Wall Street Investment Fraud Lawyer Blog

The financial publication On Wall Street published an article today discussing the fate of Michael Dimare, a former ING Financial broker who was recently permanantly barred by securities regulator FINRA for scamming approximately 22 victims out of approximately $2 million between 2001 and 2008.

Accoding to Dimare's CRD report, a report that tracks customer complaints made by customers and securities regulators, ING Financial has compensated some investors who have come forward. In the article, Jason Doss, an attorney with The Doss Firm was quoted, "The question is whether everyone will come forward."

FINRA's investigation uncovered that between 2001 and 2008, Dimare persuaded his clients to invest in fictitious investments. Between 2001 and 2006, Dimare was a sales manager for John Hancock Mutual Life Insurance Company. During that time period, victims wrote checks made payable to John Hancock believing that the money would be invested. In reality, Dimare deposited the funds into his own bank account.

Between 2006 and 2008, Dimare was a registered representative of ING Financial Partners. During this time period, it appears that Dimare continued to encourage his clients to write checks made payable to John Hancock and then deposited the funds into his bank account.

Victims who lost money prior to 2006 likely have legal claims that can be brought against John Hancock for failure to supervise as well as the depositary bank who accepted the checks for deposit for conversion. Victims who lost money between 2006 and 2008 likely have claims against ING Financial Partners and the depositary bank.

For more information, feel free to contact us for a free consultation.

FINRA anounced yesterday that it permanantly barred former ING Financial broker, Michael Dimare, from Ponta Vedra Beach, Florida for scamming approximately 22 victims out of approximately $2 million between 2001 and 2008.

FINRA's investigation uncovered that between 2001 and 2008, Dimare persuaded his clients to invest in fictitious investments. Between 2001 and 2006, Dimare was a sales manager for John Hancock Mutual Life Insurance Company. During that time period, victims wrote checks made payable to John Hancock believing that the money would be invested. In reality, Dimare deposited the funds into his own bank account.

Between 2006 and 2008, Dimare was a registered representative of ING Financial Partners. During this time period, it appears that Dimare continued to encourage his clients to write checks made payable to John Hancock and then deposited the funds into his bank account.

Victims who lost money prior to 2006 likely have legal claims that can be brought against John Hancock for failure to supervise as well as the depositary bank who accepted the checks for deposit for conversion. Victims who lost money between 2006 and 2008 likely have claims against ING Financial Partners and the depositary bank.

For more information, feel free to contact us for a free consultation.

According to First Coast News in Ponte Vedra, Florida, Michael Joseph Dimare pleaded guilty to mail fraud Monday for scamming about 22 people out of approximately $2 million. He worked as a registered representative of ING Financial Partners from October 2006 to May 2008. Based on the article, it appears that Mr. Dimare engaged in the ponzi scheme fraud while he was with ING Financial Partners and the firm he worked with before ING, Signator Investors, Inc. According to Mr. Dimare's CRD report, a publicly available report that tracks customer complaints against financial advisors, it appears that only 11 customers have filed complaints thus far. One of the victims came forward in the article and stated that she received every penny of her money back from a financial firm. That firm is likely ING Financial Partners and/or Signator Investors, Inc.

Given that he pleaded guilty to defrauding 22 people, there are likely more victims who have not come forward yet.

The Doss Firm, LLC represents investors across the nation against financial firms and seeks to recover investment losses that result from fraud. If you believe you have been defrauded by Mr. Dimare, feel free to contact us.

With all of the talk these days about the need to find alternative energy sources, there is a real demand for "Green" energy. There are a lot of legitimate entrepreneurs out there looking for investors to put up money to fund new energy-saving environmentally-friendly ideas. With every legitimate entrepreneur however, comes a hundred scam artists also looking to make a buck from unsuspecting potential victims.

On December 29, 2009, FINRA, the organization tasked with regulating the financial services industry, issues an Investor Alert entitled, Save Your Greenbanks - Don't Fall for Green Energy Scams. The Investor Alert provides a great discussion on ways to avoid becoming a victim of these scams.

Some tips include:
1. Beware of investment opportunities promises high returns;
2. Beware of unsolicited recommendations communicated through methods such as faxes, emails, text messages, etc.;
3. Don't invest in things you do not understand.

The most unfortunate part of these scams is that when something goes wrong, there is rarely a chance to recover the losses from the fraudster because they are almost always insolvent. As a result, the best approach is to stay away altogether.

