NASDAQ 'Grossly Mishandled' Facebook IPO, Class Claims

NASDAQ 'Grossly Mishandled' Facebook IPO, Class Claims

By DEE MOORE 

     (CN) - Potential Facebook investors found nothing to "Like" when they tried to purchase shares of the social networking site's stock on the first day of its initial offering, claiming in a class action that the NASDAQ "grossly mishandled Facebook's IPO."
     According to the lawsuit, defendants failed to accurately and promptly process purchase and cancelation orders and delayed the opening by half an hour.
     "The massive amount of trading in FB stock overwhelmed Nasdaq's trading system causing a backlog of unfilled orders. Confirmations weren't sent in a timely manner," the complaint states."Investors and brokers could not tell if their orders went through and if they did at what price ... hours passed before some trade orders were processed leaving investors unable to figure out if or when they should sell stock or if they even owned stock.
     "Nasdaq was so overwhelmed that it failed to cancel other orders despite timely customer requests to do so."
     In the end, investors were being stuck with shares they had bought at inflated prices only to see the value of the stock fall dramatically or were unable to realize the full potential of re-sale thanks to the glitches in Nasdaq's system.
     Shares initially began trading at $38 a piece and one point dropping as low as $27 each only to increase in price again this time to $45. Purchasers had no idea at the time what they bought or sold their shares for, according to the lawsuit.
     The complaint quotes a Reuters article stating, "behind the scenes the massive order volume was overwhelming Nasdaq's systems." Purchases were held up for hours, and trading dropped off as investors backed away from the stock unsure if they owned shares or not, the story goes on to say.
     The Wall Street Journal reported that share purchase orders "never made it through."
     The class is represented by Thomas Aman in New York, Brian Robbins and Gregory Del Gaizo of Robbins Umeda LLP in San Diego and William C. Wright in West Plam Beach, Fla. 

Copyright Courthouse News Service 2012

http://www.cnssecuritieslaw.com/2012/06/11/398.htm

 

Routine FINRA Probe Nets Florida Firm $1M Fine

Routine FINRA Probe Nets Florida Firm $1M Fine

By DEE MOORE

CN) - The Financial Industry Regulatory fined Brookstone Securities of Lakeland, Fla. $1 million for committing fraud against the elderly.

The company, its CEO, one of its brokers and the former compliance officer were found by a hearing panel to have sold collateralized mortgage obligations (CMOs) to "unsophisticated, elderly and retired investors." The company was ordered to pay restitution in addition to the fine.

CEO Anthony Lee Turbeville, broker Christopher D. Kline and former compliance officer, David Locy were all called out on their conduct and the panel noted that Locy as compliance officer should have been the customer's first line of defense against improper practices by Brookstone brokers.

According to the investigators, the securities firm "preyed on their elderly customers greatest fears." They "made negligent misrepresentations and omissions of material fact" and were told that the CMOs were "government guaranteed bonds"

Two of Kline's customers were elderly widows with very limited investment knowledge, the report stated, and were very vulnerable after their husbands' deaths when they were approached and convinced to invest their retirement savings in CMOs, the panel found.

It was discovered that Kline told the widows that they could not lose money in CMOs because they were government-guaranteed bonds. He then further increased their risk by trading on margin.

The company was also accused of sending letters which contained misleading statements to customers who had invested in CMOs.

The investigation determined that the firm's supervision of its personnel was lacking since there were no written procedures for due diligence requirements for third party private placements and that brokers failed to attend compliance meetings. It also found that they failed to update forms, failed to report customer complaints, failed to report transactions to TRACE (Trade Reporting and Compliance Engine) and failed to complete tickets for transactions involving corporate bonds.

"The hearing panel did not find Turbeville's testimony credible," the decision states. They didn't believe his claims that he fully explained the CMOs risks to his clients.

