Tag Archives: New Mexico

Austin Morton

The Financial Industry Regulatory Authority charged Austin Morton, a former Edward Jones broker located in eastern Oklahoma, with the theft of $36,000 from an 83-year-old man with dementia.  It is alleged that this theft was motivated by outstanding gambling debts of Morton.

Wall Street photo 2Morton is alleged to have taken more than $22,000 that the elderly investor left in Morton’s car after the investor liquidated his retirement account.  The FINRA complaint asserts that in September 2016 the investor was in the car of Morton after having lunch with Morton.

A month later the Edward Jones broker filled out a signed blank check from the customer for another $22,000.  Morton defended the action saying that the transfer of funds to him was a loan and that the investor was a personal friend.  Part of the funds were asserted by the broker to be for medical expenses which are alleged to have never occurred.

The FINRA complaint states, “[I]n 2016 Morton incurred close to $130,000 in losses from Online [gambling site], the primary online horse racing wagering facility with which he placed bets at the time.”  The complaint goes on to say, “[I]n September 2016 alone, the month in which he committed his first act of conversion, Morton made 38 separate deposits into his Online [gambling] account, totaling more than $17,300.”

Finra charged Morton with both conversion of funds and an unrelated charge of engaging in undisclosed outside business activity. These are substantial charges that could result in a bar from the securities industry.

On his FINRA BrokerCheck record, a form of his CRD record, Morton denied his employer’s termination charges stating, “gentleman [the alleged victim] [is] a long time family friend,” and that the investor “was no longer a client,” the broker wrote.

A copy of the complaint can be found at the following link.

LINN Energy (“LINE”) Loss Recovery

If you suffered losses in LINN Energy (LINE or LNCO), including tax obligations, you may be entitled to recovery of those losses.  Please call 1-866-817-0201 for a free consultation with a lawyer about loss recovery.  Most representations handled on a contingency basis where attorney fees are not due unless a recovery is received.

LINN Energy, which changed its name to LINCO, stated on March 16, 2016 that bankruptcy protection through the courts may be unavoidable.  This prediction came true on May 11, 2016 when LINN filed for bankruptcy per Rueters.  This will leave many investors who have invested their life savings in LINN looking to change their retirement plans and their financial outlook. For many of these investors LINN Energy was never a suitable investment, and this fact may give the individuals the right to recover their losses.

While some investors may call it “LINN” and others refer to it as “LINE,” all investors can agree that investors should not be responsible for the losses in LINN Energy to the extent that the investment was procured by fraud or negligence. Brokerages that allow the sale of unsuitable investments are responsible for the ultimate losses sustained by their investors.  Brokers and financial advisors have a duty to only sell suitable investments to investors. To be suitable, the investment must be consistent with the wants and needs of the investor.

LINN Energy is, and has always been, a speculative investment.  Unless you are a speculative investor and could afford to gamble on high risk investments LINN Energy was unsuitable for you. The list of people for whom LINN would be unsuitable and entitled to reimbursement includes, but is not limited to, any one of the following:  conservative to moderate investors; investors reliant upon investments for income; individuals reliant upon their savings; unsophisticated investors; individuals not understanding the risks of limited partnerships; individuals who could not afford to risk the amounts invested in LINN: and individuals who would have difficulty re-earning the funds invested in LINN if the investment were completely lost.

The recommendation to invest in LINN can be the result of either negligence or fraud.  Speculative investments often pay a higher commission and give brokers incentive to recommend investments that are not in the best interest of their investors.  Irrespective, the broker’s or financial advisor’s employer is responsible for losses as the result of unsuitable recommendations.

379335_544495705568117_1587447150_nThe risk surrounding LINN are many and not just from the falling oil market.  The potential tax consequences for its investors if LINN were to restructure some of its debt will also impact the value of the investment. When debt is restructured, debt that is forgiven is, for tax purpose, treated as income. Since LINN is an LLC, the tax liability belongs to the investors holding Linn shares.  This will further increase the losses of those holding LINN shares if they must pay tax on the income of LINN.

LLCs are popular because income is only taxed once, unlike regular corporations where the income of the corporation is taxed and the resulting dividends are also taxed.  While the single taxation is popular because it means less taxation of income when things are good, the downside is that investors are responsible for the tax the LLC cannot pay when things are bad.  That can accelerate the decline of an LLC when industry challenges, such as a decrease in the price of oil, occur.

By some estimates, investors will be responsible for paying approximately $24 per share in tax liability to the IRS even if they no longer hold the shares.  Even though the shares may be worthless.  So say an investor purchase $40,000 worth of the investment when Linn was trading at $40 per share, that individual may have to pay the IRS $24,000 for the tax liability of Linn.