According to the Atlanta Journal Constitution (AJC), Eldon A. Gresham, of The Gresham Company, a Peachtree City based company, has been charged with running a multimillion dollar Ponzi scheme. The U.S. Commodity Futures Trading Commission charges Gresham with soliciting more than $15 million from at least 75 investors to further his scheme. Particularly, it is alleged that he preyed on Christian individuals by telling him that he was successful as a result of the Lord's blessings and was going to offer his program to a limited number of Christians.

Gresham allegedly promised monthly returns of 5 to 10 percent with very little risk. He would then allegedly pay off certain individuals with money invested by new individuals. It is said by the Commission that Gresham would communicate the bogus returns of the scheme to investors through emails.

Gresham's longtime friend, Werner H. Beiersdoerfer, of Calera, Alabama, and his son, Kirk Gresham, have also been named as "relief defendants." A "relief defendant" is defined as "a person who is not accused of wrongdoing in a securities enforcement action where that person: (1) has received ill-gotten funds; and (2) does not have a legitimate claim to those funds." S.E.C. v. Cavanagh,155 F.3d 129, (C.A.2,1998).

Assets of all three individuals have been frozen by a federal judge. A hearing has been set for July 23.

For more information about investment fraud, please visit our website at www.dossfirm.com. If you would like a personal consultation with a lawyer regarding potential claims that you may have, please call our investment abuse hotline, 1-800-939-8879.

According to newsday.com, many Ponzi Scheme victims will now be able to write off their financial losses under their state itemized tax deductions.  New York will allow victims to claim such loses as a "theft" deduction.  New York State is merely following the Internal Revenue Service's (IRS) lead.  In March, the IRS issued a statement saying that investors can claim their financial losses as theft. This allows the investor higher deductions than capital, personal theft and personal casualty loss.

New York state officials have also stated that individuals who have already filed their 2008 state tax returns can amend their returns.

However, individuals should know that New York tax laws do limit how much can be written off. According to newsday.com, "itemized deductions are reduced by up to 25 percent for individuals who make more than $100,000 in adjusted gross income, and for married taxpayers with more than $200,000 in adjusted gross income. Further, "it's reduced by up to 50 percent for all filers making more than $475,000 in adjusted gross income," says Ellen Yan of newsday.com. However, those with an adjusted gross income of more than $1 million will not be able to make non-charitable itemized deductions, which includes theft deductions.

This should come as some relief for investors who have lost money as a result of a ponzi scheme. Most notably in New York this shall aid those who are victims of the Bernie Madoff investment scam.  

In addition to tax relief, victims of investment fraud may have legal claims which could provide further financial relief and/or recovery. If you believe that you are a victim of investment fraud, please do not hesitate to contact our firm.  We provide free legal consultations. Additionally, please visit our website www.dossfirm.com for further information with regard to investment fraud.

According to the Atlanta Journal Constitution (AJC), Robert Price Copeland, a Marietta, Georgia lawyer, pleaded guilty on April 20, 2009 to wire fraud relating to a ponzi scheme he had been running for five years. U.S. Attorney David E. Nahmias said that in total Copeland owes more than $28 million to 125 investors.  The investors included senior citizens who trusted Copeland and invested their entire life savings.

The U.S. Attorney's office says that Copeland, a lawyer who specialized in elder law, solicited his victims through seminars and financial planners. Copeland would promise the investors that he would invest their money in real estate and promised returns as high as 15 percent every six to 12 months. In addition to the promises made by Copeland, he would show the investors false security deeds to document their promised profits. Unfortunately, this was merely a scam, which netted Copeland more than $40 million.

It is believed by the U.S. Attorney's office that Copeland conducted little, if any, real estate financing or development.

Copeland does face up to 20 years in prison and a $25,000 fine. Additionally, Copeland will likely have to pay restitution to his victims and forfeit all of the proceeds from the fraud.  The Government has seized several bank accounts, jewelry and cars, 12 properties, and other valuable items from Copeland.

It is hoped that Copeland's investors are able to recoup at least some of their losses.  

If you would like to learn more about investment fraud, please visit our website www.dossfirm.com.  

