Florida Securities Fraud Lawyer Blog

The Securities and Exchange Commission ("SEC") has charged Fort Lauderdale-based First Resource Group LLC ("First Resource") and its principal, David Stern ("Stern") of Tamarac, Florida, with running a boiler room stock scheme.

The SEC's complaint alleges that First Resource employed telemarketers who fraudulently solicited investors to purchase securities in two microcap companies, TrinityCare Senior Living, Inc. and Cytta Corporation. The SEC claims that First Resource's employees cold-called potential investors on a list given to them by Stern, and using a script prepared by Stern, falsely touted the stock in the two companies by providing grossly inflated sales projections.

The SEC also claims that, while Stern was selling these securities, he also purchased small amounts of the stock at prices above the market to raise the market price and to create the false impression of legitimate trading activity. The complaint asserts that Stern then took advantage of the manipulated stock prices by selling large amounts of First Resource's shares at the fraudulently elevated prices and then transferred the proceeds of these stock sales from First Resource's brokerage accounts to his personal account.

Investors nationwide who have incurred investment losses, and who may have a FINRA arbitration claim, may contact the Florida securities lawyers at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or by e-mail to kelly@mccaberabin.com.

The Financial Industry Regulatory Authority ("FINRA") issued an alert to investors warning them that a compromised email account can not only lead to identify theft, but also to the theft of their money.

FINRA's investor alert was issued in response to a growing number of reports of investor monies being stolen by individuals, who first gained access to the investor's email account, and then emailed instructions to the investor's financial institution directing it to transfer funds outside of the account.

According to a joint fraud alert recently issued by the Federal Bureau of Investigation, Financial Services Information Sharing and Analysis Center, and Internet Crime Complaint Center, these types of crimes follow a typical pattern. After gaining access to an investor's email account, the fraudster searches the contact lists and emails looking for information about the investor's broker or brokerage firm. The fraudster then uses the investor's email account to send an email to the investor's broker or brokerage firm with instructions to wire funds to a third-party account, often overseas. The instructions may be accompanied by a fraudulent letter of authorization, also sent from the investor's email account.

FINRA cautions that fraudsters can be quite persuasive in stressing the urgency of the requested transfer, pressuring brokerage firms to transfer the funds without verifying the authenticity of the instructions. Oftentimes, the fraudster fabricates tales of woe involving a death in the family, or some grave illness which prevents the investor from contacting the firm by telephone.

To prevent this from happening, investors should immediately notify their brokerage firm and other financial institutions if they believe someone has gained unauthorized access to their email account. Investors should also check their financial accounts for unauthorized transactions and ask the firm to investigate any that are discovered. Investors should also change their username, password and PIN for all financial accounts and change their email account password.

A Financial Industry Regulatory Authority ("FINRA") arbitration panel has awarded former Boston Red Sox catcher and two-time World Series winner, Doug Mirabelli and his wife, $1.2 million in their claims against Merrill Lynch, Pierce, Fenner and Smith, Inc. ("Merrill Lynch"). The Award represents $800,219 in compensatory damages, plus $391,474 in attorney's fees and $47,339 in costs.

According to a New York Times article, the Mirabellis' claims related to their investment in the Merrill Lynch Phil Scott Team Income Portfolio, a bundle of 33 dividend-paying growth stocks. The Award stated that the Mirabellis had argued that the recommendation by their broker, Phil Scott, to invest in the income portfolio was unsuitable and that he made misrepresentations to the couple in connection with the investment.

It is the second FINRA award against Merrill Lynch in the past seven months in connection with the Merrill Lynch Phil Scott Team Income Portfolio. The prior award, issued in June 2011, found in favor of the investor and awarded damages of $880,000. Merrill Lynch has moved to vacate the award. It is unknown whether Merrill Lynch will move to vacate the award in favor of the Mirabellis.

According to Mr. Scott's FINRA BrokerCheck record, another investor, alleging $2,500,000 in damages, filed an arbitration claim before FINRA in April 2011. That claim remains pending.

Investors nationwide who have incurred investment losses, may contact the Florida securities attorneys at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or by e-mail to kelly@mccaberabin.com.