Further, Linn offered investors the opportunity to trade in their shares for shares that protected investors from such liability, but Linn and the brokers selling Linn gave investors very little and we believe insufficient notice to investors concerning the opportunity to make the transition and the severe consequence if the transition was not elected.  The deadline to exchange LINE units expired on August 1, 2016. Forbes estimates that only 35% of the Linn investors successfully made this switch to avoid payment to the IRS.  The other 65% will have to pay for Linn’s mismanagement beyond the extent they invested in Linn.

On August 2, 2016, Linn issued the following statement concerning the exchange period:

“The subsequent offering period for the Exchange Offer expired at 12:00 midnight (New York City time) on Monday, August 1, 2016 [...] a total of 19,954,774 LINN units were validly tendered during the subsequent offering period and an aggregate of 123,909,317 LINN units (including LINN units accepted for exchange during the initial offering period), representing approximately 35% of LINN’s issued and outstanding units, were validly tendered and not validly withdrawn pursuant to the Exchange Offer and have been accepted by LinnCo for exchange. “

This is all in addition to the likely losses that shareholders would feel from that restructuring and oil prices that may not rise above $40 per barrel in the near future. LINN and LINCO investments likely became worthless on May 11, 2016.  On that date, LINN filed for Chapter 11 bankruptcy protection per Rueters.

Please call for more information. The Law Offices of Jeffrey Pederson has represented investors with suitability claims in FINRA arbitrations across the country.  Most representations done on a contingency basis.

For a detailed description on the rise and fall of Linn:  http://www.oilandgas360.com/rise-fall-linn-energy/

For a great article on the mess investors will be facing, along with an estimate of tax liability Linn investors will face:  http://www.forbes.com/sites/christopherhelman/2016/05/19/oil-bankruptcies-continue-linn-energy-reorg-wont-be-pretty/#35f687375edc .

MLP Losses

Oil StockWe are investigating losses sustained by investors in Master Limited Partnerships (“MLP”).  This includes all MLP investments including but not limited to UBS ETRACS, Enbridge Energy Partners,  EV Enterprise Partners, and Eagle Rock Energy Partners.  If you have suffered such losses please call toll-free 1-866-817-0201.

MLPs are sometimes referred to as “SSPs” and other names.  There are limited types of investors to whom such investments could be legally sold.  Selling such high-commissioned investments when they contradict the objectives or needs of an investor, making them “unsuitable” for certain investors, is a form of fraud. In August 2015, the SEC conducted an examination of firms selling MLPs.

Among other things, the SEC regulatory examinations revealed several significant deficiencies in the areas of suitability and supervision with respect to all of the examined firms’ recommendations and sales of MLPs to retail investors. Specifically, all of the examined firms: “Failed to maintain and/or enforce adequate controls relating to determining the suitability of MLP recommendations;” and “Failed to conduct both compliance and supervisory reviews of registered representatives’ (“representatives”) determinations of customer suitability in the MLPs, as required by their internal controls.”

MLPs have been increasingly marketed to retail investors, who have been interested in generating income in the low-yield interest-rate environment that has persisted since the financial crisis.  Additionally, MLPs may offer attractive attributes such as partial or full “principal protection” or exposure to a particular asset class.

MLPs often provide for payments determined by reference to other assets or indices and may be more complex than a simple debt instrument with a stated interest rate.  However, these investments have always been known to carry a high degree of risk. A central aspect of a broker-dealer’s duty of fair dealing is the suitability obligation, which generally requires a broker-dealer to make recommendations that are consistent with the best interests of its customer.  So investments must be of the character and have the level of risk that is consistent with these wants and needs.  This “suitability” obligation is a requirement under the  antifraud provisions of the state and federal securities laws, and also requirement of a brokerage firm’s membership in FINRA.  

FINRA also requires brokerages to supervise their representatives, and the Exchange Act, the federal securities law, permits the SEC to sanction broker-dealers who fail reasonably to supervise, with a view to preventing violations of the state and federal securities laws by a person subject to their supervision.  In addition, FINRA has released guidance to help assess the adequacy of controls with respect to MLPs and complex products that members should include in their supervisory and compliance procedures.

For more information on MLPs containing LINN Energy, also known as LINE, see the following: www.jpedersonlaw.com/blog/linn-energy-losses/

Jeffrey Pederson has represented investors in Alabama, Arizona, Arkansas, California, Colorado, Connecticut , Florida, Hawaii, Massachusetts, Montana, New Jersey, New Mexico, New York, North Carolina, Minnesota, Missouri, North Dakota, Rhode Island, Texas, Utah, and Wyoming, in FINRA arbitration actions against securities brokerage firms for unsuitable investments.  Please call for a confidential and free consultation.

