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Archive for September, 2013

Two Indicted in Fraud Scheme

A federal grand jury has indicted Richard Shusterman, age 50, of Highland Beach, Florida, and Jonathan E. Rosenberg, age 44, of West Orange, New Jersey, on charges of conspiracy and wire fraud, in connection with a scheme to defraud equity investors and asset-based lenders in medical accounts receivable of more than $275 million. The indictment was returned on September 4, 2013, and unsealed today upon the arrest of the defendants.

 The guilty pleas of Robert Feldman, age 65, of Beach Haven, New Jersey, and Douglas A. Kuber, age 53, of Livingston, New Jersey, were also unsealed today. Feldman and Kuber pleaded guilty to conspiracy to commit wire fraud on September 3, 2013 and October 11, 2012, respectively.

The indictment and guilty pleas were announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Stephen E. Vogt of the Federal Bureau of Investigation; and Special Agent in Charge William Winter of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).

“The indictment alleges that the defendants perpetrated a brazen and complex Ponzi scheme that defrauded investors of more than $275 million,” said U.S. Attorney Rod J. Rosenstein.

According to the 10-count indictment, Richard Shusterman was a shareholder and president of International Portfolio Inc. (IPI). Robert Feldman was part owner of IPI and was also the president of United Consulting Inc. Shusterman and Feldman represented that IPI was a company that had experience in the field of medical accounts receivable, including their purchase, valuation, collection, and resale. Beginning on June 21, 2006, Shusterman and Feldman, through United Consulting and IPI, engaged in the business of buying and selling consumer debt, including medical debt portfolios.

According to the indictment, Jonathan E. Rosenberg and Douglas A. Kuber operated Account Receivable Services LLC (ARS). ARS invested in medical accounts receivable purchased from IPI using funds borrowed from investors interested in asset-based lending. Rosenberg was also president of two other companies that recruited investors for medical accounts receivable portfolios purchased from IPI.

From December 2006 through June 2008, IPI paid more than $25 million to purchase over $4.1 billion in medical accounts receivable, comprising more than 3,872,514 past due patient accounts that the hospitals and other entities selling the accounts had been unsuccessful in collecting. Beginning in June 2007, Shusterman, Rosenberg, Feldman, and Kuber began promoting an investment model to individual investors and investment fund managers.

To implement the investment model, the conspirators allegedly agreed that Shusterman, through IPI, would batch accounts receivable from IPI’s inventory into discrete debt portfolios with specified total outstanding account balances. These portfolios would then be offered for sale to investors. In addition, Shusterman and IPI would manage all the collection efforts for each debt portfolio IPI sold.

SEC approves change to FINRA arbitrator appointment process

The SEC approved a FINRA rule proposal which simplifies the way investors select arbitrators in disputes with their brokerage firms.  Arbitrations, rather than court proceedings, are mandatory in disputes between investors and their brokers, who are regulated by FINRA — the Financial Industry Regulatory Authority. Clients and brokers have some options to chose the arbitrators from a pool of panelists with industry experience, or the general public.

Under the new rules, customers wouldn’t have to first decide whether they want an all-public panel, or one with public and industry arbitrators. Instead, the parties can directly choose from a list of public and non-public arbitrators without deciding first which methodology to use. Parties can select an all-public arbitration panel.  FINRA data show that investors fare better with all-public panels.

Department of Labor fiduciary duty proposal delayed

The Department of Labor timeline for releasing the proposal for an expanded fiduciary duty for advisors who work with retirement plans has been delayed. 

Speaking at the Financial Services Institute’s Financial Advisor Summit, Phyllis Borzi, the Labor Department’s assistant secretary for the Employee Benefit Security Administration, said that her agency is continuing to revise its proposal, and that it is more concerned about getting it right than delivering it in on the previously announced schedule.

But while the industry will not see the DOL’s proposal in October, it is coming. Borzi says she’s not stepping down and will not just let the SEC handle fiduciary duty. “We don’t have overlapping jurisdictions,” she explained saying there are two investment “buckets,” a retirement one and another for other securities.  And while the SEC regulates securities across both, Borzi says retirement savings is “sacred money” and advisors should be held to a higher standard.  She did note, however, that from the very beginning, the DOL has worked with other regulators including the SEC.

“The impact of this regulation is to attack problem, or address the problem of conflicted advice,” she says.  As to what the new proposal will cover, Borzi says Individual Retirement Accounts, IRAs, will definitely be covered. “We’re going to cover them,” she says, adding that there’s an even grater need in IRA marketplace, there’s a need to protect investors.

Two indicted in Ponzi scheme

A federal grand jury in Baltimore indicted two men Friday on conspiracy and wire fraud charges in a scheme to defraud investors and lenders of $275 million. Richard Schusterman, 50, of Highland Beach, Fla., and Jonathan Rosenberg, 44, of West Orange, N.J., were named in the indictment. A statement by the U.S. Department of Justice said the 10-count indictment alleges “the defendants perpetrated a brazen and complex Ponzi scheme that defrauded investors of more than $275 million” through their medical accounts receivable company, International Portfolio Inc.

The indictment claims Schusterman, Rosenburg and two partners who have pleaded guilty, Robert Feldman, 65, of Beach Haven, N.J., and Douglas Kuber, 53, of Livingston, N.J., made fraudulent claims regarding the prices, results and values of debt portfolios they sold to investors.

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