The Department of Justice announced that Cayuga Medical Center of Ithaca, New York ("Cayuga") settled a lawsuit filed under the qui tam provision of the False Claims Act regarding false claims submitted to the Medicare and Medicaid programs. The qui tam lawsuit was filed on behalf of whistleblower Daniel S. Joregenson, M.D.

According to the complaint, Cayuga recruited physicians pursuant to recruitment agreements, in violation of federal law, and submitted claims for payment to Medicare and Medicaid, certifying it was in compliance with federal law, when it was not.

Federal law prohibits a physician from referring a patient to a medical facility if that physician has a financial relationship with the facility, unless some exception applies. Medical facilities are also prohibited from billing Medicare or Medicaid for a prohibited referral. However, federal law does permit medical facilities to pay certain limited expenses of medical practices that employ physicians recruited to the area by the facility.

The qui tam complaint alleged that Cayuga paid for expenses that were not permitted by law, used improper recruitment agreements, and submitted false claims to Medicare and Medicaid, when it certified it was in compliance with federal rules and regulations when, in fact, it was not.

Of the $3,576,056 settlement amount, the whistleblower will receive $566,955.18 as a reward.

If you have any firsthand knowledge, information, or evidence related to any federal, state, county or city government fraud, you should speak with an experienced qui tam lawyer who can help you understand your legal rights and help you obtain the compensation you deserve.

If you have a claim, contact the Florida whistleblower attorneys at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or e-mail kelly@mccaberabin.com.

The Financial Industry Regulatory Authority ("FINRA") has fined Merrill Lynch, Pierce, Fenner and Smith, Inc. ("Merrill Lynch") $1 million for failing to arbitrate disputes regarding employee retention bonuses. FINRA Rule 13200 requires that firms and associated persons arbitrate any disputes that arise out of the business activities of the member, including those related to the collection of monies owed by associated persons who leave the firm.

According to FINRA, after merging with Bank of America in January 2009, Merrill Lynch implemented a bonus program, in the form of forgivable promissory notes, designed to retain high-producing brokers. Merrill Lynch paid approximately $2.8 billion in retention bonuses to more than 5,000 of its associated persons.

FINRA claims that Merrill Lynch purposely structured the notes to circumvent FINRA's requirement that disputes related to the collection of the unpaid balances of the notes be arbitrated. The notes contained a provision requiring that disputes regarding the notes could be brought only in New York state court, a state that greatly limits the ability of defendants to assert counterclaims. In addition, FINRA asserted that Merrill Lynch made it appear that the bonuses were funded by its non-registered affiliate, allowing it to pursue collection efforts in the name of its affiliate, against brokers who left the firm in New York state court, rather than in FINRA arbitration.

According to FINRA, in late 2009 when Merrill Lynch filed more than 90 New York state court actions against its former associated persons in proceedings to collect monies due under the notes, it violating the FINRA rules requiring arbitration of employment matters.

Florida businessman, Gaston Cantens ("Cantens"), pleaded guilty today to wire and mail fraud in connection with a real estate scheme that targeted members of South Florida's Cuban-American community. Cantens faces up to five years in prison when he is sentenced on April 4.

According to Federal prosecutors, more than 150 investors, including the Belen Jesuit Preparatory School in Miami ("Belen"), lost approximately $47 million dollars between 2003 and 2008. Cantens graduated from the Belen school when it was still located in Havana, Cuba, prior to its move to Miami in 1961.

Prosecutors claimed that Cantens used his prominent standing in South Florida's Cuban-American community to induce investors to invest in real estate through his company Royal West Properties, Inc. ("Royal"), promising returns as high as 16 percent. According to court documents, Royal sold real estate investments in Florida beginning in 1993, got into financial trouble around 2002, and ultimately declared bankruptcy in 2009.

According to prosecutors, Cantens used money received from newer investors to pay older investors like a Ponzi scheme. Many of the harmed investors were vulnerable, elderly members of the Cuban-American community who trusted Cantens with their life savings.