Also, the panel noted that Locy completely ignored his responsibility as chief compliance officer and "should have been a line of defense against Turbeville's and Kline's egregious conduct," but instead "he looked the other way while Turbeville and Kline traded CMO accounts that were unsuitable for their customers."

Enforcement called nine witnesses which included five customers and two family members of customers. There were 324 exhibits submitted to the panel by the investigators and 185 by customers at the hearing.

Both Kline and Turbeville now permanently barred from the securities industry and they must pay $440,600 of the $1 million fine imposed jointly and severally with Turbeville, and the remaining $1,179,500 imposed jointly and severally with Kline. Locy is barred from acting in any supervisory or principal capacity, was suspended in all capacities for two years and fined $25,000.

The investigation began as a routine examination of the company by FINRA.

Copyright Courthouse News Service 2012

http://www.cnssecuritieslaw.com/2012/06/08/392.htm

Oregon Pipeline Could Harm Butterfly, Flowers

Oregon Pipeline Could Harm Butterfly, Flowers

By DEE MOORE

EUGENE, Ore., (CN) - A pipeline project for a water-strapped Oregonian city will harm endangered species of flower and butterfly, an environmental group claims in Federal Court.
"The effects of the project will result in urban, suburban, commercial, and industrial development and conversion of native prairie habitat, and the Fender's blue butterfly, the Bradshaw's lomatium, the Willamette daisy and the Kincaid's lupine will be adversely affected," the complaint states.
Development will also increase traffic in, around and through the Eugene wetlands, where the government plans to lay a pipeline that carries water from the Eugene Water and Electric Board source main.
Once completed, the 9.7 miles of 24-inch diameter water pipe will carry water to the Veneta reservoir.
But LandWatch Lane County claims that the United States Fish and Wildlife Service violated federal law by not preparing supplemental analysis for the pipeline project.
"Urban, suburban, commercial and industrial development and agricultural conversion are a significant threat to the viability and recovery of the" these endangered species," according to the complaint.
The nonprofit claims that the agency violated the Administrative Procedures Act by "issuing a concurrence letter that is arbitrary, capricious, an abuse of discretion, and contrary to law."
That letter said the project "would not likely adversely affect" endangered species that inhabit the area, but LandWatch says this is untrue.
The project and the urban growth that it will facilitate will indeed adversely affect the butterfly and two plants, according to the complaint.
Failure to account for this expansion constituted a violation of the National Environmental Policy Act, the group says.
"The cumulative effect of the reasonably foreseeable Urban Growth Boundary expansion in the city of Eugene and the project will jeopardize the aforementioned endangered species in addition to other environmental impacts," the complaint states.
Fish and Wildlife guidelines define harm as "significant habitat modification or degradation which actually kills or injures fish or wildlife by significantly impairing essential behavioral patterns, including breeding, spawning, rearing, migrating, feeding, or sheltering," according to the complaint.
Helping Veneta to expand with an increased water supply allegedly violates this rule.
LandWatch wants the court set aside the letter as "arbitrary, capricious, an abuse of discretion, and contrary to law."
It is represented by attorney Sean Malone.

Copyright Courthouse News Service 2012
http://www.courthousenews.com/2012/06/05/47129.htm

