As the financial crisis deepens, investors are looking at claims against those who misled them. These are the type of claims being evaluated:
1. Brokerage claims.
Brokers may not have violated professional standards particularly concentrating investments in companies dependent upon subprime-mortgages. A claim was filed against Credit Suisse.
Brokers at Credit Suisse have been accused of deception in the marketing of collaterized debt obligations. Anderson, Two Brokers Accused of Securities Fraud Published: September 3, 2008 "The broker said the securities were as safe as cash. After all, he claimed, the outfit that issued them, Glacier Education Loan, bought student loans guaranteed by the federal government. Skip to next Two former Credit Suisse brokers, ... were indicted on securities fraud and other charges.
The problem: there is no such thing as Glacier Education Loan. Authorities say the broker, Eric Butler, sold customers some of the most toxic investments of the subprime age — collateralized debt obligations — in what federal prosecutors characterize as a $1 billion bait-and-switch. On Wednesday, Mr. Butler and a former colleague, Julian Tzolov, were indicted on securities fraud and other charges, believed to be the first criminal charges stemming from the auction-rate securities debacle. In a statement, the United States attorney’s office in Brooklyn said the pair, who formerly worked at Credit Suisse Securities, sold corporate clients securities backed by C.D.O.’s, subprime mortgages and mobile-home contracts but told the investors they were buying investments linked to safe student loans. The scheme was designed to reap high commissions, the authorities say.
Paul T. Weinstein, a lawyer for Mr. Butler, said his client be- lieved in the triple-A securities he had sold to customers. “He believed he was doing the best for his clients, and they agreed, until the entire auction-rate securities market failed, which had nothing to do with him,” he said. Mr. Tzolov has fled the country, people briefed on the case say, and is believed to be in Bulgaria. His lawyer, Kenneth M. Breen, declined to comment.Auction-rate securities have proved to be a costly mistake for many investors and increasingly for the Wall Street banks that marketed them. The securities are preferred shares or debt instruments with interest rates that reset regularly, usually every week, in auctions overseen by the brokerages that originally sold them. They worked fairly well until this year, when the auctions began to fail in the credit crisis, sticking investors with securities they could not sell. Regulators have been examining how brokers sold such securities and whether they fully disclosed the potential risks to buyers. ...
...As is standard on Wall Street, the riskier the investment, the higher the brokerage commission. To cover up their scheme, the complaints allege, the two brokers often changed the descriptions of the securities in e-mail messages with customers, replacing terms like “C.D.O.” with words like “student” or “education.” They sent customers 50 e-mail messages that falsely described the securities, according to the S.E.C. complaint. Sometimes they instructed sales assistants to omit the terms “C.D.O.” or “mortgage,” the S.E.C. says. For example, on June 19, 2006, Mr. Tzolov purchased for a Swiss client $23.5 million of auction-rate securities backed by C.D.O.’s issued by an investment vehicle called South Coast Funding V Ltd. In an e-mail message to the client, Mr. Tzolov described the investment as “South Coast St. Loan,” the S.E.C. complaint says. The scheme began to unravel in August 2007, authorities say, when the credit markets seized up. The market for auction-rate securities backed by subprime mortgages collapsed, and the brokers were unable to liquidate their clients’ investments. In one instance, the two brokers misled a client, claiming there was an administrative error in filing a trade ticket, when in fact the auction for the client’s securities had failed. They then persuaded the customer to invest $25 million more in securities backed by student loans. Instead, they invested that money in riskier securities. That client is waiting to recover $132.5 million. David Walker, a spokesman for Credit Suisse, said on Wednesday that Mr. Butler and Mr. Tzolov resigned in September 2007, after the bank discovered the scheme and suspended the two men. “Credit Suisse immediately informed our regulators, and we have continued to assist the authorities,” he said....Mr. Walker, the Credit Suisse spokesman, said: “We do not comment on meritless lawsuits.”
2. Securities fraud claims
False, deceptive, or misleading statements were made to induce individuals to invest. these occur in different contexts with different federal and state regulations potentially applicable.
3. Accounting Negligence
Accountants and other professionals who reviewed financials, provided opinions, and rendered auditing services may have failed to perform such services with reasonable care.
Law Offices of Howard A. Gutman,
230 Route 206,
Flanders, New Jersey 07836
(973) 598-1980, E-mail Howian@aol.com Fax Number 973-598-1982
New York Office
305 Madison Avenue, Suite 449
New York, New York 10165
