on a “damage control” campaign to avoid liquidations of YieldPlus by its clients. Behind the scenes, Schwab quietly dumped 2.9 million YieldPlus shares from the portfolios of its other mutual funds during that time — from Jan. 31, 2008 to April 1, 2008. The investors also claim Schwab and Daifotis misrepresented the safety of YieldPlus and failed to disclose material facts to investors about the fund.

Shine and Vernon were the first attorneys to file an investor claim naming Daifotis as a respondent. One day after filing that claim, Schwab announced that it had replaced Daifotis as YieldPlus Fund manager. 

Schwab is contacting some investors with settlement offers, but investors with larger losses are filing arbitration claims in the face of Schwab’s offers to pay pennies on the dollar (if anything) and refusal to acknowledge any wrongdoing or remorse for its actions.

In addition to representing Florida investors, Shine and Vernon are pursuing claims against Schwab on behalf of investors from California, Hawaii, Texas, New York and the Midwest.  

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

For information, contact:

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 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

Charles Schwab Reporting YieldPlus Complaint Letters From Clients as Complaints Against Financial Consultants

Charles Schwab financial consultants are starting to get dinged on their CRDs, the regulatory report card for stockbrokers, over the Schwab YieldPlus Fund fiasco. These dings can come in cases when the financial consultants relied on defective information from their employer, Charles Schwab, regarding Schwab’s YieldPlus fund.  

Charles Schwab clients, who appropriately feel betrayed by the charade of safety that Charles Schwab used to market its YieldPlus Fund, have in some cases sent letters to Charles Schwab complaining about their financial consultants who recommended the fund as a safe alternative to cash. These complaint letters are typically entered on a broker’s CRD report that’s accessible to the public via the web site tool sponsored by FINRA, the Financial Industry Regulatory Authority.

Financial consultants (as well as Charles Schwab) clearly have “Know Your Security” suitability duties to know the essential facts about the products that they are recommending to their clients and to disclose the risks associated with those products. However, Charles Schwab financial consultants may feel that the risks pertaining to the Schwab YieldPlus Fund were not adequately disclosed in the fund’s prospectus and other SEC filings.  Charles Schwab financial consultants may also feel that they were further misled by Schwab YieldPlus Fund marketing materials that effectively described the fund as an alternative to cash.

Moreover, Charles Schwab conducted a “damage control” campaign designed to provide Charles Schwab financial consultants with information that would deter them from recommending to clients that they sell the fund as the price declined. This damage control campaign occurred so that Charles Schwab could quietly dump several million shares from other Charles Schwab proprietary funds ahead of Charles Schwab’s retail clients, according to claims we’ve filed so far or are preparing to file on behalf of investors from Florida, Hawaii, Texas, California, New York, and other states.

Some Charles Schwab financial consultants (and former consultants) may ultimately be supportive of clients who pursue YieldPlus claims against Schwab and agree that Charles Schwab misled investors.  Merely sending a complaint letter to Charles Schwab, as opposed to filing an arbitration claim or lawsuit against Charles Schwab, does little to assist the investor in recovering losses or damages from Charles Schwab. Similarly, the complaint letter does little harm to Charles Schwab but opens the door for Charles Schwab to file regulatory reports that disclose that a customer has complained about one of its brokers in connection with the sale of YieldPlus. 

 

Shine and Vernon legal team: Retiree Suing to Recover Significant 401(k) Losses in Schwab’s YieldPlus Fund Fiasco

Naples, Fla. — Charles Schwab & Co.’s removal of one of its most prominent fund managers has come too late for investors now suffering the disastrous consequences of the reckless mortgage and asset-backed security strategy orchestrated in Schwab’s YieldPlus Fund.

A retired emergency room physician from Hawaii, who lost more than $150,000 of the $510,000 he invested in Schwab’s YieldPlus Fund in his 401(k), filed an arbitration claim today that seeks recovery of his losses and damages.         

Schwab marketed its YieldPlus Fund to retirees and others as a safe and conservative “cash alternative” but the bond mutual fund’s price has decreased by more than 30 percent in the last year.  This price decrease has resulted in the virtual liquidation of the Schwab YieldPlus Fund (SWYX, SWYPX) with the fund’s total net assets under management declining by more than $13 billion or — 96 percent — during the past year.   

