Florida Securities Fraud Lawyer Blog

National Retirement Partners Inc. (NRP) has been ordered to pay a $2 million arbitration award to two former brokers who NRP terminated after it bought their practices.

Jeffrey Brain Bafs and Wade Alan Walker left Merrill Lynch in 2008 to become affiliated with NRP. The advisers had 150 to 200 retirement plan clients at their practice before the move.

NRP claimed that advisers breached their transition agreement, and it accused the pair of breach of contract and fiduciary duty, promissory fraud, intentional misrepresentation and intentional interference with contract.

The FINRA panel dismissed NRP's claims, stating they were frivolous and in bad faith. The panel awarded the two advisers on their counterclaim $2 million.

The advisers claimed that they were "set up for failure" when NRP made it impossible to bring their clients over and that NRP's refusal to support the practice due to the broker-dealer's "financial-liquidity issues" ensured the collapse of the advisers' practice.

LPL recently announced that it is acquiring the assets of NRP.

Last Wednesday, following an eight-day federal court trial in Tampa, Beau Diamond was convicted on 18 counts, including wire fraud, mail fraud, and illegal monetary transactions. His sentencing is now scheduled for October 7th, but his attorney intends to appeal the verdict.

Diamond perpetrated a Ponzi scheme where he convinced upward of 200 investors that he had discovered a method of making money off the foreign exchange markets. Diamond continuously boasted about how profitable his system was. In contrast, evidence at trial illustrated that in his three years of trading, Diamond lost money all three years and kept the scheme going by soliciting new investments.

Many of Diamond's investors were divorced or widowed women who had little to no financial acumen. One such widow from Sarasota transferred around 75% of her savings to Diamond. A Bradenton attorney, who still represents some of the victims, says many of these investors lost substantial parts of their life savings and found themselves in foreclosure because they relied on Diamond's promises of guaranteed financial returns.

The SEC has settled with Goldman, Sachs & Co. which has agreed to pay $550 million and change its business practices to settle charges that Goldman misled investors in a subprime mortgage product as the housing market was crashing.

The SEC alleged that Goldman misstated and omitted key facts regarding a synthetic collateralized debt obligation (CDO) it marketed that hinged on the performance of subprime residential mortgage-backed securities. Goldman failed to disclose to investors vital information about the CDO, known as ABACUS 2007-AC1, specifically the role that hedge fund Paulson & Co. Inc. played in the portfolio selection process and that Paulson had taken a short position against the CDO.

Goldman acknowledges that the marketing materials for the ABACUS 2007-AC1 transaction contained incomplete information, but agreed to settle the SEC's charges without admitting or denying the allegations by consenting to the entry of a final judgment that provides for a permanent injunction from violations of the antifraud provisions of the Securities Act of 1933. Of the $550 million to be paid by Goldman in the settlement, $250 million would be returned to harmed investors through a Fair Fund distribution and $300 million would be paid to the U.S. Treasury.

The landmark settlement also requires remedial action by Goldman in its review of offerings of certain mortgage securities. The settlement also requires additional education and training of Goldman employees in this area of the firm's business. In the settlement, Goldman acknowledged that it is presently conducting a comprehensive, firm-wide review of its business standards, which the SEC has taken into account in connection with the settlement of this matter.

This is the largest settlement of its kind and shows that the aftermath of Madoff has had its impact on the SEC. The SEC's new regime under Obama appears to be progressing to a different level of enforcement and sanctions in punishing firms that have violated securities laws and rules.

The SEC has charged an Italian company ENI, S.p.A. and a Dutch subsidiary Snamprogetti Netherlands B.V. with violating the Foreign Corrupt Practices Act (FCPA) in a bribery scheme tied to Nigerian government officials for the purpose of winning construction contracts.

Snamprogetti and ENI will jointly pay $125 million to settle the SEC's charges, and Snamprogetti will pay an additional $240 million penalty to settle separate criminal proceedings announced today by the Department of Justice.

ENI and Snamprogetti are the latest to be charged in the decade-long Nigerian bribery scheme conducted by a joint venture of companies that included both named in previous SEC enforcement actions. The $365 million to be paid by ENI and Snamprogetti brings the total sanctions against all the companies involved in the scheme to more than $1.28 billion.

This elaborate bribery scheme featured sham intermediaries, Swiss bank accounts, and carloads of cash as everyone involved made a concerted effort to cover their tracks.

In the related criminal proceeding announced today, the Department of Justice filed a criminal action against Snamprogetti, charging one count of conspiring to violate the FCPA and one count of aiding and abetting violations of the anti-bribery provisions of the FCPA. Snamprogetti has entered into a deferred prosecution agreement with the DOJ and agreed to pay a criminal penalty of $240 million.

FINRA has barred a former advisor from Deutsche Bank from the securities industry for manipulating the stock price of Monogram Biosciences (MGRM). The purpose of the scam was to enrich himself and a hedge fund client.

Edward S. Brokaw engaged in trading designed to decrease the price of MGRM stock and increase the value of contingent value rights (CVRs) on that stock.

The MGRM CVRs were created and issued in December 2004, in connection with the merger of two firms to form MGRM. The CVRs were to be valued during a 15-day pricing period scheduled for 18 months after the merger.

Brokaw's hedge fund client held approximately 18.5 million CVRs - nearly 30 percent of the 64.8 million MGRM CVRs outstanding.

The FINRA hearing panel decision notes that the hedge fund owned 3 million shares of MGRM and told Brokaw that it wanted to sell those shares during the pricing period. Deutsche Bank's compliance group reviewed the orders and decided it would no longer execute MGRM sales for the hedge fund's account. Deutsche Bank first suspended, then terminated Brokaw based on his MGRM sales orders for the hedge fund.

The FINRA panel found that Brokaw violated Deutsche Bank's policy requiring the individual accepting a client order to create an order ticket "immediately upon receipt of an order." Instead, Brokaw's sales assistant completed one "booking ticket" each day, each showing a single 100,000-share order to sell, each with a false notation that the order was given by the client directly to the trading desk rather than to Brokaw - bypassing branch office compliance review of the orders.