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Archive for March, 2011


Judge Halts Securities America Class Action Settlement

In a potentially costly blow to the brokerage firm Securities America, a federal judge in Dallas ruled on Friday that hundreds of arbitration claims against the company should move forward rather than being stuffed into a catch-all class-action lawsuit.

The case, which was heard by Judge Royal Furgeson, stems from litigation against Securities America, a division of Ameriprise Financial, one of the country’s largest advisory firms. Securities America sold hundreds of millions of dollars of so-called private placement notes in Medical Capital Holdings, which in 2009 was found to be fraud. Since then, Securities America has come under fire for failing to provide adequate due diligence on Medical Capital.

Many investors filed arbitration claims against Securities America. Recently, however, Ameriprise, Securities America and class-action lawyers, who represent other clients of the brokerage firm, struck an agreement that would affect all investors — regardless of how they chose to make their legal claim. Collectively, investors lost about $400 million. The deal would have halted all arbitration claims, leaving investors with the ability to recoup about 10 cents on the dollar from a settlement fund worth $48 million.

On Friday, lawyers who attended the session said Securities America pleaded poverty, saying the firm did not have enough cash on hand to pay if the arbitration claims start to add up. Regardless, the judge ruled that the arbitration claims should move forward along with two separate state enforcement actions that class-action lawyers had also tried to halt.

CDO Fraud Probes to Be 2011 Priority

U.S. criminal investigators will step up probes into possible fraud involving collateralized debt obligations and credit default swaps, a top federal prosecutor in New York said.

Christopher Garcia, chief of the Securities and Commodities Fraud Task Force in the U.S. Attorney’s Office in Manhattan, told white-collar criminal-defense lawyers at a conference today that his office will spend this year investigating possible fraud involving CDOs and CDSs.

“If there’s crime there, we’re going to find it and we’re going to pursue it,” Garcia said at an American Bar Association meeting in San Diego. Investigators won’t be deterred by the complexity of the financial instruments, he said.

CDOs are pools of assets such as mortgage bonds packaged into new securities. Interest payments on the underlying bonds or loans are used to pay investors.

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