Schwab is contacting some investors with settlement offers, but investors with larger losses are filing arbitration claims in the face of Schwab’s typical offers to pay less than 10 cents on the dollar. Schwab’s offers come despite investors’ claims of misrepresentations and failures to disclose material facts by Schwab and former Schwab Yield Plus Fund manager Kimon Daifotis about the safety of the YieldPlus Fund to investors.

The claim, filed by former Securities and Exchange Commission attorney Thomas F. Shine and investor rights attorney Chris Vernon, contends that Schwab committed gross misconduct when it embarked on a “damage control” campaign and encouraged investors to hold on to their YieldPlus shares. Behind the scenes, Schwab quietly dumped 2.9 million YieldPlus shares from the portfolios of its other mutual funds during that time, from Jan. 31, 2008 to April 1, 2008.

On Schwab’s web site, the brokerage giant compared the safety of its YieldPlus Fund to that of one and two-year certificates of deposit. But that safety was a sham: YieldPlus fund manager Daifotis put increasing portions of the fund’s assets into higher risk asset-backed and mortgage backed securities. That concentration ultimately put the fund at risk for an enormous failure. That failure began as the subprime crisis rocked Wall Street.   

Shine and Vernon were the first attorneys to file an investor claim naming Daifotis as a respondent. One day after filing the claim in June, Schwab announced that it had replaced Daifotis as the fund manager of YieldPlus.

Investors from around the country are contacting Shine and Vernon, who have teamed up with other former SEC attorneys and investor rights attorneys on their investigation.

We are encouraging investors who’ve been contacted by Schwab to ask Schwab to retain custody of taped conversations between themselves and their investment advisor: We believe these recorded conversations will strengthen your potential claim against Schwab because it is unlikely that Schwab’s employees were even aware of the true level of risk associated with the fund, much less able to adequately disclose those risks to potential purchasers.

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

For more 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

Calculating Your Schwab YieldPlus Fund Losses

Prior to contacting the Charles Schwab Client Advocacy Team to discuss your Schwab YieldPlus Fund losses, we are recommending to our potential clients that they prepare a Profit/Loss spreadsheet that chronologically reflects all of their purchases, dividends (reinvested and/or distributed) and sales of the fund’s shares.  Such a spreadsheet should include date of transaction, a description of the transaction (original purchase, dividend reinvestment or distribution, or sale), number of shares, price per share, and the total dollar amount purchased, sold or actually received as a dividend.  This spreadsheet will assist you with your negotiations with Charles Schwab.  In the event that those negotiations are unsuccessful, the spreadsheet is an excellent tool to assist you and your attorney in preparing your claim for arbitration or litigation.

There are two ways that you can obtain your spreadsheet information.  The more time consuming method would be to take the information directly from each of your monthly statements from the month that you initially purchased the fund through the month that you completely liquidated your holdings.  The simpler and probably quicker method of obtaining this information is to ask your Charles Schwab Financial Consultant to provide to you what is called an “Account History” for your transactions in the Schwab YieldPlus Fund.  We have found that the various Charles Schwab Financial Consultants have been very cooperative in providing this service to their clients to assist them in evaluating their options in pursuing a recovery of their Schwab YieldPlus Fund losses.

Please feel free to contact Chris Vernon at (239) 649-5390 or Tom Shine at (800) 838-8320 if you wish to consult with either of us about any of the matters discussed above.  We are in the process of signing up additional Schwab YieldPlus clients (generally those clients who lost more than $20,000 in the fund) and expect to be filing a number of new claims in the very near future.

Schwab announces replacement of YieldPlus portfolio manager after Vernon Healy - Shine legal team files claim

Charles Schwab & Co. announced the replacement of Kimon Daifotis, Schwab’s YieldPlus portfolio manager, one day after our legal team filed what appears to be the first investor arbitration claim that names Daifotis as an individual respondent.

Our claim, filed on June 12, 2008, asserts that Daifotis, one of Schwab’s most prominent fund managers, misrepresented the safety of Schwab’s YieldPlus Fund (SWYSX) whose total net assets plunged by $12 billion during the eight-month period ending April 1, 2008. Daifotis put increasing portions of the fund’s assets into risky mortgage-backed securities and put the fund at risk for a huge failure when the subprime lending credit crisis rocked Wall Street.