Recently, there have been numerous Georgia articles discussing the ponzi scheme committed by Marietta attorney, Robert P. Copeland. Mr. Copeland, a real estate attorney, was charged by federal prosecutors with operating a ponzi scheme from 2004-2009.  In total, Mr. Copeland duped 125 investors out of $28 million. In a recent article in the Dalton Daily Citizen, U.S. Attorney David Nahmias stated, "But we hope this case sends a second message as well. This defendant came forward, reported his crimes, and pledged his full cooperation, which has already resulted in numerous seizures of assets that will be restored to the victims."

What Mr. Nahmias did not say, however, how the assets will be distributed to investors. You need to pay attention to this because you may be entitled to more than a pro rata share of the seized assets if you can trace your money.  Typically, when the U.S. Government seizes the assets of a fraudster, the Government distributes the money seized back to investors on a pro rata basis.  This means that if the government seizes $10 million from a fraudster and there are 125 victims, each victim receives from the restitution fund a percentage of the $10 million based on how much each victim invested. For example, if the total amount of the fraud totals $28 million and Investor A invested $2.8 million, Investor A would receive 10% of the $10 million or $1 million.

This may seem fair on the surface.  What if Investor A invested the $2.8 million a week before the Government seized the assets and the money can be traced to the fraudster's bank account? Is is fair for Investor A only to receive $1 million out of $2.8? Maybe not.

Does the U.S. Government have unfettered discretion to distribute the funds anyway it sees fit? The answer is no.  Victims of Ponzi schemes have the right to petition the Court and challenge the Government's discretion.  If you can trace your funds, you may be able to establish a constructive trust on the money.  In simple terms, this means that title to the money never transferred to the fraudster. Therefore, the Government did not have the right to seize the funds in the first place. If Investor A, for example, can establish a constructive trust on the $2.8 million, he or she is entitled to receive $2.8 million, not $1 million.

If you are a victim in this situation, our firm has handled these types of cases.

  

 

 

According to the Atlanta Journal Constitution (AJC), the U.S. Attorney Office has filed an action against Robert Price Copeland, a Marietta attorney.  The U.S. Attorney's Office seeks to have Copeland forfeit a dozen properties that he allegedly bought with money he gained from the alleged ponzi scheme.

It is alleged by the U.S. Attorney's Office that Copeland used a number of businesses, including Axiom Development Group, Inc., We Buy Inc., Robert P. Copeland, P.C., and HBV Services, Inc. to perpetuate the fraudulent scheme.

Copeland has not yet been charged criminally with regard to this alleged conduct. Despite attempts by the AJC, Copeland refused to return phone calls seeking comment regarding the allegations made by the U.S. Attorney's Office.

According to the Georgia Bar website, Copeland was admitted to the Georgia Bar in 1995.

When ponzi schemes implode, there is usually no money left behind for the victims to recover.  One silver lining for victims who lost money in ponzi schemes that actually made investments is that the fraudster typically can not accomplish the fraud alone.  Collateral parties such as brokerage firms are often involved to help execute trades or be custodians of funds. Under some circumstances, those collateral parties can be held liable for their involvement in the fraud.  In addition, perpetrators of ponzi schemes often utilize a sales force to help them gather assets.  In exchange for new clients and funds, the ponzi scheme fraudster will pay those brokers a commission.

 

Those brokers often are employed by legitimate and solvent brokerage firms that are responsible to supervise the broker's business activities.  If you invested in a ponzi scheme through a broker or salesperson, it would be wise to take the following steps immediately:

 

 

 

 

 

 

1.   Start making a written chronology that touches on the following areas:

·         How did you learn about the investment?

·         Did someone recommend the investment to you? If so, who?

·         Why did you decide to invest?

·         What did you expect the investment to do for you?

·         Did you purchase the investment to generate income? If so, how much income did it generate and how important was that income to your overall financial picture?

·         How was the investment described to you? Was it described as a safe investment? Risky?

·         Were any promises made to you about the performance of the investment?

 

2.   Gather all of the written marketing materials that you received in connection with the investment.

The written chronology is very important because (1) memories fail over time and (2) the document is a living document because it can evolve over time when new information is added later. For example, many times an unrelated event such as a TV commercial will trigger a memory about a statement that was made to you about the investment. If you have already created a written chronology, it is easy to add that information.