Stepmom Faces Demand Over 2010 Kidnapping

Stepmom Faces Demand Over 2010 Kidnapping

By DEE MOORE

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PORTLAND, Ore. (CN) - The biological mother of a 7-year-old child who went missing from two years ago pointed blame at her ex-husband's new wife in a civil lawsuit.
Stepmother Terri Horman brought 7-year-old Kyron to school on June 4, 2010, and the child was never seen again, Kyron's biological mother Desiree Young claims in Multnomah County Circuit Court.
"Desiree Young, Kyron's mother, brings this claim against Terri Horman, asserting that Terri Horman is responsible for the disappearance of Kyron," the complaint states.
Young says she shared joint custody of Kyron with her ex-husband, Kaine Horman, but that Terri deliberately sought to deprive her of her parental rights.
"Ms. Young claims that Terri Horman intentionally interfered with her parental rights, and that Terri Horman intentionally inflicted severe emotional distress," according to the complaint. "Ms. Young seeks the return of her son, and seeks compensatory damages."
Claiming that Terri knows where her son is, Young wants the court to order an injunction for his return.
"Assuming that Kyron is alive, plaintiff is entitled to the return of her son," the complaint states. "If Kyron is dead, plaintiff is entitled to the return of his remains. Terri Horman knows whether Kyron is alive or dead, and knows his present whereabouts or the location of his remains."
Young says her son's disappearance has caused her to suffer serious mental health issues and ongoing trauma.
"Plaintiff is suffering ongoing fear, anxiety and grief on a daily basis, and has no other adequate remedy except for the issuance of an injunction compelling Terri Horman to return Kyron to his parents, or, alternatively, if Kyron is dead, an injunction compelling Terri Horman to reveal the whereabouts of Kyron's body so that his parents may properly care for his remains," the complaint states.
In addition to the return of her son, Young wants $10 million in damages for grief and suffering. She is represented by Elden Rosenthal of Rosenthal Greene & Devlin.

Copyright Courthouse News Service 2012
http://www.courthousenews.com/2012/06/05/47143.htm

Class Challenges Deal For EDGAR Online

Class Challenges Deal For EDGAR Online

By DEE MOORE

(CN) - Shareholders sued EDGAR Online over R.R. Donelley & Sons Co.'s plan to buyout the company for $1.09 per share.
"The Individual Defendants have knowingly and recklessly and in bad faith violated fiduciary duties of care, loyalty, good faith, and independence owed to the public shareholders of EDGAR and have acted to put their personal interests ahead of the interests of EDGAR shareholders," the complaint states.
According to the complaint, the offer is well below NASDAQ's 52 week high of $1.30.
Plaintiffs claim the sale will prevent them from reaping the benefits of EDGAR's two year investment and focus on its XBRL (eXtensible Business Reporting Language) software. Though the company reported losses associated with its focus on XBRL, financial data from the company's 2011 fourth quarter statement showed this was beginning to turn around.
"I am pleased to report that EDGAR Online experienced tremendous growth in 2011 . . . In addition to generating record revenues for the year, we implemented the infrastructure and added the human talent necessary to support future growth and product evolution. The value propositions embodied in our data and analytics products, disclosure management solutions, and software businesses position EDGAR Online to expand and gain market share," CEO Robert Farrell said in March 2012, according to the lawsuit.
In addition to the inadequate price, the board also agreed to a no solicitation provision and a $2.75 million termination fee.
The class is represented by Brian D. Long, Seth Rigrodsky and Gina Serra of Rigrodsky & Long in Wilmington, Del. and Eduard Korsinsky of Levi & Korsinsky LLP in New York.

Copyright Courthouse News Service 2012

http://www.cnssecuritieslaw.com/2012/06/04/382.htm

SEC Takes Phoenix Adviser To Task For Misleading Clients To Fund Lavish Lifestyle

SEC Takes Phoenix Adviser To Task For Misleading Clients To Fund Lavish Lifestyle