On June 13, 2008, Schwab Investments filed an amended prospectus with the Securities and Exchange Commission that discloses (page 29) that Daifotis, a Senior Vice President and the Chief Investment Officer–Fixed Income for Charles Schwab Investment Management, Inc., had been replaced as the senior portfolio manager responsible for the overall management of the Schwab YieldPlus Fund and four other Schwab fixed income funds. Mr. Daifotis’ replacement is Jeffrey Mortimer, CFA, who is also a Senior Vice President and the Chief Investment Officer for CSIM.

We have spoken with a number of Schwab YieldPlus Fund shareholders over the past month who are weighing their options with respect to which route they might wish to follow in attempting to recover their losses.  Charles Schwab’s Client Advocacy Team appears to be proactively contacting Schwab YieldPlus Fund shareholders and making settlement offers to various individuals. 

In evaluating your recovery options, a practical first step would be to contact the Client Advocacy Team to explore whether Charles Schwab might be willing to make a reasonable settlement offer to you and, if so, how much Charles Schwab willing to offer to you.  The address and telephone number for the Charles Schwab Client Advocacy Team are as follows:

Charles Schwab & Co., Inc.
Client Advocacy Team
101 Montgomery Street
San Francisco, CA  94104-4104
(800) 468-3774

We are actively advising clients on how to best navigate this process to achieve the best results.

Some Schwab YieldPlus Fund shareholders are reporting to us that Charles Schwab Client Advocacy Team representatives are playing audiotapes of conversations that the shareholders had with Charles Schwab financial consultants or traders about the Schwab YieldPlus Fund when the shareholder initially communicated their orders to purchase the fund.  It is our belief and opinion that these recorded conversations will support rather than detract from the strength of your potential claim against Charles Schwab because it is highly unlikely that Charles Schwab’s employees were even aware of the level of risk associated with purchasing the fund, much less able to disclose those risks to potential purchasers of the fund. 

We are requesting that our prospective clients sign authorization letters instructing Charles Schwab to maintain custody, possession and control of these taped conversations for production during discovery and use in the presentation of our clients’ claims in their arbitration hearings.

Another topic that is coming up frequently during settlement discussions between Schwab YieldPlus Fund shareholders and Charles Schwab Advocacy Team members is the issue of what is the proper measure of the shareholder’s damages in the fund.  For purposes of arbitration or trial,  valid ways to calculate damages include “recissionary damages” and “well managed account damages.”  However, for settlement discussions in these types of cases, discussions often revolve around "out of pocket losses" which ignores the time value of money and any reasonable investment return. 

Not surprisingly, for settlement purposes, Charles Schwab appears to be focusing on its customers’ net out–of-pocket losses.  These losses are calculated by subtracting the total cost of all Schwab YieldPlus Fund purchases (including reinvestment of monthly dividends back into the fund) from the total net sales proceeds realized by the liquidation of all Schwab YieldPlus Fund shares owned by the shareholder plus the dividends actually received by the shareholder (that is, those dividends that were not reinvested back into the fund).   

Unfortunately, with respect to its out of pocket loss calculations, Charles Schwab appears to be improperly treating dividends reinvested back into the fund as distributions actually received by shareholders rather than money that was used to make additional purchases of the fund.  We believe that, conceptually, Charles Schwab’s methodology is incorrect and can result in a significant error in Charles Schwab’s favor in the computation of your net out of pocket losses for settlement purposes.

Your Charles Schwab monthly statements for the months in which you sold your Schwab YieldPlus Fund shares contains Charles Schwab’s calculations of the amounts of your losses resulting from your sale(s) of Schwab YieldPlus Fund shares (Realized Gain or Loss on Investments Sold).  You can also access this information for your account from the www.schwab.com/trading/center website. 

For investors who reinvested their Schwab YieldPlus Fund dividends back into the fund, Charles Schwab’s Realized Gain or Loss on Investments Sold calculation appears to accurately reflect your total net out-of-pocket losses for settlement purposes.  For investors who did not reinvest their dividends back into the fund, the amount of dividends received would reduce their net out-of-pocket losses for settlement purposes.

Please feel free to contact Chris Vernon at (239) 649-5390 or Tom Shine, at (800) 838-8320 if you wish to consult with either of us about any of the matters discussed above.  We are in the process of signing up additional Schwab YieldPlus clients (generally those clients who lost more than $20,000 in the fund) and expect to be filing a number of new claims in the very near future.