Eric Bustillo, Regional Director of the Securities and Exchange Commission's Miami office called it a typical affinity fraud. Affinity fraud refers to an investment scam that preys upon members of an identifiable group, such as a religious or ethnic community. In this case, prosecutors claim that Cantens preyed on individuals associated with the Belen school and members of the Cuban-American community.

Investors nationwide who have been the victim of investment fraud, may contact the Florida investment fraud attorneys at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or by e-mail to kelly@mccaberabin.com.

The Boeing Company ("Boeing"), one of the world's largest aerospace companies, has agreed to settle a lawsuit filed under the qui tam provisions of the False Claims Act relating to bills submitted to the United States Department of Defense ("DOD") for the production and modification of Chinook helicopters.

According to the Complaint, in 2003, Boeing and the DOD entered into a contract for the production and modification of Chinook helicopters for the U.S. Army. The contract terms included a set contract price for "Basic Work" and indicated any "Over and Above" work would be paid on an hourly basis.

The qui tam action, filed in February 2010 by whistleblower Vincent A. DiMezza, Jr., alleged that Boeing employees knowingly overcharged the federal government by submitting bills for time they claimed was spent performing Over and Above work when they were actually doing Basic Work already covered in the contract price or were not working at all.

The United States Department of Justice announced that the lawsuit was settled for $4.4 million, including an $812,664 reward to the whistleblower.

If you have any firsthand knowledge, information, or evidence related to any federal, state, county or city government fraud, you should speak with an experienced qui tam lawyer who can help you understand your legal rights and help you obtain the compensation you deserve.

If you have a claim, contact the Florida whistleblower attorneys at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or e-mail kelly@mccaberabin.com.

Johnson and Johnson ("J&J") has agreed to settle a Texas qui tam lawsuit brought by whistleblower Allen Jones for $158 million. The settlement ended the trial which had begun earlier this month.

The qui tam complaint filed in 2004 alleged that J&J used false marketing practices in order to influence Medicaid officials to spend millions of dollars on the drug Risperdal. According to the complaint, Risperdal was promoted as superior to other antipsychotic drugs, J&J downplayed its side effects, and promoted its use by children and the elderly, when it had not been approved by the Food and Drug Administration for such uses.

The complaint further alleged that Medicaid, and in turn taxpayers, paid millions of dollars in reimbursements for prescriptions of Risperdal for unapproved uses. Risperdal is approved to treat schizophrenia and mood disorders associated with autism.

The $158 million settlement will be split between the whistleblower, the State of Texas and the federal government. It is the largest Medicaid fraud settlement in Texas history.

If you have any firsthand knowledge, information, or evidence related to any federal, state, county or city government fraud, you should speak with an experienced qui tam lawyer who can help you understand your legal rights and help you obtain the compensation you deserve.

If you have a claim, contact the Florida whistleblower attorneys at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or e-mail kelly@mccaberabin.com.

Maersk Line Limited, a wholly-owned subsidiary of Denmark-based A.P. Moller Maersk, has agreed to pay $31.9 million to settle a qui tam lawsuit initiated by whistleblower Jerry H. Brown II, a former industry insider, under the False Claims Act. A qui tam action is a whistleblower lawsuit brought by an individual as a "relator" on behalf of the federal government.

The whistleblower alleged that Maersk overcharged the United States in connection with contracts to transport cargo to support U.S. troops in Pakistan, Afghanistan and Iraq. The qui tam complaint alleged that Maersk knowingly billed in excess of the contractual rates for things such as late fees, maintaining the operation of refrigerated containers holding perishable cargo at a port in Pakistan, and failed to credit the U.S. government for rebates received by Maersk's subcontractor at a Kuwaiti port.

The Department of Justice announced that the lawsuit settled for $31.9 million, including a $3.6 million reward for the whistleblower.

If you have any firsthand knowledge, information, or evidence related to any federal, state, county or city government fraud, you should speak with an experienced qui tam lawyer who can help you understand your legal rights and help you obtain the compensation you deserve.

If you have a claim, contact the Florida whistleblower attorneys at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or e-mail kelly@mccaberabin.com.

