Areas of Practice

Employment Law: Securities Litigation

Orlando, Florida Securities Litigation Manual Lawyer / Attorney

Securities Fraud

Since 1978, I have represented several major broker/dealers, including Shearson Lehman Brothers Inc. and PaineWebber, Inc. I have practiced securities litigation in federal and state courts, the New York Stock Exchange and the National Association of Securities Dealers. I handle cases involving churning, unauthorized trading, suitability, negligence, and breach of fiduciary duty.

WHAT IS BROKER FRAUD? "Broker fraud" includes many types of wrongdoing: misrep-resentations, churning, unsuitable investments and other acts of greed, incompetence and negligence by stockbrokers, financial planners, and others in the securities industry. These actions sometimes cause investors to lose their inheritances, their retirement or even their life savings! Securities regulators "police" the securities industry and issue fines and suspensions. To recover their losses investors must file claims for recovery. Statistics demonstrate that they are far more likely to recover if they are represented by experienced attorneys. Since investors sign account documents at brokerage firms which almost always contain binding arbitration clauses, most claims against brokerage firms must be resolved in securities arbitration. Our primary goal is to represent investors who have lost money because of mishandling of their brokerage accounts.

Worldcom fraud:

To those who have lost money in Worldcom at Salomon Smith Barney, you may have a claim to get your money back from Salomon Smith Barney, the investment banking arm of Citigroup, Inc. This is what Sanford I. Weill, Chairman and CEO of Citigroup, said about the Worldcom debacle: "We can see that certain of our activities do not reflect that way we beleve business should be done. That should never be the case and I am sorry for that."

Merrill Lynch

Despite the declining value of its clients' portfolios, Merrill Lynch continues to make a great deal of money. In its mid-year report to shareholders, the company brags that "reported second-quarter net earnings were 17% higher than the 2001 second quarter." For the first half of 2002, their Private Client business sector "earned 32% more before taxes than in the same period in 2001…pre-tax profit margin for this period was 13.3%, meaningfully better than the 8.9% reported for the first half of last year." The company's retail stock brokerage sector, "pre-tax earnings were 25% higher than in the first six months of 2001." Some of the stocks that Merrill Lynch pushed its clients to buy:

Merrill Lynch Settles Analyst Charges for $100 million excerpts from recent News Articles on Merrill Lynch and Henry Blodget (May 9 through May 22, 2002):

New York state Attorney General Eliot Spitzer has dropped the idea of asking Merrill Lynch to contribute to a restitution fund for investors who lost money on what he says were excessively bullish recommendations by the firm's analysts. Spitzer said that investors had a better chance of recovering money through private lawsuits. Spitzer released e-mails in which Merrill Lynch analysts derided stocks that the firm publicly recom-mended. Lawyers for shareholders have em-braced that evidence.

As part of a settlement with the New York Attorney General's office, Merrill Lynch will pay $48 million to the state of New York and $52 million to other states as part of the settle-ment related to "inappropriate communi-cations" found in the first phase of a potentially lengthy investigation of Wall Street analysts' behavior. The company also agreed to implement several changes in how it is organized internally, further separating its investment banking and stock research wings. The allegations arose from analyst behavior during and immediately after the incredible rise of Internet and related technology stocks.

During the investigation, New York Attorney General Eliot Spitzer revealed e-mails that showed stock analysts privately referred to stocks as "dogs" while publicly maintaining buy ratings. "It is my view that restitution is best accom-plished through private actions that individual investors will bring based on the particular facts of his or her or their investments," he said, according to the Associated Press. By not acknowledging wrong-doing, Merrill has retained the right to defend itself against a host of private lawsuits filed in connection with the same stock bubble. Some of the pending suits -- more have been filed in recent days -- single out former Merrill Internet analyst Henry Blodget.

The settlement comes about a month after a judge cleared the way for further investigation of Merrill Lynch. That ruling followed Spitzer's presentation of 100,000 pages of documents, which he said showed that Merrill analysts were encouraged to give posi-tive stock recommendations to help the company win investment banking and underwriting business. The allegations focused mainly on dot-com clients, such as Pets.com, Buy.com, eToys, GoTo.com (now known as Overture) and InfoSpace. Spitzer called the agreement a possible template for reform on Wall Street. But the company did not admit wrongdoing, and some observers suggested that the structural reforms, though stronger than those recently approved by the Securities and Exchange Commi-ssion, may fail to eliminate analysts' conflicts of interest.

The attorney general had accused Merrill Lynch researchers, notably former Internet analyst Henry Blodget, of misleading investors by issuing enthusiastic reports on stocks they privately derided so Merrill could win or keep lucrative investment-banking business from those firms. Spitzer stunned the financial world by releasing a handful of subpoenaed e-mails in which Blodget and others at Merrill Lynch disparaged stocks the company was publicly recommending, calling them "junk," "crap," "dog" and "disaster." Spitzer pledged to press ahead with his investigation into analyst behavior at other firms. The attorney general has subpoenaed at least seven other major Wall Street houses: Morgan Stanley Dean Witter & Co.; Credit Suisse First Boston; the Salomon Smith Barney Inc. unit of Citigroup Inc.; Lehman Brothers Inc.; Bear, Stearns & Co.; UBS Warburg; and J.P. Morgan Chase & Co.

The SEC has opened its own investi-gation into conflicts of interest on Wall Street. The Justice Department has also expressed interest in probing the issue. The SEC approved new analyst rules proposed by the New York Stock Exchange and the National Association of Securities Dealers. In its statement of contrition, Merrill Lynch apologized for "the inappropriate communication brought to light" by Spitzer. But it stopped short of an admission of wrongdoing, an element Spitzer fought for but Merrill rejected, saying that such an admission would leave the firm wide open to the dozens of shareholder lawsuits filed against it.

National Organizations

Commodities Futures Trading Commission (CFTC)

202.418.5508, Office of Proceedings

Web site: http://www.cftc.gov

National Association of Securities Dealers (NASD)

800.289.9999

Web site: http://www.nasdr.com

Securities and Exchange Commission

202.942.7040, Office of Investor

Education & Assistance

Web site: http://www.sec.gov

Some Individual State Securities Regulators

Florida:

Securities Division

Department of Banking & Finance

101 East Gaines St.

Tallahassee, Fla. 32301

904.488.9805
 

For a confidential consultation regarding potential employment dispute cases, contact the Law Office of N. James Turner, Esq., P.A. at (407) 422-6464

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