corpfraud.typepad.comAbsolute Power Absolute Corporuption

The increasingly unchecked power of the fictional entitiy called the Corporation. Reed R. Kathrein's views, commentary and news alerts informed by 35 years of litigating against corporate wrongdoing. Home Archives Profile Subscribe October 25, 2013 A Push to End Securities Fraud Lawsuits Gains Momentum---NYT Dealbook According to the New York Time Dealbook, Halliburton, the oil company, is asking the Supreme Court to reconsider one of the fundamental tenets of securities fraud litigation: a doctrine known as “fraud on the market.” This doctrine is critical for shareholder protection. The doctrine has its origins in the 1986 Supreme Court case Basic v. Levinson. To state a claim for securities fraud, a shareholder must show “reliance,” meaning that the shareholder acted in some way based on the fraudulent conduct of the company. In the Basic case, the Supreme Court held that “eyeball” reliance — a requirement that a shareholder read the actual documents and relied on those statements before buying or selling shares — wasn’t necessary. Instead, the court adopted a presumption, based on the efficient market hypothesis, that all publicly available information about a company is incorporated into its stock price. Applying this doctrine, the Supreme Court reasoned that any fraud would affect a company’s price. The court held that therefore a shareholder need not prove reliance because the shareholder’s purchase or sale was based on an inaccurate share price, a price that changed as a result of false information. The New York Times states that 4 out of 5 justices seem to be leaning Halibuton's way---and if successful, securities fraud recoveries will be available to only the largest investors with resources to litigate. The complete article by Professor Steven M. Davidoff and be found here . Posted at 04:35 PM | Permalink | Reblog (0) November 28, 2012 Ten Things The SEC Will Not Tell Investors I enjoyed and concur with this list from MarketWatch writer Quentin Fottrell--- these are some of the many reasons we are here to represent investors. The SEC will never tell you: “We will never live up to your expectations.” To be fair, experts also point out that the agency faces a near-impossible job as the watchdog of Wall Street.... “The damage is often done before we get involved.” By the time the SEC takes an enforcement case, the worst of the losses and abuse have occurred, critics charge.... “Do as we say, not as we do.” The SEC stresses that firms should keep diligent records and never shred important files. But in fact, the regulator has allegedly done exactly that.... “We may have to scale back our responsibilities.” The U.S. Senate Appropriations Committee last year approved $1.4 billion to fund the SEC, but experts say the agency needs more money to handle increased responsibilities under the Dodd-Frank... “...and we need to better manage the money we do have.” While the SEC has said it needs more money to better police the financial industry, critics say it isn’t managing the funds it has well.... “We can’t always protect the most vulnerable.” The SEC is well aware that the elderly are particularly vulnerable when it comes to financial scams. It has even produced a special investment guide for seniors. Unfortunately, the commission is ill-equipped to do much more to protect that age group.... “Our own employees prove difficult to regulate.” Regulation, like charity, starts at home, say experts. The SEC has had many highly embarrassing incidents of its staff behaving badly.... “...and our best people leave and work against us.” Many critics of the SEC, including some members of Congress, have charged that the SEC is undermined by the fact that many employees leave to work for companies overseen by the commission.... “We’re sometimes chummy with Wall Street.” Just ask Gary Aguirre, the former SEC investigator... “We’ll miss the next Bernie Madoff.” Experts say that the next Bernie Madoff is probably out there right now lurking in the shadows. The SEC is a minnow compared with the industry it regulates.... To review the full article, go here . Posted at 11:32 AM | Permalink | Reblog (0) October 17, 2012 SEC Charges Hedge Fund Adviser Yorkville and Two Executives, Mark Angelo and Edward Schinik With Fraud SEC Charges Hedge Fund Adviser and Two Executives With Fraud in Continuing Probe of Suspicious Fund Performance FOR IMMEDIATE RELEASE 2012-209 Washington, D.C., Oct. 17, 2012 – The Securities and Exchange Commission today charged a former $1 billion hedge fund advisory firm and two executives with scheming to overvalue assets under management and exaggerate the reported returns of hedge funds they managed in order to hide losses and increase the fees collected from investors. The SEC alleges that New Jersey-based Yorkville Advisors LLC, founder and president Mark Angelo, and chief financial officer Edward Schinik enticed pension funds and other investors to invest in their hedge funds by falsely portraying Yorkville as a firm that managed a highly-collateralized investment portfolio and employed a robust valuation procedure. They misrepresented the safety and liquidity of the investments made by the hedge funds, and charged excessive fees to the funds based on the fraudulently inflated values of the investments. Additional Materials SEC Complaint Some Other SEC Cases in the Aberrational Performance Inquiry This is the seventh case arising from the SEC’s Aberrational Performance Inquiry, an initiative by the Enforcement Division’s Asset Management Unit that uses proprietary risk analytics to identify hedge funds with suspicious returns. Performance that is flagged as inconsistent with a fund’s investment strategy or other benchmarks forms a basis for further investigation and scrutiny. “The analytics put Yorkville front and center on our radar screen,” said Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit. “When we looked further we found lies to investors and the firm’s auditors as well as a scheme to inflate fees by grossly overvaluing fund assets. We will continue to pursue hedge fund managers whose success is based on fiction rather than fact.” According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Yorkville, Angelo, and Schinik defrauded investors in the YA Global Investments (U.S.) LP and YA Offshore Global Investments Ltd hedge funds. The SEC alleges that Yorkville and the two executives: Failed to adhere to Yorkville’s stated valuation policies. Ignored negative information about certain investments by the funds. Withheld adverse information about fund investments from Yorkville’s auditor, which enabled Yorkville to carry some of its largest investments at inflated values. Misled investors about the liquidity of the funds, collateral underlying the investments, and Yorkville’s use of a third-party valuation firm. The SEC alleges that by fraudulently making Yorkville’s funds more attractive to potential investors, Angelo and Schinik enticed more than $280 million in investments from pension funds and funds of funds. This enabled Yorkville to charge the funds at least $10 million in excess fees based on the inflated values of Yorkville’s assets under management. via sec.gov Posted at 10:19 AM | Permalink | Reblog (0) October 03, 2012 Why the NY AG's Suit Agains JP Morgan Matters Thomson Reuters News & Insight . Great post by Alison Frankel on why NY AG's suit is signicant. Some quotes diving home the message I believe in are below. Use the link to the entire article: Cynicism aside, why the NY AG's MBS suit vs JPMorgan matters It would be so easy to be cynical about the suit New York Attorney General Eric Schneiderman brought Monday night against JPMorgan Chase, seeking to hold the bank liable for the alleged mortgage securitization fraud committed by Bear Stearns before JPMorgan acquired Bear in March 2008. ...Then, of course, there's the content of the complaint. I've b...