Maxim Healthcare Services Inc. ("Maxim"), one of the nation's largest providers of home healthcare services, has agreed to settle criminal and civil charges relating to a nationwide scheme to defraud Medicaid and the U.S. Department of Veterans Affairs of more than $61 million. To date, nine individuals, including two Florida residents, have pleaded guilty to felony charges arising out of the submission of fraudulent billings to the U.S. government.

The fraud was initially brought to light by whistleblower, and Maxim patient, Richard West when he filed a qui tam action alleging that Maxim had improperly billed Medicaid for 735 hours of home nursing care that he never received. West, a Vietnam veteran with muscular dystrophy, began receiving in-home care from Maxim in 2003 but in 2004, New Jersey officials suspended his Medicaid benefits claiming he had exceeded his monthly cap. West had kept good records and knew that was incorrect. After some investigating, West determined that Maxim had billed Medicaid $20,000 for care that he had never received. West complained to his social worker but she did nothing. Then he complained to New Jersey officials who ignored him. He then complained directly to Medicaid but similarly, they took no action. So, West found a qui tam lawyer who filed a whistleblower lawsuit under the False Claims Act, finally triggering an investigation of Maxim.

The investigation revealed that the fraud went far beyond just the improper billing for Richard West. The criminal complaint accused Maxim of submitting more than $61 million in fraudulent billings to government health care programs for services not rendered, or otherwise not reimbursable. The investigation revealed that from 2003 to 2009, the submission of false bills to government health care programs was a common practice at Maxim.

The Department of Justice announced that Maxim has agreed to pay $150 million to resolve the charges. Of that, whistleblower Richard West will receive $15.4 million.

If you have any firsthand knowledge, information, or evidence related to any federal, state, county or city government fraud, you should speak with an experienced qui tam lawyer who can help you understand your legal rights and help you obtain the compensation you deserve.

If you have a claim, contact the Florida whistleblower attorneys at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or e-mail kelly@mccaberabin.com.

The Justice Department announced that the United States has intervened in a qui tam lawsuit filed by whistleblowers Dawn Richardson and Marsha Brown against Golden Gate Ancillary LLC dba AseraCare Hospice ("AseraCare") in the United States District Court for the Northern District of Alabama. A qui tam action is a whistleblower lawsuit brought by an individual as a "relator" on behalf of the federal government.

The government's complaint in intervention filed on January 3, 2012, alleges that AseraCare, a for-profit company consisting of 65 hospice providers in 19 states, violated the False Claims Act by misusing millions of taxpayer dollars intended for terminally ill Medicare recipients needing hospice care.

For-profit hospice providers, such as AseraCare, are only entitled to Medicare funds for Medicare recipients with a prognosis of six months or less to live. When a Medicare recipient is admitted to hospice care, that patient is no longer entitled to receive medical treatment intended to cure his or her illness. Instead, patients in hospice receive care that is intended to relieve pain, symptoms and the stress of terminal illness.

The government alleges that AseraCare knowingly submitted false claims to Medicare reflecting that Medicare recipients who were not terminally ill received hospice care.

If the United States is successful in proving that AseraCare knowingly submitted false claims, the whistleblowers will be entitled to a percentage of the recovery.

If you have any firsthand knowledge, information, or evidence related to any federal, state, county or city government fraud, you should speak with an experienced qui tam lawyer who can help you understand your legal rights and help you obtain the compensation you deserve.

If you have a claim, contact the Florida whistleblower attorneys at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or e-mail kelly@mccaberabin.com.

Last week, the Financial Industry Regulatory Authorized ("FINRA") issued Notice to Members 12-03 ("Notice") informing its members of the traits which may make an investment "complex," requiring heightened supervision and compliance procedures.

FINRA stated that any investment with multiple features that impact its returns under different scenarios is potentially complex. This is especially true if an average, retail investor could not reasonably be expected to discern the existence of these features and to understand the basic way in which the features interact to provide a return on the investment.

In its list of potentially complex products, FINRA included the following: asset backed securities such as collateralized mortgage and debt obligations ("CMOs" and "CDOs"); unlisted real estate investment trusts ("REITs"); structured notes; inverse or leveraged exchange-traded funds ("ETFs"); and hedge funds.