 

Oil or Gas Investment Losses

Oil Stock IIJeffrey Pederson, P.C. helps investors determine if they have a right to recover investment losses in oil, gas or other investments.  Please call 1-866-817-0201 toll-free for a free consultation.

In 2016, oil dropped to a price below $30 a barrel.  Many investors simply ignore their losses, believing that the loss is simply due to the market, without knowing that they may be entitled to a recovery.  Such individuals unnecessarily let their plans for retirement or other future plans go unfulfilled because of the financial loss they sustained.

Since late 2014, countless oil, gas and other energy companies have filed for bankruptcy.  Many investors in these companies were illegally sold these investments by brokerage firms motivated by commissions paid by the investments.  Such investments can take many forms including, but not limited to, Master Limited Partnerships (MLPs), common stock, notes, bonds, mutual funds, and Exchange Traded Funds (ETFs).

We are currently investigating investments into the following energy companies:Oil Stock

American Eagle, BPZ, Buccaneer, Climax Energy, Duer Wagner, Hart Resources, Hercules Offshore, Linn Energy, Milagro Oil and Gas, Petrobras, Quicksilver Resources, Sabine, Samson Resources, Sandridge Energy, Southern Pacific, Walter Energy and WBH Energy.

Oil and gas limited partnership losses can do more than take away the hard earned principal of investors, it can also create tax liabilities that the investor was not expecting.  The result is that the investor could lose more than invested.  The following link discusses the risks that in more detail.

Jeffrey Pederson has represented investors in Alabama, Arizona, Arkansas, California, Colorado, Connecticut , Florida, Hawaii, Massachusetts, Montana, New Jersey, New Mexico, New York, North Carolina, Minnesota, Missouri, North Dakota, Rhode Island, Texas, Utah, and Wyoming, in FINRA arbitration actions against securities brokerage firms for unsuitable investments.  Please call for a confidential and free consultation.

 

 

 

Variable Annuity Fraud

We help investors who believe that they are victims of variable annuity fraud.  Variable annuity fraud has always been a frequent trick of brokers looking to put their own interests ahead of their investors (often by selling to those approaching retirement which is generally an unsuitable recommendation).  The investments pay an extremely high commission and the investments are only suitable for a small section of the investing public.  This fraud hit a new low last week.

As reported in http://www.investmentnews.com/article/20140313/FREE/140319954, the Securities and Exchange Commission Thursday, March 13, 2014, filed charges against a group of brokers in a scheme wherein investors used variable annuities to wager on the lives of the terminally ill.

The brokers in question were Michael A. Horowitz of Los Angeles and Moshe Marc Cohen of Brooklyn, N.Y.

The brokers allegedly obtained the personal health and identification data of the dying patients through fraud, marking them as annuitants on variable annuity contracts that he had marketed to wealthy clients, according to the SEC’s complaint.  Under false pretenses, the brokers allegedly received their employers’ approval to sell the annuities.  The motivation with this plan, as with most fraudulent sales of variable annuities was the commission.  Variable annuities pay as large of a commission as just about any investment product that you can purchase through a securities brokerage.  The brokers reaped approximately $1 million in commissions from their sale, the SEC claimed, with Mr. Horowitz obtaining more than $300,000 and Mr. Cohen became unjustly enriched to the tune of more than $700,000.

If you have lost money with these or any other brokers you believe may have defrauded or mismanaged you portfolio call 303-300-5022.

Merrill Lynch Broker Zeng Barred From Industry

David G. Zeng (CRD #4303055, Merrill Lynch Registered Representative (broker), Santa Fe, New Mexico) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity, effectively making him barred from the securities industry. Without admitting or denying the findings, Zeng consented to the described sanction and to the entry of findings that he failed to respond to FINRA requests for information and documents and failed to appear and provide FINRA-requested testimony concerning several customer complaints that his former member firm became aware of after Zeng resigned from Merrill Lynch. The findings stated that Zeng informed FINRA that he would not cooperate with FINRA’s requests for testimony and documents in connection with this matter.

The alleged fraud of Mr. Zeng included many different investments some of the most common include the following: Focus Media Holding, Sina Corp., Silver Wheaton, Claymore/Alphashares China, Valero Energy, Ultrashort MSCI, Teck Cominco, Proshares Trust Ultrashort, Goldcorp, Teck Resources, and MGM Resorts.

Circumstances surrounding the bar of Zeng were the misrepresentations and the making of unsuitable recommendations of securities.  If you were a client of Zeng’s please call 303-300-5022.