According to the Atlanta Journal Constitution, Wendell Ray Spell, of Gainesville, Georgia, pled guilty Tuesday to federal charges relating to a Ponzi scheme. Authorities say that the scheme defrauded investors out of more than $60 million dollars. It was alleged by authorities that Spell, who ran a construction equipment company, lured more than 50 individuals to invest their money with him.  Authorities say that Spell told investors that that he would purchase construction equipment with their money and then sell the equipment for a large profit. However, like any ponzi scheme, it has been alleged that Spell was paying investors "profits" by giving them money that had been invested by newer investors.

According to the U.S. Attorney's office, Spell faces a maximum sentence of 20 years in prison and a fine of up to $250,000. Sentencing has not yet been schedule for Spell.

Investors must be very careful as to who they trust with their money. Furthermore, although they may consider someone a friend, they should still conduct appropriate background checks on the person, checking whether they are licensed or registered and investigating their experience and employment history. Additionally, investors should be very diligent in researching any investments they make and should be wary of guaranteed promises of high returns. Remember investing always involves a certain amount of risk. 

For the sake of Spell's investors, it is hoped that federal authorities seized funds from Spell that can be distributed to his alleged victims. Unfortunately, however, recovery may be minimal at best. 

In a telephone conference today, Bart Chilton, the commissioner of the Washington-based Commodity Futures Trading Commission (CFTC) referred to the recent discovery of unprecedented numbers of ponzi schemes as "rampant Ponzimonium." According to a Reuters article published today, Mr. Childers was making a play on the word "Lollapalooza," a popular music festival.

In that article, Mr. Chilton was also quoted as saying, "Because of the economy, people are seeking redemptions more than they ever have and that's making a lot of these scams go belly up."

Mr. Chilton should have made another play on words and said that "a lot of these scams go 'pork-belly' up."  That is because many of the recently discovered ponzi schemes involve commodities futures trading.  Mr. Chilton admitted that so far this year, the agency has uncovered 19 ponzi schemes, up from 13 for all of 2008.

While the SEC has certainly received its fair share of criticism recently, the CFTC has not received much negative press. It deserves some though.

What many investors do not know is that the CFTC along with the National Futures Association (NFA) regulate the commodities industry, not the SEC.  Investors often are unaware that the rules and regulations of the NFA have the practical effect of being less stringent on its members than those imposed on brokerage firms that sell securities.  Risk disclosure requirements are more relaxed and less effective because the rules shift much of the burdens of risk disclosure to the commodities trading advisors and away from the brokerage firms.  As a result, it is more difficult to hold the brokerage firms actually making the trades liable for unsuitable recommendations.

In addition, because much of the commodities trading is done through online forex trading platforms, it is not difficult for criminals to open accounts in his or her name and trade (without a license) on behalf of groups of investors. Because of lax regulations, commodities brokerage firms called Futures Commodities Merchants (FCM) disregard their due diligence duties and do nothing to stop ponzi schemes from forming.  As a result, the scams are not discovered until it is too late and rampant ponzimonium takes effect. 

It is no wonder, therefore, that crooks looking to rip off consumers view the commodities industry as their Afganistan of the scam artist criminal landscape.  

    

 

On March 19^th, Bloomberg published an article entitled, Ponzi Scheme Victims All Missed an Easy Clue: Bogus Auditors.  The article discussed how victims could have easily discovered that they were investing in ponzi schemes simply by calling the accounting firms that purported audited the financial of the bogus investments sold by Bernie Madoff, Allen Stanford and James Nicholson.  According to the article, had victims done this, investors would have learned that no one answered the phone at Stanford's auditing firm in Antigua; Madoff's auditing firm was a sole proprietor of Friehling & Horowitz, an accounting firm run from a 13-by-18-foot storefront in the New York City suburb of New City.

 

These examples were followed by a quote from an accounting professor at Ohio State University in Columbus which stated, "Due Diligence 101 should demand that you check out the auditing firm and find out if it exists" [...] "Then, you have to find out if they are qualified."

 

The implications from this article are disturbing because it suggests that investors should have known better than to invest with people who turned out to be crooks.  The truth is that "due diligence 101" should require accounting firms who "audit" books of investment entities to make sure that the Bernie Madoffs of the world are accurately reporting the scope and nature of the audit.

 

A subtle but disturbing undertone of this article is that investors should have known better.  This mindset is dangerous to the integrity of the laws designed to protect investors.  For example, a common claim brought by victims of ponzi schemes is common law fraud and section 10b-5 securities fraud claims.  Both of these claims require investors to prove that they justifiably relied on the misrepresentations contained in the prospectus or other sales literature.  Whether reliance is justifiable is a defense commonly raised to defend these actions.