The Notice indicated that firms recommending complex products should have formal written procedures addressing everything from the initial due diligence to post-sale performance. In addition, brokers who recommend complex products must understand all of the features and risks associated with the products. A broker's analysis of a complex product should include the likely performance of the investment in a wide range of normal to extreme market conditions. A lack of product understanding by a broker recommending the product could violate the broker's suitability obligations. The Notice also indicated that brokers should consider whether less complex products would achieve the same objectives.

FINRA cautioned that a firm should not recommend complex products to retail investors until the firm has implemented heightened supervisory and compliance procedures. The extent to which these procedures address concerns raised by the recommendation of complex products to retail investors should be closely monitored. Firms should also scrutinize the sale of complex investments to ensure that the products are only recommended to customers who understand the essential features of the products and for whom the products are suitable.

A Financial Industry Regulatory Authority (FINRA) arbitration panel issued an Award on January 13, 2012 ordering CapWest Securities, Inc. ("CapWest") to pay $7,925,763 in compensatory damages, plus $1,188,863 in attorney's fees to a group of 40 investor claimants. The Award is related to losses in Provident Royalties LLC, Medical Capital Holdings, Inc. and DBSI, Inc. It is believed to be one of the single largest awards based on the sale of the failed private placements. Whether the claimants will be able to collect on the Award remains to be seen. CapWest closed its doors last year and its FINRA membership was canceled in July.

The Florida Office of Financial Regulation announced that Boynton Beach resident, Anthony Cutaia, was sentenced yesterday to 51 months in prison for his role in a $6 million Ponzi scheme perpetrated on 35 Florida investors. Cutaia pleaded guilty to mail and wire fraud for misleading investors and misappropriating funds.

Cutaia began soliciting potential investors in March 2003 through his Boca Raton based company, CMG Property Investment Group. He told investors their investments would be used as down payments on commercial real estate transactions. In return for their investments, they would share in any profits and be paid interest.

Prosecutors alleged that Cutaia used investor money to make payments to earlier investors and to fund his personal and business expenses such as cruises, trips to casinos, gambling debts, overdue office rent and a DirecTV subscription.

Many investors were solicited through a local real estate talk show Cutaia hosted "Talk About Mortgages and Real Estate," which was broadcast on PAX TV Network and WSBR radio, as well as through the church Cutaia attended.

Investors nationwide who have been the victim of investment fraud, may contact the Florida investment fraud attorneys at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040, or by e-mail to kelly@mccaberabin.com.

In the first trial related to Scott Rothstein's $1.2 billion Ponzi scheme, a Miami federal jury took less than a day to return a $67 million verdict against TD Bank, including $32 million in compensatory damages and $35 million in punitive damages.

The jury determined that TD Bank helped Rothstein defraud a group of Texas businessmen known as Coquina Investments ("Coquina"). The complaint alleged that TD Bank executives, former Vice President Frank Spinosa in particular, lied to the businessmen about the safety of their money and aided Rothstein in his fraud on investors. During the trial, Coquina's lawyers focused on a bank's obligation to know its customers and to detect fraud in accordance with the Bank Secrecy Act.

Scott Rothstein, a disbarred Fort Lauderdale lawyer, was sentenced to 50 years in prison for his $1.2 billion Ponzi scheme. He told potential investors they were buying interest in phony pre-lawsuit settlements for whistleblower and sexual harassment cases. In order to make his scheme work, Rothstein needed banks who did not ask questions about why he was moving large amounts of money between attorney trust accounts. Coquina's lawyers claimed that TD Bank should have asked questions, but didn't.

TD Bank will be on the defensive again as another Rothstein related case is set for trial in March in Broward County Circuit Court. One thing the plaintiffs in that case will have is Rothstein's December testimony that he bribed TD Bank employees. That testimony was not allowed in the Coquina case because of the timing.

Investors nationwide who have been the victim of investment fraud, may contact the Florida investment fraud attorneys at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or by e-mail to kelly@mccaberabin.com.