By DEE MOORE

(CN) - A Phoenix area investment adviser has been charged by the Securities and Exchange Commission with withholding information about his stake in investments he recommended to his clients.
According to the Securities and Exchange Commission's complaint, Oxford Investment Partners LLC principal Walther J. Clark advised his clients to invest in two businesses without divulging that he owned one of the businesses and had financial ties to the other. Oxford's website describes the company as a "boutique wealth-management firm that offers financial, retirement, tax and investment planning."
"In late 2007, Clarke faced severe financial problems and decided to obtain money to address his difficulties by exploiting an Oxford client," the complaint states. "Specifically, in March 2008, Clarke sold 7.5% of his ownership interest in Oxford to a client at a fraudulently inflated price ($750,000). Indeed, in connection with this transaction, Clarke employed several devices to artificially inflate the value of Oxford by at least $1.5 million, thereby causing the client to overpay for the 7.5% interest in the firm by at least $112,000."
Clark also recommended his own company, Cornerstone Lending Group, to several of his clients without informing them that he was the owner. The clients funded loans for Cornerstone which were later defaulted on causing investors to lose more than $300,000.
Later that year, according to the commission, "Clarke convinced four clients to invest approximately $10,000 each in a privately-held company called HotStix, without first disclosing that the owners of HotStix had ownership interests in Oxford and were paid consultants to Oxford," the complaint states.
Not long after the investments were made, HotStix failed and filed for bankruptcy, once again leaving Clark's clients high and dry.
According to the complaint, Clark was paying the mortgage on two houses, one of which is valued at $3.5 million. He was also paying for private schools for his children, professional private tennis lessons and interior designers. In addition, he was dealing with a financial strain caused by a $400,000 settlement he was paying to this former employer, Wachovia, and the financial burden his business was creating because his partner was facing severe health issues.
"Investment advisers have a fiduciary duty to be forthcoming with their clients and act in their best interests," said Marshall S. Sprung, Deputy Chief of the SEC Enforcement Division's Asset Management Unit. "Clarke breached that duty by deliberately overvaluing the firm and staying mum on his personal ties to the recommended investments."

Copyright Courthouse News Service 2012
http://www.cnssecuritieslaw.com/2012/06/03/378.htm

Quantek Settles With SEC For Misleading Investors

Quantek Settles With SEC For Misleading Investors

By DEE MOORE

(CN) - Miami-based Quantek Asset Management LLC agreed to pay $3.1 million in fines, total disgorgement and penalties, to the Securities and Exchange Commission for deceiving investors about whether its managers had invested in a Latin America-focused hedge fund or not.
"Quantek misled investors about three important attributes of funds that it managed: management "skin in the game", the funds' investment process and certain related-party transactions.
"At its peak, Quantek managed over $1 billion in assets, primarily through the Quantek Master Fund, SPC Ltd. and its two feeder funds, Quantek Opportunity Fund, L.P. and Quantek Opportunity Fund, Ltd.," the SEC states.
According to the commission, fund managers made various misrepresentations to investors about company executives having personally made investments in the $1 billion Quantek Opportunity Fund when in fact executives had never invested their own money in the fund.
Quantek misled investors about the rigor of the Opportunity Funds' investment process. The funds used an asset-based lending strategy, with a focus on industrial and real estate ventures in Latin America.
The SEC alleges that Quantek officials told investors that investments required approval by a committee of principals who reviewed formal memoranda explaining each proposed investment before it was made and that the principals would then sign the memo if the investment met their approval.
"In reality, Quantek failed to prepare investment committee memos for numerous transactions," the commission says. "[E]mployees prepared and backdated the missing loan documents. Quantek employees also created investment memos designed to appear as if they were drafted before the funds made the loans."
The company "made these misstatements in due diligence questionnaires and in side letter agreements executed with certain institutional investors."
"These materials inaccurately described key terms of the related-party loans and gave the impression that the loans had been sufficiently documented and secured at all times."
The SEC's investigation also found that Quantek misled investors related-party transactions involving its lead executive Javier Guerra and its former parent company, Bulltick Capital Markets Holdings LP.
"The related-party transactions were problematic to begin with, and the false deal documents left investors in the dark about the adviser's conflicts of interest," said Scott Weisman, SEC Assistant Director of the Enforcement Division's Asset Management Unit.
Bulltick, Guerra and former Quantek operations director Ralph Patino were also charged.
"Quantek's investors deserved better than the misleading information they received in marketing materials, side letters, and other fund documents.

Copyright Courthouse News Service 2012

http://www.cnssecuritieslaw.com/2012/06/03/377.htm