 

It is disturbing to think that investors could lose a lawsuit because they failed call the accounting firm who conducted the audit of the books just to make sure that the work was done properly.  This goes against the heart of the securities laws.  These laws were meant to abolish the "buyer beware" mindset and shift the burden to the seller of securities and other parties involved in the sales process (including accounting firms) to make sure that the information contained in the prospectus is accurate and truthful. 
 
While it is true that it is be a good idea for investors to call those firms to verify that the representations made in any prospectus or investment sales document are accurate, investors who do not should not be penalized.

Thousands of U.S. taxpayers have fallen victim to investment fraud schemes, often losing their entire life savings, and now the Internal Revenue Service (IRS) wants to assist taxpayers by articulating  how to handle the complex issues facing these taxpayers when filing their taxes. 

On March 17, 2009, the Commissioner of the IRS, Doug Shulman, testified before the Senate Finance Committee on Tax Issues that affect victims of ponzi schemes.  In particular, the IRS issued two guidance items, a revenue ruling and a revenue procedure, to aid taxpayers who have fallen victim to investment schemes. 

According to the IRS website, the IRS's revenue ruling states that (1) "The investor is entitled to a theft loss, which is not a capital loss"; (2)" 'Investment' theft losses are not subject to limitations that are applicable to 'personal' casualty and theft losses," meaning the loss, although an itemized dediction, is "not subject to the 10 percent of AGI reduction or the $100 reduction that applies to many casualty and theft loss deductions;" (3) "The theft loss is deductible in the year the fraud is discovered, except to the extent there is a claim with a reasonable prospect of recovery;" (4) "The amount of the theft loss includes the investor's unrecovered investment including income as reported in past years;" and (5) "A theft loss deduction that creates a net operating loss for the taxpayer can be carried back and forward according to the time frames prescribed by law to generate a refund of taxes paid in other taxable years."

The revenue procedure was issued by the IRS in an effort to provide victims of investment schemes a uniform approach to dealing with investment losses due to fraudulent schemes.The IRS's revenue procedure, outlined on the IRS website, allows taxpayers to assume two things when reporting their losses.  First, the IRS will deem the loss to be resulting from theft if (1) the fraudster was charged under federal or state law for the commission of fraud, embezzlement or a similar crime that would be defined as theft; (2) the fraudster was the subject of a federal or state criminal complaint which alleges that they have committed such a crime; and (3) either there was some evidence of an admission of guilt asserted by the fraudster or a trustee was appointed to freeze the assets associated with the scheme. Second, taxpayers will be generally allowed to "deduct in the year of discovery 95 percent of their net investment less the amount of any actual recovery in the year of discovery and the amount of any recovery expected from private or other insurance."  Should the victim of the scheme sue someone other than the fraudster, however, they would compute the deduction by substituting 75 percent for the 95 percent in the above formula.

If you have fallen victim to an investment scheme, as you can see, there may be tax implications with regard to the losses sustained.  A tax professional should be consulted in an effort to best manage the economic fallout from such losses. Additionally, it is imperative that you consult an attorney to determine what, if any, legal action may be taken to assist in the potential recovery of financial losses. Remember there may be a time limitation on when you may file an action so do not delay. 

 

One of the most infamous Wall Street swindlers in history, Bernie Madoff, pled guilty to to 11 criminal counts and was ordered to go straight to jail this week.  During his last court hearing, Madoff stated, "I operated a Ponzi scheme."

What exactly is a Ponzi scheme? How do you spot one? More importantly, how do you avoid becoming a victim?

According to Wikipedia, a ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from any actual profit earned.  The scheme is named after Charles Ponzi, who became notorious for using the technique after emigrating from Italy to the United States in 1903.

Investment operations typically do not start out as Ponzi schemes.  Instead, legitimate investment operations evolve into criminal schemes due to a number of reasons. For example, a broker may lose a significant amount of investors' money through risky investments or bad decisions and is not willing to face the consequences from his clients.  As a result, the broker entices new investors into the investment operations so that he can pay off prior investors with the hopes that he can make the money back through subsequent investment activity. 

Continue reading "Madoff's Ponzi Scheme Is Not The First (And Will Not Be The Last) " »